Stocks Are Tax-Free, Crypto Faces 22% Tax as South Korea’s Virtual-Asset Regime Draws Criticism

2027 Virtual Asset Tax System Review Forum

Critics say major gaps remain in the framework

Income should be classified by type of activity

Fairness with the financial investment income tax also needs review

Tax infrastructure remains inadequate

South Korea is set to begin full-scale taxation of virtual assets, or cryptocurrencies, next year, but criticism persists that the system still has major institutional gaps. Despite years of discussions dating back to 2020, the framework remains less refined than those in major overseas markets, speakers at a forum said.

At the "2027 Virtual Asset Tax System Review Forum" held at the National Assembly in Seoul's Yeouido on Sept. 3, Park Jong-su, president of the Korean Association of Tax Law, said virtual assets generate income through a range of economic activities beyond trading and exchange. He said the current tax code has neither a properly organized income classification system nor the enforcement infrastructure needed to support it.

The forum was hosted by Democratic Party lawmaker Moon Jin-seok and organized by the Digital Asset eXchange Alliance, or DAXA, and the Korean Association of Tax Law.

Virtual-asset taxation is scheduled to take effect on Jan. 1, 2027. Under the current Income Tax Act, income generated from the transfer or lending of virtual assets is classified as miscellaneous income. After an annual deduction of 2.5 million won, it is taxed at 20%. Including local income tax, the effective rate is 22%.

Park divided income-generating virtual-asset activities into seven categories: trading and exchange; lending and deposit arrangements structured like stock borrowing and lending; staking; mining and validating; liquidity provision; airdrops; and hard forks.

While all seven can generate income, the current tax code is effectively focused only on transfers and lending, making it difficult to establish a sound basis for taxation, he said.

Trading and exchange have similarities to capital gains, which could provide some legal justification for taxation, Park said. Other virtual-asset activities, however, do not fit within any existing income classification under the tax code.

Without a clear income classification, winning taxpayer support will be difficult, he added.

Park also said South Korea's system is overly uniform compared with those in major countries. He pointed to the possibility of double taxation if all virtual-asset income is lumped together as miscellaneous income.

Major economies including the US, UK, Japan and Germany separate disposal gains and losses from mining or staking rewards depending on the nature of the transaction, Park said. If South Korea uniformly taxes virtual assets as miscellaneous income, taxpayers could face double taxation and a heavier burden.

He also cited fairness relative to other investment products as another issue. Domestic listed stocks and virtual assets serve similar economic functions as investment assets, Park said. Taxing virtual assets regardless of investment size while capital gains on domestic listed shares remain exempt after the abolition of the financial investment income tax would undermine policy consistency.

Park said shortcomings in tax infrastructure also need to be addressed before the levy takes effect.

Following last year's tax-law revision, the method for calculating the acquisition cost of virtual assets was unified under a resident-by-resident total average cost method. As a result, taxpayers must combine transaction records across personal wallets, overseas exchanges and decentralized finance, or DeFi, platforms. That has prompted criticism that virtual-asset taxation will rely too heavily on voluntary reporting by taxpayers.

Taxpayers who use multiple exchanges or personal wallets bear the burden of consolidating and reporting all transaction records themselves, Park said. There is also no system that allows one virtual-asset business operator to verify records held by another, raising concerns about whether the rules can be enforced smoothly in practice.

Park said it would not be enough to simply begin the planned 2027 regime, which imposes a unified miscellaneous-income tax on gains from transfers or lending, without broader reforms. Legislative work on income classification and tax procedures should come first, he said.