South Korea may scrap crypto tax before it takes effect
South Korea is once again revisiting its approach to taxing digital assets. Lawmakers from the ruling People Power Party have proposed отменить a planned crypto tax that was set to take effect in 2027.
According to Digital Asset, the initiative is intensifying the debate over how to regulate the market without creating additional barriers for investors and the industry.
Move to cancel the tax before it takes effect
The amendment to the Income Tax Act was introduced by floor leader Song Eon-seok. The proposal seeks to remove all provisions related to the taxation of digital assets.
Under current rules, starting January 1, 2027, income from crypto transactions would be taxed at 20% (up to 22% including local taxes). However, proponents argue that such a framework is excessive.
One of the key arguments is the inconsistency in asset classification. Cryptocurrencies are treated as commodities, yet the proposed taxation mirrors that of securities. There are also concerns about double taxation, as digital assets are already subject to value-added tax (VAT).
The proposal also highlights imbalances in the broader tax system. While taxes on financial investment income were previously scrapped to support capital markets, introducing a separate tax on crypto assets could put investors at a disadvantage.
Another issue is administration. Calculating acquisition costs—especially for non-residents—could place a significant burden on the system and reduce its effectiveness.
Why the debate is back in focus
The issue of crypto taxation has been under discussion in South Korea for several years. Authorities have repeatedly delayed implementation, citing the need for clearer rules and better infrastructure.
South Korea remains one of Asia’s largest crypto markets, driven largely by retail investors. Any changes in tax policy directly impact liquidity and investor behavior.
Scrapping the tax could support market activity and make the country more competitive compared to other jurisdictions. At the same time, regulators face the challenge of maintaining oversight and transparency.
If approved, the move could influence regulatory trends across the region, where similar discussions are underway.
Earlier, South Korea tightened rules for storing confiscated cryptocurrencies. The National Police Agency (KNPA) introduced standardized procedures for handling digital assets—from seizure to storage and accounting—following several incidents involving lost funds. This suggests that while tax policy may be softened, oversight of the crypto sector is becoming stricter.
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