South Korea Reaffirms January Crypto Tax Plan as Democratic Party Weighs Stance

South Korea’s government has reaffirmed its plan to begin taxing virtual assets in January and made clear it does not intend to grant another delay. Market attention is now focused on the ruling Democratic Party, whose formal position could shape the next phase of the debate. Some within the party favor proceeding as scheduled, though a more cautious mood has emerged ahead of local elections in June.

Government Reaffirms January Tax Rollout

National Tax Service Steps Up Preparations

Industry Watches Democratic Party Policy Line

“This Is a Party-Level Issue … Leadership Decision Is Key”

At a National Assembly forum on crypto taxation on May 7, the Ministry of Economy and Finance said it will launch its electronic system for taxing gains and lending income from virtual assets on Jan. 1 as planned. The ministry took a firm line, saying there is no longer any justification for postponing the tax given the need for fairness with labor and business income.

Under the plan, income exceeding the basic deduction of 2.5 million won ($1,800) will be taxed at a flat 22% rate, including local income tax. The income will be classified as “other income,” so investors will not be allowed to carry forward losses to offset gains in later years.

The ministry also rejected criticism that taxing only crypto would be too harsh. Stocks are already taxed in some cases, including for major shareholders and unlisted shares, it said, arguing there is no basis for exempting virtual assets alone. It also defended the “other income” classification, saying the 22% flat rate can be more favorable for high earners than other income categories subject to a comprehensive income tax rate of as much as 45%.

The National Tax Service, which will handle administration of the levy, is also speeding up preparations. Park Jung-yeol, director-general of individual taxpayer services at the agency, said at a recent briefing that officials are preparing to begin accepting income filings from May 2028. The agency also plans to complete this year a legislative notice covering taxation standards for newer transaction types beyond simple trading, including decentralized finance, staking and airdrops.

With tax authorities reiterating their intention to press ahead next year, attention has shifted to the ruling party, which holds the key to any amendment of the tax law. Within the Democratic Party, some voices have argued that the tax should take effect on schedule without another delay.

Jin Sung-joon, a Democratic Party lawmaker who chairs the National Assembly’s budget and accounts committee, said in a broadcast appearance on May 4 that crypto taxation should begin next January as planned. In late 2024, when he served as the party’s policy chief, he also argued that the tax should not be postponed without a special reason and should be introduced even if the deduction threshold were raised to 50 million won ($36,100).

Cho Seung-rae, the party’s secretary-general, has also signaled opposition to delaying the tax for political reasons. He said it was important to allow sufficient deliberation rather than hastily putting together a system ahead of an election.

The Democratic Party has yet to adopt an official position. Industry participants say its final stance now matters even more because the People Power Party has adopted abolishing crypto taxation as its party line.

One industry official said political wrangling over crypto taxation could intensify around June, when local elections are scheduled, and July, when revisions to the tax law are expected to be announced.

An official at the Democratic Party’s Digital Asset Task Force said the issue has moved beyond lawmakers on the National Assembly’s political affairs and finance committees and become a party-level matter, making it difficult for individual lawmakers to comment freely. In the end, the official said, the voices of party leaders, including the policy chief, will be key to determining the party’s final position.