In a strategic move ahead of the upcoming general election, South Korea’s ruling party, the People Power Party (PPP), has announced plans to push for another two-year delay on the implementation of crypto tax, local media reported on February 19.
Party officials announced their intention to explore the postponement as a key campaign promise during a February 19 press conference. The proposal examines whether taxation can be postponed until January 2025.
The decision is in line with the government and legislature consensus to prioritize regulation before taxing virtual assets.
Pre-tax regulations
PPP argues that there must first be a fundamental regulatory “system” for crypto before taxation can be feasible.
The decision is in line with the government’s broader financial policy trends, including the abolition of income tax on financial investments and the relaxation of the income tax criteria for large shareholders on share transfers.
A senior party official said establishing a solid tax foundation was very important. However, the lack of a comprehensive regulated trading platform and the challenges of income verification in crypto companies pose significant obstacles to effectively collecting tax on virtual assets.
The official added that taxation should be postponed for at least two years to ensure there is a comprehensive system ready to tackle the complexities of crypto.
New legislation
PPP said it plans to propose the second phase of the “Cryptocurrency User Protection Law” at the upcoming 22nd National Assembly to address the gaps identified in the first phase of the law, which was introduced in June 2023 accepted.
The first phase aimed primarily at protecting investors and punishing fraudulent activities, but was criticized for its limited scope and inability to establish a comprehensive regulatory framework.
The proposed legislation will focus, among other things, on defining custodial service providers, legally incorporating listing systems and establishing a crypto exchange to address the need for comprehensive regulation and supervision within the virtual asset market.
Some taxes still need to be collected
Despite the push for a postponement, PPP continues to maintain that completely abolishing crypto tax is not being considered, and adheres to the principle of taxing income.
However, the party is exploring adjustments to the tax criteria, criticizing the tax differences between shares and virtual assets. The proposal aims to harmonize the tax treatment of different capital growth strategies, recognizing the challenges in tracking investment amounts and returns for tax purposes.
The party’s leadership said finalizing central election promises by February is crucial for a timely announcement, signaling a rapid move towards formalizing this position as part of their election campaign strategy.
Under current law, income from the transfer or lending of virtual assets above KRW 2.5 million is subject to a 22% tax, including local taxes, which is in stark contrast to the non-taxable limit of KRW 50 million for shares .