South Korea postpones 20% tax on crypto gains to 2025
South Korean government postpones the controversial 20 percent crypto tax for the second time. Tax to be imposed from 2025
By Shashank Bhardwaj
The South Korean government has delayed plans to impose a 20 percent tax on all crypto earnings until 2025. On Thursday, government officials announced their new tax reform plans, deferring crypto tax policy to 2025, citing stagnant market conditions and the time needed to prepare investor protection measures.
The announcement comes after the country's lawmakers delayed initial plans to tax virtual assets until 2023 in December. The initial plan to levy an additional 20 percent tax on crypto gains exceeding KRW 2.5 million ($1,900) in a year remains unchanged. Some reasons for the delay were attributed to the current global market outlook, which is generally negative. The legislators were also concerned about the time required to prepare for investor protection measures.
Yoon Suk-yeol, South Korea's president-elect, stated that imposing taxes without a clear basis for legally defining crypto assets in the country's system would be inconsistent. As a result, it would be preferable to postpone the tax until the crypto market matures and new legislation is thoroughly prepared to ensure transparency and investor protection.
The contentious 20 percent crypto tax was supposed to go into effect in January 2022, but lawmakers in the country delayed it until 2023. It has now been postponed for another two years. According to South Korean blockchain advocate Harold Kim, one reason for the 20 percent tax delay could be that small crypto investors would be unfairly targeted, given that the threshold for capital gains in the traditional stock market is much higher.
During the election campaign, Suk-yeol promised to abolish the capital gains tax to help retail investors and to postpone taxation on crypto assets for two years. According to President Yoon's plans for the crypto and Web 3.0 ecosystem in South Korea, the Digital Asset Basic Act (DABA) will be introduced to lawmakers sometime in 2023. His stance came as politicians from both parties sought to appeal to millennial and Gen Z voters ahead of the presidential election.
Other countries that have implemented such crypto taxes have run into serious problems. Thailand proposed a 15 percent tax on crypto gains. However, the Thailand retail traders were outraged due to the new taxation policy. The government was eventually forced to abandon the tax policy. Beginning April 1, India imposed a 30 percent tax on crypto. Heavy taxation has wreaked havoc on the country's crypto exchanges, with trading volumes dropping by more than 90 percent within weeks of the implementation of new tax laws.
Shashank is the founder at yMedia. He ventured into crypto in 2013 and is an ETH maximalist. Twitter: @bhardwajshash
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