According to the newspaper BlockBeats, the ruling party in South Korea is considering postponing the tax on crypto to 2028.
In this way, all profits, understood as capital gains from trading digital assets and other crypto-related activities, will be exempt from taxation for another 3 years.
The proposal for tax revision comes after 2 other postponements, which occurred in 2021 and 2023. All this could favor the growth of the markets in South Korea, supporting the development of the crypto sector.
Let’s see all the details below.
South Korea considers postponing the payment of taxes on crypto capital gains to 2028
The party currently in power in South Korea, known as the “People’s Power Party” has recently proposed to postpone the payment of taxes on crypto.
According to a document published on the site “The National Assembly of the Republic of Korea”, the intention is to postpone the event to January 2018.
By doing so, the implementation of the tax on capital gains on crypto in the country would be postponed by 3 years, from the currently effective date set for January 2025.
As stated by the leading party of South Korea, the current sentiment towards crypto activities is deteriorating and it is necessary to remedy it.
The political representatives believe that it is not the most appropriate time to enforce this tax law. In fact, under the current conditions, several investors might decide to leave the market if the tax were to be implemented soon.
It is worth noting that on February 19, before the South Korean general elections in April, the People’s Party had promised to delay the implementation of taxes on crypto.
As part of the election campaign commitment, the group had argued that before diving into taxation, the country should create a proactive cryptographic framework.
Only when the basic framework is completely finalized, can we think about taxes on capital gains.
According to a representative of the party, the minimum time to resolve this regulatory snag is at least 2 years.
Confirmations are expected regarding this political position by the end of the month, in which the revision of the fiscal law will likely be announced
Delay of 7 years from the original regulation on crypto taxes
The first plan to impose a tax program on crypto in South Korea was initially scheduled for 2021.
The original fiscal design, presented during the Moon Jae-in administration, had been approved by the South Korean National Assembly with a deadline set for October of that year.
As reported by the “Korea Economic Daily”, due to political tensions, the government of the country had decided at the time to postpone the issue of taxes.
Subsequently, due to the presidential elections for 2022, the implementation of the first capital gains taxes in South Korea had been set for January 2023.
In any case, under the administration of Yoon Suk-yeol the date has been further postponed to January 2025, citing concerns for the interests of investors.
Now the proposal focused on the completion of crypto taxes in the Asian country risks being delayed by a total of 7 years from its initial schedule.
The law in question aims at a 20% tax on capital gains from crypto activities, if the profits exceed 2.5 million won, or approximately 1,800 dollars.
This threshold limit is much higher in the field of stocks, where taxes are paid only for profits greater than 50 million won, corresponding to 36,000 dollars.
New monitoring system for crypto activities
In all this, the tax reform of South Korea and the issue of taxes on crypto, passing through new monitoring systems.
As indeed reported in the new law “Virtual Asset User Protection Act”, the government will establish an organization to monitor the cryptographic activities of the country’s users.
In particular, the activities of crypto exchanges will be under observation, with the aim of reporting transactions of a “dubbia” nature related to money laundering and tax evasion.
Furthermore, unfair commercial operations advanced with cryptographic tokens and attempts of market manipulation will be targeted.
This approach should come into effect at the end of July and will be the first step of a journey towards the implementation of a tax law.
In fact, it is clear that before imposing a tax rate on capital gains, it is necessary to have an entity dedicated to fiscal monitoring.
As reported by the South Korea Financial Supervisory Service (FSS), the country has developed a system that aims to separate irregular transactions from others.
However, the collaboration of centralized exchanges will be essential in order to eliminate suspicious activities in the crypto market.
In detail, the CEX would have been asked to create a team dedicated to this type of activity, following the FSS guidelines.
As recently reported by the same supervisory authority:
“We have compared the criteria for extracting anomalous transactions and prepared models and metric indicators through various simulations. We anticipate that these will meticulously filter the anomalous transactions.”
The proposal from South Korea could benefit the growth of the crypto sector in the country
It is clear that if the tax on crypto activity in South Korea is postponed to 2028, the country will have greater opportunities for growth in this sector.
Usually investors, especially the more greedy ones typical of the crypto world, are constantly searching for tax havens where they can realize capital gain in peace.
Many of these could gain significant economic advantages by abstaining from paying capital gains taxes, especially at the end of the current bull market.
This would unilaterally push the development of the cryptographic industry for at least another 3 years, supporting the growth of a crypto hub in South Korea.
Following this logic, in fact, the profits made in the current year or in 2025, could be reinvested in digital or real infrastructures in the Korean territory.
On the other hand, the entry into force of taxes starting from January 2025 would limit the buying and selling activity of cryptocurrencies already from now.
In fact, anyone who would buy a token now would immediately feel the weight of an incoming regulation on potential profits.
In this scenario, investors might lose interest in these markets, moving to other places and other less taxable businesses.
We also remind you that crypto activities are by nature very volatile and dangerous: this detail discourages investments especially if there is no law that promotes their tax exemption.