South Korea to Postpone Crypto Tax Bill to 2027

South Korea has decided to delay the implementation of its 20% cryptocurrency tax, originally slated to take effect in 2025, until 2027. This decision follows a recent agreement between the government and the Democratic Party (DP) after a series of discussions. The delay reflects the government’s need for more preparation and institutional reforms before it can systematically enforce taxes on crypto traders.

Background on the Crypto Tax Proposal

The tax bill, first introduced in December 2020, has faced multiple delays. Initially, the tax was expected to be enacted as early as 2021. However, it was postponed to 2025. Now, with this new agreement, the implementation will likely be pushed back to 2027. The tax would apply a 20% rate on profits from crypto trading exceeding 2.5 million won (around $1,781). In addition to the national tax, there would be an extra 2% local tax on these profits.

Political Negotiations and the Delay

The decision to delay the tax came after discussions within South Korea’s National Assembly, where there was debate over the specifics of the proposal. Park Chan-dae, the floor leader of the Democratic Party (DP), initially opposed the postponement, pushing for the tax to be implemented as planned in January 2025. The DP also proposed raising the annual tax exemption threshold from 2.5 million won to 50 million won (around $35,633), arguing that the current threshold was too low.

However, the government rejected the DP’s proposed changes, choosing instead to support the People’s Power Party’s (PPP) plan to delay the tax until 2027. Park acknowledged that more institutional preparation was needed, and suggested that additional reforms would be necessary before such a tax could be implemented effectively.

Future Negotiations and Changes to the Tax Bill

Although the delay has been agreed upon, Park mentioned that there is still room for negotiations regarding the 13 bills currently being discussed in the National Assembly, including the crypto tax bill, the inheritance tax, and gift tax proposals. This means that while the 20% tax on crypto profits exceeding 2.5 million won remains on the table, it could still undergo modifications in the coming months.

“If the government does not take any action, an even greater reduction is possible with the revised plan,” Park said, hinting that the threshold could be raised or other changes could be made to the proposal.

Impact on the Crypto Market and Exchanges

The delay in the implementation of the crypto tax law is seen as a significant relief for both crypto traders and major crypto exchanges in South Korea. Many of these exchanges had voiced concerns over the low 2.5 million won threshold, arguing that taxing profits at this level could drastically reduce trading volumes in the country. Some feared that such a tax could discourage investment in cryptocurrency, especially among smaller traders.

This marks the third time the South Korean government has decided to postpone the virtual asset tax bill. The repeated delays highlight the challenges the country faces in regulating the rapidly evolving crypto market. However, the decision to push the tax deadline further to 2027 indicates that the government is taking a more cautious approach, ensuring that the proper regulatory infrastructure is in place before imposing such a significant tax.

South Korea’s decision to delay the crypto tax bill until 2027 reflects both the government’s desire to establish a more stable regulatory framework and the concerns of stakeholders in the cryptocurrency market. The delay provides more time for discussion and refinement of the tax, with potential adjustments to the tax exemption threshold or other aspects of the proposal. However, it also underscores the complexities of implementing effective taxation in the fast-evolving world of cryptocurrency, where market conditions and trading behaviors are constantly changing.