Key Points
- South Korea’s Democratic Party is finalizing legislation for a 20% tax on crypto profits, with a significantly increased tax deduction of 50 million won ($38,000 USD), rejecting calls for further tax deferrals
- The party argues this structure will mainly affect large-scale investors, as the high deduction threshold would only impact traders with approximately 1 billion won ($760,000 USD) in investments
Legislative Details and Timeline
The Democratic Party has confirmed its intention to process the virtual asset taxation bill through the National Assembly’s Finance Committee on November 26th. The revised tax law would significantly increase the deduction limit for crypto trading profits from 2.5 million to 50 million won. The bill also includes provisions allowing taxpayers to use up to 50% of the total transfer value as an alternative when the actual acquisition value is difficult to verify.
Political Strategy and Negotiations
Despite mounting pressure from crypto investors and some party members advocating for a tax deferral, the Democratic Party has opted for a conciliatory approach through increased deductions. The party contends that this strategy effectively nullifies taxation for most investors, as reaching the 50 million won threshold would require approximately 1 billion won in investments at a 5% return rate.
Implementation and Political Implications
The party holds a strong position in negotiations, maintaining that if no agreement is reached with the government, they could force the implementation of the original law through a parliamentary vote on December 2nd. This would result in the current 2.5 million won deduction limit taking effect from January 2024. While the Democratic Party prefers to reach a consensus with the ruling party, they are prepared to take a hardline stance if the government insists only on deferral.
The taxation system, originally scheduled for implementation in January 2022, has already been delayed twice and is now set to take effect in 2024, with a tax rate of 20% (22% including local tax) on profits exceeding the deduction limit.
