According to a report by the South Korean media outlet
The Seoul Shinmun, the Democratic Party of Korea, the largest party in the National Assembly, plans to continue pushing for the implementation of a tax on cryptocurrency gains starting from January 1, 2025, rather than further delaying it.
20% Cryptocurrency Capital Gains Tax to be Implemented Next Year, Proposed to Increase Tax Exemption Limit
A 20% tax (22% including local tax) on cryptocurrency gains was originally scheduled to take effect on January 1, 2022. However, due to strong opposition from cryptocurrency investors and industry experts, the plan has been postponed twice to January 1, 2025. Although there have been discussions and proposals to further delay the implementation, the Democratic Party of Korea remains committed to implementing the taxation plan as scheduled.
However, the Democratic Party of Korea is revising the taxation plan, seeking to raise the tax exemption limit for cryptocurrency gains from 250 million won (USD 1,795) to 500 million won (USD 35,919).
The report mentions that the revised bill includes a new provision that if taxpayers are unable to confirm the actual purchase cost of virtual assets, they can use a certain percentage (up to 50%) of the total sales amount as an alternative basis, meaning that up to half of the sales amount can be exempted from taxation.
The Democratic Party of Korea plans to vote on this revised bill in the Tax Subcommittee of the Planning and Finance Committee of the National Assembly on the 25th, and to pass it in the plenary session on the 26th. Although the Democratic Party of Korea had previously assisted the government in abolishing the financial investment income tax, it is now considered acceptable to delay the virtual asset taxation, but ultimately chose to pass the bill with conditions to attract investors.
The Democratic Party of Korea's decision to abolish the financial investment income tax but push for virtual asset taxation is expected to face backlash from investors. However, the party believes that raising the tax exemption limit is effectively equivalent to abolishing the virtual asset taxation, as very few investors can earn more than 500 million won in cryptocurrency gains, making the actual tax impact limited.
A relevant person from the Planning and Finance Committee stated that if the tax exemption limit is set at 500 million won, assuming a 5% return rate, the investment amount needs to exceed 10 billion won, meaning that only a small number of large-scale investors will be taxed, while the majority of investors will be exempt from taxation.
The Democratic Party of Korea also accused the government of insisting on not adjusting the tax exemption limit and only advocating for a delay, which is a "political tactic" to reuse the virtual asset delay issue in the next election.
However, to be honest, a 35,919 USD gain may still be a relatively low number for South Korean cryptocurrency investors, and the government may have underestimated the potential profitability of cryptocurrency investments.
Will Taiwan Follow Suit?
It is worth noting that the Taiwanese Ministry of Finance has recently
stated that profits from cryptocurrency transactions will be subject to taxation. According to the current tax laws, cryptocurrencies are not considered currency but rather digital asset transactions, and any gains from asset transactions must be taxed. However, since it is a self-declaration system, the Ministry of Finance will strengthen the audit process, and once the Financial Supervisory Commission introduces new regulations on virtual assets, there will be new audit measures.
The Taiwanese Minister of Finance, Chou Chui-yun, promised in the Legislative Yuan this week that within 3 months, the ministry will introduce regulations on the taxation of cryptocurrency trading profits. It is expected that Taiwan will refer to the experiences of other countries and develop a more comprehensive cryptocurrency taxation system, and the case of South Korea, especially its approach to the tax exemption limit, may become a reference for Taiwan.
