Coinspeaker South Korea to Enforce 20% Crypto Tax by 2025 Deadline
South Korea’s Democratic Party of Korea (DPK) is moving forward with its crypto taxation plan for 2025, but with a significant modification that could benefit many investors. The ruling party has proposed raising the tax-free threshold from 2.5 million won to 50 million won ($35,919), marking a dramatic shift in the country’s approach to digital asset taxation.
The tax initiative, which has faced multiple delays since its initial planned implementation in January 2022, will maintain its core 20% tax rate (22% including local taxes) on cryptocurrency gains. However, the substantial increase in the exemption limit represents a strategic move to address concerns from the cryptocurrency community while maintaining regulatory oversight.
The amended plan includes a practical solution for traders who struggle to document their initial investment costs. In recognition of the cryptocurrency market’s volatile nature, investors may be permitted to use up to 50% of their sale price as a proxy for determining their original purchase price when precise records are unavailable.
New Exemption Threshold Targets High-Volume Traders
A Finance Committee official highlighted the significance of the new exemption threshold, explaining that to exceed the 50 million won limit, investors would need to manage portfolios worth approximately 1 billion won, assuming a 5% return. This adjustment effectively means that only a small segment of high-volume traders would fall within the taxable bracket.
“The deduction limit is set at 50 million won, but assuming a 5% return, the investment amount should be at least 1 billion won […] This could have the effect of most investors, except for a very small number of ‘big players,’ not being included in the tax target,” said the Finance Committee.
The Democratic Party’s decision comes after extensive deliberation over potential further delays, including a proposal to postpone implementation until 2028. However, the party has chosen to proceed with the 2025 timeline while making the exemption limit more favorable to retail investors.
The legislative process is moving swiftly, with the amended plan scheduled for review by the National Assembly’s tax subcommittee on November 25, followed by a vote in the legislature’s general meeting on November 26, 2024.
Political Implications and Negotiations
The Democratic Party has taken a firm stance on implementing the tax framework despite some opposition. Party officials have characterized alternative proposals, such as further delays, as political maneuvers aimed at leveraging the issue in future elections.
Current negotiations between the Democratic Party and the ruling party are ongoing, with the DPK maintaining leverage in the process. If an agreement isn’t reached at the Planning and Finance Committee stage, the tax law will automatically advance to the plenary session in December 2024.
A Democratic Party policy committee official emphasized the importance of reaching a consensus, stating that negotiations would continue until the plenary session. However, the party has also made it clear that if cooperation fails, they have the power to implement the original law with the lower 2.5 million won exemption threshold starting January 2025.
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South Korea to Enforce 20% Crypto Tax by 2025 Deadline