South Korea’s Crypto Tax Proposal for 2025

The Democratic Party of Korea has confirmed its intention to introduce a 20% cryptocurrency taxation from January 2025.

The new framework will impose an additional 2% local tax and 20% tax on crypto profits exceeding 50 million Korean won ($35,919). The tax on profits from cryptocurrency was first implemented in October 2021 during former President Moon Jae-in’s tenure. Originally planned for 2022, implementation has been postponed twice in response to investor backlash. The revised exemption limit represents a significant increase over the previous threshold of $1,795 approved by South Korea’s National Assembly.

The updated framework will ensure that the majority of retail investors are not affected by the new tax rule. Additionally, the proposal would give taxpayers more flexibility as investors can claim up to 50% of the total sales price as acquisition costs if they do not have accurate records. These updates were implemented to stabilize the market and ease investors’ concerns.

There is no capital gains tax on cryptocurrency in South Korea.

Foreigners can also receive a flat tax rate of 19% on income tax (after resident tax, the rate rises to 20.9%).

However, it is impossible for foreigners to sell crypto for fiat on Korean exchanges unless they establish a company.

— Dacian (@DevDacian) June 26, 2024

Last year, the administration’s policy was scheduled to be implemented last January 2023. However, then-President Yoon Suk Yeol’s government pushed it back to 2025 due to threats that the introduction of the tax would overwhelm investors and disrupt the market.

According to CNN, in late June South Korean officials from the Ministry of Economy and Finance suggested that the country’s legislature should consider completely halting the income tax on crypto earnings. The proposal forms part of the government’s move to completely scrap tax on financial investments, which include both stocks and funds.

Major legislative votes are scheduled for November, and the Tax Subcommittee of the Strategy and Finance Committee is scheduled to review the proposal on November 25. This will be followed by the general assembly vote, which is expected to be held on November 26. The Democratic Party of Korea is working to complete the framework before its planned launch. For now, South Korea is striking a balance between protecting its investors and regulating its markets.