South Korea Budget Office Calls for 5-Year Crypto Loss Carryforward, Higher Tax Deduction

South Korea should let investors carry forward digital-asset investment losses for up to five years and raise the basic tax deduction above the current 2.5 million won ($1,800) before digital-asset taxation takes effect in January 2027, according to a proposal.

Edaily reported on August 21 that a research report commissioned by the National Assembly Budget Office proposed allowing losses from digital-asset transfers to be carried forward for as long as five years.

Under the current system, losses incurred in one year cannot be offset against gains in the next. For example, an investor who records a 100 million won ($72,000) loss in 2027 and a 10 million won ($7,200) gain in 2028 would still be taxed separately on the 2028 profit.

The report also said the annual basic deduction, currently 2.5 million won ($1,800), should be raised to at least 6 million won ($4,300). If small retail investors are included in the reporting regime, that could increase the administrative burden for tax authorities and filing costs for taxpayers.

It also proposed classifying rewards from staking and lending as loan income and taxing them separately at 22%. By contrast, newly created digital assets from hard forks should not be taxed immediately, while airdrops should continue to be taxed as miscellaneous income under the current system.

The proposals also included applying lower tax rates or tax credits to trades on domestic exchanges to curb capital outflows to overseas platforms and make tax collection easier. The National Tax Service plans to begin discussions aimed at issuing a notice on digital-asset taxation in October.