Changes to existing tax codes that were previously proposed have been postponed until January 1, 2023, because commissioners must find a way to classify cryptocurrencies as financial investment income.
The taxation of virtual assets has been postponed, according to a representative of the ruling party Roh. The new rules were supposed to go into effect in July. The representative proposed a “partial amendment to the Income Tax Act,” which would include a number of tax breaks. The representative has also stated that they intend to move the bill ahead of the October deadline.
Prior to that, the Ministry of Strategy and Finance enacted the Income Tax Act, which classified virtual assets as “other income.” With the new classification, the commission was able to levy a 20% tax on earnings exceeding 2.5 million won per year. While the new rules will most likely be implemented in January 2023, cryptocurrency investors will be taxed beginning January 1, 2022.
Representative Roh stated that postponing the enforced taxation of virtual assets is irrational and contradicts current reality. Due to the decentralized nature of the networks, it is nearly impossible to properly secure and track taxation data in cases of overseas transactions and peer-to-peer exchange between users with the current tools.
According to the representative, the country’s current taxation infrastructure is not adequately prepared for the proper taxation of digital assets.
Currently, several parties have introduced bills to suspend the taxation of virtual assets. If there is disagreement between the ruling and opposition parties in South Korea’s political system, the bill will be delayed and debated in the Korean unicameral parliament.
The government’s intention to create a comprehensive taxation framework for cryptocurrencies is viewed as a positive sign for the South Korean digital assets market due to a progressive and constructive approach that will not harm the industry.