South Korea Ruling Party Moves to Delay Crypto Income Tax to 2029

South Korea's ruling party is for the first time pushing legislation to delay taxation of virtual-asset, or cryptocurrency, income by about two years from the current schedule. The proposal aims to defer taxation until a system is in place to secure overseas trading data, preventing the tax burden from falling disproportionately on users of domestic exchanges.

According to the virtual-asset industry on Oct. 15, Rep. Park Min-kyu of the Democratic Party plans to introduce an amendment to the Income Tax Act. Instead of specifying a fixed start date, the bill would make the tax effective on Jan. 1 falling two years after the first international exchange of virtual-asset transaction information.

If the first information exchange under the Organization for Economic Cooperation and Development's Crypto-Asset Reporting Framework, or CARF, takes place as scheduled next year, taxation would begin on Jan. 1, 2029. That would be two years later than the current effective date of Jan. 1, 2027, under existing law.

A central issue raised by Park's office is that the government's ability to obtain tax data differs depending on the trading venue. Authorities can identify transactions on domestic exchanges, but there are limits to verifying income generated on overseas exchanges until the international information-sharing system begins operating.

Starting taxation under those conditions could concentrate the tax burden on users of domestic exchanges. Park's office also said inadequate tax infrastructure could not only hamper tax collection but also make it difficult for investors to predict their tax obligations.

The timing of U.S. participation in the information-sharing system was also cited as a reason for the amendment. Because the U.S. is set to join CARF in 2029, the proposal argues that the launch should be adjusted to match the conditions needed to secure overseas trading data.

The proposal also reflects the view that basic rules for the virtual-asset market should come first. It argues that taxation should follow after the Digital Asset Basic Act establishes an overall institutional framework for the market.