The Democratic Party of Korea has confirmed its intention to introduce a 20% cryptocurrency taxation starting in January 2025. The new framework will impose a 20% tax with an additional 2% local tax on crypto profits exceeding 50 million Korean won ($35,919). This tax on cryptocurrency profits was initially introduced in October 2021 during the tenure of former President Moon Jae-in. Originally set for 2022, the implementation was delayed twice due to pushback from investors. The revised exemption limit represents a significant increase from the former threshold of $1,795, which was approved by South Korea’s National Assembly.

New Tax Framework Details

The updated framework ensures that the majority of retail investors remain unaffected by the new tax rule. Furthermore, the proposal allows taxpayers more flexibility as they can claim up to 50% of the total sale price as the acquisition cost if investors don’t have accurate records. These updates were implemented to help stabilize the market and ease investor concerns.

Tax Exemptions and Foreign Investor Policies

South Korea currently has no capital gains taxes on crypto. Additionally, foreigners can benefit from a 19% flat tax rate for income tax, which effectively becomes 20.9% after including the resident tax. However, it is important to note that it is impossible for foreigners to sell crypto for fiat on Korean exchanges unless they create a company.

It is impossible for foreigners to sell crypto for fiat on Korean exchanges unless they create a company.

Policy Implementation and Legislative Actions

Last year, the administration’s policy was set to be implemented in January 2023. However, the then-President Yoon Suk Yeol’s government pushed it back to 2025 amid concerns that the introduction of the tax would overwhelm investors and negatively impact the market.

In June, South Korean officials from the Ministry of Economy and Finance proposed that the nation’s legislative assembly consider stopping an income tax on crypto gains altogether. This proposal is part of the government’s broader move to abolish the upcoming tax on financial investments, which includes both stocks and funds.

Upcoming Legislative Votes

Key legislative votes are scheduled for November, with the Tax Subcommittee of the Strategy and Finance Committee set to review the proposal on November 25. This will be followed by a plenary session vote anticipated on November 26. The Democratic Party of Korea is working to finalize the framework ahead of its planned rollout. For now, South Korea aims to strike a balance between protecting its investors and regulating the market.

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