According to the country’s finance ministry, South Korea’s National Assembly passed a bill postponing the planned tax on crypto capital gains until 2023.
On November 29, representatives from the government and the opposition in the National Assembly’s Tax Subcommittee reached an agreement. The next step is expected to take place during the plenary session on December 2. If the amendment is approved during the session, the intended taxation scheme will go into effect on January 1, 2023, one year later than planned. At that point, any annual gains exceeding 2.5 million won will be subject to a 20% capital gains tax.
While crypto gains will still be taxed in the future, delaying the prospect for another year was a bipartisan decision. Democratic Party lawmakers, for example, have been pushing for this delay, citing flaws in the National Tax Service’s prospective information gathering procedures (NTS). The bill, however, was introduced last month by the opposition People Power Party. “It is not right to impose taxes first at a time when the legal definition of virtual currency is ambiguous,” People Power Party Representative Cho Myoung-hee said.
Representative Kim Young-jin, Chairman of the Tax Subcommittee, agreed, noting that the government has yet to adopt an official definition of what a cryptocurrency or virtual asset is. “In our system, there is an inconsistent system for imposing taxes without a clear basis on how to legally define cryptocurrencies… but only in Korea does taxation come before regulation,” he said.
Both parties were concerned about fairness on behalf of their constituents. One provision of the bill also provides a more generous tax redemption than was previously planned, such as imposing a 20% tax rate on profits ranging from 50 to 300 million won ($42,000 to $251,000). “The intention is to lower the tax base to the level of financial investment income tax, so that virtual currency investors are not penalized,” one representative explained. Finance Minister Hong Nam-ki, on the other hand, wants the tax system to be equitable so that those who profit from cryptocurrency trading contribute their fair share.