South Korea Reaffirms January Crypto Tax Plan as Ruling Party Weighs Position

South Korea’s government has reaffirmed plans to begin taxing virtual assets in January and made clear there will be no further delay. Market attention is now focused on the ruling Democratic Party’s decision on the issue. While some party members favor proceeding on schedule, others have taken a more cautious stance ahead of local elections in June.

At a National Assembly forum on virtual-asset taxation on May 7, the Ministry of Economy and Finance said it will launch its tax system for income from the transfer and lending of virtual assets as planned on Jan. 1. The ministry took a firm line, saying there is no justification for further postponement given tax equity with other types of income, including wages and business income.

Under the tax plan taking effect next year, income above the basic deduction of $1,800 will be subject to a flat 22% tax rate, including local income tax. The income will be classified as "other income," meaning investors will not be allowed to carry forward losses to offset gains in future years.

The finance ministry also pushed back against criticism that taxing only crypto would be excessive. It said stocks are already taxed in some cases, including holdings by major shareholders and unlisted shares, and that there is no reason virtual assets alone should be exempt. On complaints over the "other income" classification, the ministry said the flat 22% rate could actually be more favorable for high earners than other categories, such as capital gains, where the top comprehensive income tax rate reaches 45%.

The National Tax Service, which will handle administration of the tax, is also stepping up preparations. Park Jung-yeol, head of the agency’s individual taxpayer bureau, said at a recent briefing that authorities are preparing to begin accepting income tax filings in May 2028. The agency also plans to complete this year a legislative pre-notice on rules covering taxation standards for newer transaction types, including decentralized finance, staking and airdrops, in addition to simple trading.

With tax authorities reaffirming their intention to press ahead next year, the focus has shifted to the ruling party, which holds the key to any revision of tax law. Within the Democratic Party, some voices are calling for implementation as scheduled without another delay.

Jin Sung-joon, a Democratic Party lawmaker who chairs the National Assembly’s budget committee, said in a broadcast appearance on May 4 that crypto taxation should begin next January as planned. At the end of 2024, while serving as the party’s policy chief, he also argued that the tax should not be delayed without a special reason and should go ahead even if the deduction threshold is raised to $36,000. Cho Seung-rae, the party’s secretary-general, has likewise signaled opposition to a politically driven delay, saying it is more important to allow sufficient deliberation than to hastily rework the system ahead of an election.

The Democratic Party has yet to adopt an official position. Industry participants say its final stance has become even more important after the People Power Party adopted abolition of the crypto tax as party policy.

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

An official at the Democratic Party’s digital asset task force said the matter is no longer one for digital-asset lawmakers on the National Assembly’s Political Affairs Committee and Strategy and Finance Committee, but a party-level issue. That has made it difficult for individual lawmakers to speak freely, the official said. Ultimately, the voices of senior leaders, including the policy chief, will be decisive in determining the party’s position.