In a significant turn of events, South Korean lawmakers are set to reconsider their proposed crypto tax framework following a petition that has garnered overwhelming support from the public. This petition, aimed at abolishing the long-delayed taxation system for virtual assets, surpassed the necessary threshold of 50,000 signatures, marking a pivotal moment for crypto investors in the country.
On May 21, just eight days after its launch, the “Petition for the Abolition of Taxation on Virtual Assets” reached the required signature count. Under current regulations, for a petition to be automatically reviewed by the National Assembly, it must gather at least 50,000 signatures within a 30-day period. The swift accumulation of signatures indicates a strong sentiment among South Korean investors and some policymakers against the proposed taxation.
The impending Income Tax Act, which aims to impose a tax rate of up to 22% on crypto profits exceeding 2.5 million won annually, is set to take effect on January 1, 2027. Originally proposed for implementation in January 2022, the rollout of this taxation framework has faced multiple delays, leading to growing frustration among stakeholders.
As of now, the petition has collected over 53,000 signatures, and it will be forwarded to the Finance, Economy, and Planning Committee for further evaluation. This committee will determine whether to escalate the petition to the Plenary Committee for more extensive discussion.
In its arguments, the petition highlights the recent repeal of the financial investment income tax, which was enacted to stimulate capital market growth, questioning the rationale behind imposing a distinct taxation system for crypto assets. The petition states, “There are significant concerns that current policies are excessively focused on regulation and securing tax revenue, while neglecting consideration for industrial competitiveness and securing global market leadership.” It warns that enforcing taxation primarily for short-term revenue could lead to detrimental long-term effects, including a contraction of the industry and loss of capital and talent.
Moreover, the petition criticizes the government’s push to introduce taxation before establishing essential regulatory measures such as short-selling regulations, investor protection frameworks, and monitoring systems for unfair trading practices. It calls for a comprehensive re-evaluation of the crypto taxation system, suggesting that a mere postponement or superficial adjustment would be insufficient and detrimental to the public interest.
Despite the public outcry against the crypto tax plans, previous reports suggest that the likelihood of abolishing or delaying the taxation framework remains low. Parliamentary petitions historically have had limited success in instigating legislative changes, and government officials appear committed to implementing the tax by the stipulated date in 2027.
In a separate legislative effort, the People Power Party (PPP) recently introduced a bill aimed at amending the Income Tax Act to eliminate provisions concerning the taxation of digital assets. The bill, spearheaded by PPP floor leader Song Eun-seok, argues that a separate income tax on crypto assets raises fairness and consistency issues within the tax system.
Nonetheless, the National Tax Service (NTS) is moving forward with plans to implement the crypto taxation framework. Recently, Park Jeong-yeol, Director of the Individual Taxation Bureau at the NTS, revealed that the agency is actively preparing to collect data from cryptocurrency exchanges and establish a comprehensive taxation system. The NTS is also developing an AI-driven infrastructure to track crypto investment gains, which it aims to deploy by the end of the year.
