MORGANABLE BUSINESS / DIGITAL FINANCE
South Korea’s ruling Democratic Party has formally asked the government to postpone a tax on cryptocurrency income that is due to begin in January 2027.
Akure —
South Korea’s ruling Democratic Party has formally asked the government to postpone a tax on cryptocurrency income that is due to begin in January 2027. The proposal marks another change to a policy that lawmakers first approved in 2020.
Party leader Kim Min-seok announced the decision on Wednesday, November 4, after the party reviewed concerns about industry readiness, tax reporting and fairness among investors.
The proposed delay would give cryptocurrency businesses and investors more time to prepare for the new rules. However, the party has not yet secured a legal change.
The tax remains scheduled to start on January 1, 2027, unless the National Assembly amends the law. Therefore, investors and exchanges still face uncertainty as lawmakers discuss the next steps.
Under the current plan, South Korea would impose a 20 per cent national tax, plus a 2 per cent local income tax, on annual cryptocurrency gains above 2.5 million won.
The combined rate is 22 per cent. The levy would apply to income from selling or lending digital assets, rather than the total value of an investor’s cryptocurrency holdings.
PARTY WANTS A WIDER REGULATORY FRAMEWORK
Kim said the party believes South Korea should first pass the Digital Asset Basic Act. The proposed legislation would establish a broader regulatory framework for the cryptocurrency market.
It is expected to address issues that the existing rules do not fully cover, including the operation of digital asset businesses and the treatment of stablecoins.
The party argues that a clear framework should come before the tax takes effect. It wants companies to understand their legal duties and investors to have time to adjust to the new system.
In addition, lawmakers say authorities must review the principles behind the tax and consider conditions in the domestic digital asset industry.
However, the 2024 law does not provide a complete rulebook for every part of the sector. The proposed basic act is intended to fill some of those gaps.
Lawmakers have yet to complete the legislative process, leaving businesses uncertain about the final requirements. The ruling party now wants that work to progress before the tax begins.
FOURTH POSTPONEMENT SINCE 2020
South Korea first legislated the cryptocurrency income tax in 2020. Authorities initially planned to introduce it in 2022, but lawmakers delayed the start several times. The schedule later moved to 2023, then 2025 and finally January 2027.
The latest proposal would therefore mark the fourth postponement. Each delay has reflected concerns about how authorities would identify taxable gains, collect reliable information and protect investors from unfair treatment.
The repeated changes have also created uncertainty for cryptocurrency exchanges, tax advisers and people who trade digital assets.
The ruling party has not announced a final new start date. Some lawmakers have discussed a delay of about two years, which could move implementation to 2029.
However, that timetable remains a proposal rather than an approved policy. Kim said the party would set a clear postponement period while preparing the conditions needed for implementation.
OVERSEAS TRANSACTIONS POSE A CHALLENGE
One major concern involves cryptocurrency transactions conducted through overseas exchanges.
South Korean tax authorities need reliable records to calculate an investor’s gains, including the original purchase cost and the proceeds from a later sale.
However, officials may not always have complete information about activity on foreign platforms.
International information-sharing rules may help close the gap. The Organisation for Economic Co-operation and Development has developed the Crypto-Asset Reporting Framework, known as CARF.
It aims to help participating tax authorities exchange information about cryptocurrency transactions. However, countries are adopting the framework on different schedules, which complicates the timing of a national tax system.
INDUSTRY PREPARATION AND INVESTOR FAIRNESS
The proposed delay has implications for cryptocurrency companies as well as individual investors.
Exchanges may need to upgrade their systems, retain more detailed records and help customers understand how to report taxable gains. These changes require time, money and coordination with government agencies.
Investors also need clear rules. They must know which transactions count as taxable income, how authorities will calculate acquisition costs and what records they should keep.
Without clear guidance, people who trade through different platforms could face confusion or disputes over their tax bills.
Others argue that authorities should not introduce the levy before they can apply it consistently.
They warn that weak reporting systems could place extra pressure on domestic exchange users while making it harder to track overseas activity.
The ruling party says it must consider both positions before setting a new date.
WHAT HAPPENS NEXT
The proposal does not automatically change the law. South Korea’s National Assembly must complete the required legislative steps before the government can move the start date.
Lawmakers will need to consider the proposed amendment, agree on the length of any delay and settle the wider regulatory framework.
The government has not yet accepted the party’s request. Finance Minister Lee Hyoung-il has previously supported starting the tax on schedule.
While lawmakers and industry representatives have called for more preparation. The difference in views means negotiations will remain important.
For cryptocurrency investors, the immediate position is unchanged: the current law still points to January 2027.
They should therefore avoid assuming that the tax has been cancelled or officially moved to 2029. Instead, they should follow parliamentary decisions and keep records of their transactions.
The ruling party says it wants legislation, reporting systems and taxpayer guidance ready before the levy begins.
Whether lawmakers can complete that work and agree on a new timetable will determine the next stage of the policy. Until Parliament approves a change, the planned tax remains in place.
