South Korea’s ruling Democratic Party lawmakers have agreed to recommend another delay in the country’s cryptocurrency income tax. A two-year postponement, which would push implementation to 2029, is currently the preferred option.
Summary
- Ruling Democratic Party lawmakers have recommended delaying cryptocurrency income taxation until 2029.
- They cited gaps in overseas transaction reporting, unfinished digital asset legislation, and concerns about whether exchanges are ready to meet tax reporting requirements.
- The proposed delay would be the fourth since South Korea approved its crypto tax framework in 2020. Under the current rules, an effective 22% tax applies to annual gains exceeding 2.5 million won.
- The party leadership is expected to review the recommendation within one to two weeks. Any change to the current start date would require parliamentary approval.
According to Seoul Economic Daily, members of the National Assembly’s Finance, Economy and Planning Committee reached the decision on November 3 during a closed-door meeting with government officials. They raised concerns about overseas transaction data, pending digital asset legislation, and the readiness of cryptocurrency exchanges.
Democratic Party lawmaker Oh Ki-hyung, the party’s secretary on the committee, told reporters that lawmakers still supported taxing cryptocurrency income but believed the government needed more time to prepare.
“We agree with the tax principle that income should be taxed where it arises,” Oh said, adding that current conditions made further preparation necessary.
The recommendation will now be reviewed by the party leadership and policy committee, which will discuss whether to delay the tax and how long the postponement should last.
Most committee members reportedly favored a delay of around two years, but the proposal has not yet received final approval. Under the existing law, cryptocurrency income taxation is scheduled to begin on January 1, 2027.
South Korea crypto tax delay linked to overseas reporting gaps
One of the main concerns raised during the meeting was the government’s ability to obtain reliable transaction records from cryptocurrency exchanges operating outside South Korea.
Lawmakers pointed to the Crypto-Asset Reporting Framework (CARF), an international system developed by the Organisation for Economic Co-operation and Development (OECD). It is designed to help tax authorities share information about cryptocurrency transactions.
South Korea is scheduled to begin exchanging information through CARF in 2027, while the United States is expected to join in 2029. This difference in implementation dates has become an important factor in the debate over when South Korea should begin taxing crypto income.
Oh said effective taxation would require access to overseas transaction records, especially as international reporting systems become more widely adopted.
These concerns had already led Democratic Party lawmaker Park Min-gyu to propose linking crypto taxation to the start of international information exchanges.
His bill, introduced on October 16, would move the tax start date to January 1 of the second year after the first qualifying exchange of cryptocurrency transaction data under CARF.
Domestic exchanges also face difficulties when investors transfer cryptocurrencies from overseas platforms. Local exchanges may know which assets investors have received but lack information about their original purchase prices. This can make it difficult to calculate taxable gains accurately.
The National Tax Service has said that incomplete overseas records would not necessarily prevent taxation. Deputy Commissioner Park Hae-young previously told lawmakers that authorities could use available foreign account information and CARF data to address reporting gaps.
Pending digital asset legislation adds to concerns
Lawmakers have also raised questions about how South Korea’s planned Digital Asset Basic Act could affect the existing cryptocurrency tax framework.
The legislation is expected to cover cryptocurrency businesses, transaction structures, and other parts of the country’s digital asset market.
In October, the bill entered the final stages of government consultations, although regulators had not announced a formal introduction date.
Oh said the government should consider possible changes to business classifications and transaction rules before finalizing how cryptocurrency income will be taxed.
Exchange reporting systems are another concern. Officials are reviewing how transaction records would be shared with the National Tax Service and whether existing systems can handle the requirements.
Bithumb previously estimated that developing and testing its reporting infrastructure could take six to nine months after authorities provide a suitable testing environment.
The exchange’s assessment included data accuracy, integration with tax authority systems, and operational stability.
South Korea has already postponed crypto taxation three times
South Korea first approved its cryptocurrency income tax framework in 2020, with implementation originally planned for January 2022.
The government later postponed the start date to 2023, then 2025, and finally 2027. These delays followed disagreements over investor protections and whether tax collection systems were ready.
Under the existing framework, individuals would pay a 20% tax on annual cryptocurrency income above 2.5 million won. With local income tax included, the effective rate reaches 22%.
The rules cover income from selling or lending cryptocurrencies. Investors can offset gains against losses within the same tax year, but they cannot carry losses forward to future years.
If the current schedule remains unchanged, investors will report their taxable income from 2027 in May 2028.
The possibility of another delay has also raised questions about how investors should calculate their profits and acquisition costs.
Under the current rules, for cryptocurrencies acquired before taxation begins, the cost basis is set using whichever is higher: the original purchase price or the prescribed market value at the start of taxation.
Meanwhile, the National Tax Service has been preparing new tax guidelines covering staking rewards, airdrops, hard forks, and decentralized finance transactions.
Tax Commissioner Lim Gwang-hyeon told lawmakers during an October 13 parliamentary hearing that the agency was working with exchanges and government officials to clarify how different cryptocurrency transactions should be treated.
Party leadership expected to decide within two weeks
The Democratic Party is expected to finalize its position within one to two weeks after further discussions with its leadership and policy committee.
The November 3 meeting followed earlier discussions in which lawmakers disagreed over whether taxation should begin as scheduled or be delayed to allow more preparation.
South Korea’s presidential office had previously supported another postponement, while opposition People Power Party lawmakers had proposed either delaying the tax further or removing the cryptocurrency income tax altogether.
The government and ruling party are scheduled to hold further high-level discussions this weekend. Any change to the January 2027 start date would require an amendment to the Income Tax Act.