South Korea’s ruling People’s Power Party has initiated efforts to extend the deferment of cryptocurrency profits tax for an additional two years, aligning with its campaign pledge ahead of the upcoming general election in April. According to the Herald Business Daily, the party asserts that before imposing taxation, a comprehensive regulatory framework for cryptocurrencies must be established.
The party emphasizes the necessity of formulating a fundamental framework for cryptocurrencies before delving into taxation, citing the absence of an overarching regulatory structure governing cryptocurrency trading. A party representative highlighted the absence of an authorized entity overseeing cryptocurrency exchanges and emphasized the need for a two-year period to establish such a regulatory system. Additionally, the party underscores the importance of tax policies in safeguarding citizens’ assets and lives, lamenting the government’s oversight of the cryptocurrency market thus far.
The lack of a defined tax base presents a significant hurdle in the implementation of cryptocurrency taxation measures, according to the ruling party. Unlike traditional stock exchanges, there is no regulatory body overseeing cryptocurrency transactions. The party contends that establishing an effective regulatory system will take time, necessitating a delay in the introduction of cryptocurrency taxation.
Plans to levy taxes on cryptocurrency trading profits were first announced in January 2021, with the tax threshold set at earnings exceeding 2.5 million won (approximately $1,900) per year, subject to a 20% tax rate. This threshold is notably lower than that for stock market gains, which are taxed only if they surpass 50 million won (about $37,400). Despite these plans, the implementation of cryptocurrency taxation has faced repeated delays.
Initially scheduled for implementation in 2022, the introduction of the cryptocurrency profits tax has been postponed multiple times. Lawmakers deferred its implementation until 2023, citing shortcomings in the state tax agency's data collection procedures. Subsequently, in July 2022, the government announced another two-year postponement, citing sluggish market conditions in the cryptocurrency sphere and the necessity of formulating investor protection measures.
