South Korea’s ruling political party is pressing forward with its plan to impose taxes on cryptocurrency gains starting in 2025, despite previous delays and proposals for further postponements. The new tax plan, originally set to take effect in 2022, has faced significant opposition from investors and industry experts. The Democratic Party of Korea (DPK) intends to implement the 20% tax (22% including local tax) on cryptocurrency profits, with the tax now slated to begin on January 1, 2025.
Initially, South Korea had planned to impose a 20% tax on profits from cryptocurrency transactions starting January 1, 2022. However, due to widespread backlash, the plan was delayed twice, first to January 1, 2023, and then again to 2025. Many investors and experts in the crypto industry had voiced concerns about the volatility of the market and the challenges of tracking gains, which led to the delays.
The DPK had considered further postponing the implementation of the tax, with some suggestions proposing a start date as late as 2028. However, the party has now confirmed its commitment to moving forward with the original 2025 schedule.
In response to concerns from the public, the DPK has made amendments to the proposed tax plan. One of the most notable changes is the increase in the tax-exempt limit for cryptocurrency gains. Under the amended proposal, individuals will be exempt from paying taxes on crypto profits up to 50 million Korean won (approximately $35,919), a significant increase from the original threshold of 2.5 million won (around $1,795).
The amended plan also addresses the challenges posed by the volatility of the cryptocurrency market. Since many investors struggle to keep accurate records of their transactions, the revised tax plan allows taxpayers to use a percentage of the sale price as a proxy for the original purchase price in cases where detailed acquisition records are unavailable. This adjustment aims to ease the burden on taxpayers who may not have precise documentation of their crypto investments.
While the DPK's decision to raise the exemption threshold is seen as a positive step, some critics argue that it may effectively nullify the tax plan. With the new exemption limit of 50 million won, only a small percentage of crypto investors are likely to exceed this amount. In essence, the plan could impact a relatively small number of high-value cryptocurrency traders, while the majority of investors would remain unaffected by the tax.
The DPK plans to push the amended tax proposal through the National Assembly’s tax subcommittee on November 25, with a full vote scheduled for the general meeting of the National Assembly on November 26. If approved, the new tax plan will come into effect on January 1, 2025, marking a significant shift in South Korea’s approach to cryptocurrency regulation.
As the crypto market continues to evolve, the success of this tax policy will depend on its ability to balance government revenue generation with the needs and concerns of investors. Investors and industry stakeholders will be watching closely as the final vote approaches and the details of the tax implementation are finalized.
South Korea’s ruling Democratic Party is determined to implement its cryptocurrency tax plan in 2025, despite prior delays and ongoing opposition. The amendments to the tax exemption threshold and the introduction of more flexible record-keeping requirements indicate the government’s recognition of the challenges posed by the volatile crypto market. As the country prepares for the final vote on the tax plan, the coming months will be crucial for shaping the future of cryptocurrency taxation in South Korea.
November 2024, Cryptoniteuae