As a seasoned financial analyst with extensive experience in the South Korean market, I have closely followed the ongoing debate surrounding crypto taxation and its potential impact on investors. Having witnessed the fluctuations in the crypto market over the years, I can’t help but share my thoughts on this latest development.
A South Korean news outlet has announced that the current administration is contemplating delaying the crypto tax by three more years, meaning that the Korean government will not impose taxes on cryptocurrency capital gains until 2028 instead of the initial plan in 2025.
Crypto Tax Relief to South Korean Investors Likely
Discussion over cryptocurrency taxation in South Korea intensified in 2021 after the National Assembly passed the relevant legislation during the Moon Jae-in presidency. The implementation of this tax law was initially delayed until 2023 due to the presidential election the following year. Later, under the Yoon Seok-yeol administration, the start date was pushed back once again to January 2025.
Critics argue that the tax policy for cryptocurrencies in South Korea is significantly influenced by public opinion, which is shaped by the large number of crypto investors – over 6.45 million as of May 2024, according to data from the Financial Services Commission (FSC).
Amidst the plummeting Bitcoin value and significant downturn in the global cryptocurrency market, concerns over existing tax regulations in South Korea are mounting. A market source disclosed to Hankyung that:
In March, the daily cryptocurrency trading volume on local exchanges reached approximately 20 trillion won. However, this figure has significantly dropped to around 2 trillion won in recent times. If a cryptocurrency income tax is introduced early next year, many investors may choose to withdraw, leading to even lower trading volumes.
Income Tax Postponement Gains Momentum
As an analyst, I’ve noticed that the planned implementation of the financial investment income tax in South Korea is encountering delays. Contrary to the government’s earlier announcement to eliminate this tax, Lee Jae-myung, former leader of the Democratic Party of Korea, expressed on the 10th of this month that “we should give more consideration to the appropriate timing for its implementation.”
If investors have to pay taxes on their crypto gains before taxes on traditional financial investments, they may feel put at a disadvantage. Critics contend that extensively taxing cryptocurrencies is unrealistic due to the inadequate readiness of the system and institutions. A government official stated: “Legislation supplementary to current law is necessary to clearly define cryptocurrencies and distinguish the various businesses within the industry. Only then can taxes be imposed seamlessly. The existing infrastructure is not yet prepared.”
Opponent leaders argue that the government’s inadequate preparation for crypto taxes indicates a failure to fulfill their responsibilities in this area. Furthermore, they contend that the government is overemphasizing public opinion when formulating crypto tax regulations.
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2024-07-15 07:00