South Korea’s main opposition party has moved to scrap the planned income tax on crypto gains, escalating a high-stakes debate over how digital assets should be taxed as the 2027 implementation date approaches.
What happened
- On March 19, People Power Party (PPP) floor leader Song Eun-seok filed an amendment to the long-delayed Income Tax Act that would remove all provisions taxing digital assets. The filing was reported by local outlet Digital Asset.
- If passed, the amendment would abolish the separate 20% income tax (22% including local levies) scheduled to take effect on January 1, 2027, with a current annual deduction cap of 2.5 million won.
Context and history
- The government originally planned to impose a 20% tax on crypto gains in January 2022. That timetable has been pushed back three times, including a two-year delay announced in December 2024 that set the current 2027 start date.
- The most recent postponement exposed divisions between PPP and the ruling Democratic Party of Korea (DPK). PPP and the government backed the delay; the DPK pushed instead to raise the deduction limit to 50 million won. The parties ultimately agreed on postponement to 2027.
Why the PPP wants abolition
- The PPP’s draft cites recent joint guidance from U.S. regulators — the SEC and CFTC — classifying most digital assets as commodities rather than securities. The party argues this undermines treating crypto under the same tax framework used for securities in Korea.
- The bill points out that digital assets in Korea are already managed under the value-added tax system and effectively treated as commodities, so adding an income tax would create double taxation.
- The amendment also argues the move would be inconsistent with broader Korean tax policy: the financial investment income tax was abolished to spur capital markets and protect investors, and a separate crypto income tax could be at odds with that objective.
- Practical concerns were raised too, such as administrative difficulties in calculating acquisition costs for non-resident foreigners—potentially limiting the tax’s enforceability.
Ruling party reaction and next steps
- The DPK said it will review the PPP’s amendment. Senior Deputy Floor Leader for Policy Kim Han-kyu acknowledged the equity concerns between how stocks and crypto are taxed and said lawmakers will discuss the bill in the National Assembly’s Finance and Economy Committee.
- Kim also noted the ruling party has not formally considered abolishing crypto taxation and has no internal consensus toward that end. The DPK previously favored increasing the deduction limit rather than scrapping the tax, suggesting the PPP proposal may face limited support.
What this means for crypto markets
- The PPP bill ups the political stakes ahead of the 2027 rollout and highlights ongoing uncertainty for investors and industry players about the future tax regime.
- Even if abolition is unlikely to pass quickly, the development signals lawmakers are still debating fundamental questions about how to classify and tax digital assets—a debate that will shape Korea’s crypto environment in the years ahead.
Read more AI-generated news on: undefined/news
