- South Korea plans to apply a 20% tax on crypto gains starting in January 2025.
- The Democratic Party proposes increasing tax exemption to $35,900 for crypto investors.
- Authorities are enhancing tools and measures to combat cryptocurrency tax evasion nationwide.
South Korea reaffirmed its plan to tax virtual currency gains starting January 1, 2025, after a series of delays that pushed back the policy from its original 2022 launch date.
Jin Seong-jun, Chairman of the Policy Committee for the Democratic Party of Korea (DPK), emphasized the need for legal clarity and financial stability regarding crypto taxation during a radio appearance.
The plan will impose a 20% tax (22% including local tax) on crypto asset profits. However, concerns remain about domestic and overseas transactions.
Jin acknowledged that while domestic cryptocurrency transactions are easily monitored for tax purposes, overseas transactions pose challenges due to limited tracking capabilities.
To address this gap, the DPK proposes taxing domestic transactions immediately and extending the tax to overseas transactions by 2027, when monitoring tools should be more effective.
Increased Tax Exemption Limit Proposed
In addition to the policy adjustment, the DPK is pushing for an increase in the digital asset tax exemption threshold. Under the current plan, gains below 2.5 million Korean won (approximately $1,795) are exempt.
The proposed changes would raise this limit to 50 million won (approximately $35,900), offering more flexibility for crypto investors. Jin stated this change will be discussed at the upcoming Strategy and Finance Committee meeting on November 26.
Combating Crypto Tax Evasion
South Korean authorities stepped up efforts to prevent tax evasion involving digital currencies. Local governments are using advanced tracking software and partnering with exchanges to access wallet details, enabling them to identify tax dodgers.
Read also: South Korea Debates Raising Crypto Tax Exemption to $35,900
The city of Paju had most recently warned 17 residents to pay due taxes or face forced liquidation of their crypto holdings. In a similar action, officials in North Jeolla Province collected $138,000 worth of cryptocurrency from tax offenders in June 2023.
Despite discussions about delaying the tax policy to 2028, the DPK remains committed to implementing it in 2025. The party believes this is crucial for maintaining financial stability and aligning digital currency taxation with the broader tax framework.
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