South Korea is discussing whether to include cryptocurrency assets in a planned abolition of income tax on returns from financial investments. This comes after the Country refused to revoke its ban on Cryptocurrency exchange-traded funds.
In a shift towards harmonizing cryptocurrency taxation with traditional investments, some lawmakers have proposed introducing a 22% tax on cryptocurrency gains exceeding 2.5 million Korean won (approximately $1,865) per year. This proposal aligns with the planned tax regime for gains from stocks, bonds, and other financial instruments, set to take effect in 2025.
Current Situation
According to Foresight News, Jeong Jung-hoon, deputy minister of South Korea’s tax office, said the National Assembly should also examine if crypto gains should have income tax removed. This would align digital asset taxation with the administration’s goal of ending investment income tax to support citizen wealth building.
"I hope it can be processed in February before the general election," Jeong stated, "We plan to submit an amendment to the Income Tax Act to the National Assembly at the end of January or early February to abolish the financial investment income tax."
This is surprising in light of the government's original intention to impose virtual asset taxes beginning in January 2025. Income from the sale and rental of virtual assets is categorized as "other income" under the present income tax law and is therefore taxable.
For cryptocurrency investors, however, the possible elimination of the virtual asset tax would entail considerable adjustments since they would no longer be subject to the 22% tax rate on earnings over 2.5 million won.
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In an effort to increase investor confidence and stock values, South Korean President Yoon Suk Yeol promised earlier this year to revoke the proposed capital gains tax on financial assets. He underlined that the nation's equity markets are cheap in spite of their competition on a worldwide scale.
The top financial regulator in South Korea, meanwhile, continues to forbid financial institutions from making any investments, including the introduction of cryptocurrency exchange-traded funds (ETFs). The regulator justifies the continuation of the current limits by citing worries about investor protection and the stability of the financial markets.