South Korean Lawmakers Propose Bill To Abolish 22% Upcoming Crypto Tax

South Korea’s opposition party has proposed a bill to abolish the upcoming income tax on crypto assets, citing US regulators’ guidance on asset classification, concerns about double taxation, and inconsistencies with the current tax system.

According to the report, PPP’s floor leader, Song Eun-seok, introduced the legislation on March 19, seeking to abolish the taxation of crypto assets. If approved, the amendment would remove all provisions governing the taxation of digital assets in the current Income Tax Act.

Under the current digital assets law, crypto assets will be subject to a 20% income tax rate, up to 22% including local taxes, starting January 1, 2027, with a deduction limit of 2.5 million won.

As the report noted, the People Power Party and the Democratic Party of Korea (DPK) clashed over the latest two-year delay, with the PPP and the government supporting the postponement. In contrast, the DPK advocated raising the tax deduction limit to 50 million won rather than postponing crypto taxation, ultimately agreeing to postpone it until 2027.

“Since digital assets are already classified as commodities in Korea and subject to the value-added tax system, imposing an additional income tax on them would create issues of double taxation,” the report added, citing the bill.

The amendment contends that imposing a separate income tax on digital assets raises concerns regarding the fairness and consistency of the tax system, considering that the financial investment income tax has been abolished to promote capital market development and protect investors.

If income tax is imposed in the future, significant practical and administrative difficulties are expected, such as determining the acquisition cost for non-resident foreigners, which would limit the effectiveness of the system.

In response to the People Power Party’s push to abolish the 20% crypto taxes, the Democratic Party of Korea has affirmed that it will review the recently introduced amendment.

“I am aware that there are calls to strike a balance between the stock market and the digital asset market in terms of taxation,” he told reporters after a general meeting of lawmakers on Thursday.

Kim also revealed the South Korean ruling party had not considered a proposal or any measures to abolish the upcoming crypto taxation, as it had “not yet reached a level where it is being seriously discussed or where there is a consensus within the party.”

Nonetheless, he noted that the party’s stance had previously been to proceed with the existing bill, previously advocating a higher deduction limit instead, which could signal the proposed amendment risks limited support from the DPK.