Digital Asset Tax to Proceed Despite Fairness Concerns

The South Korean government has confirmed it will proceed with digital asset taxation from 2027 as planned, while delaying the introduction of financial investment income tax (FTI) until market conditions stabilize. Industry representatives argue that the current setup creates an unfair burden compared to stocks, citing lack of preparation for verifying acquisition costs and applying different tax rates based on transaction types.

During a parliamentary hearing, Deputy Prime Minister and Finance Minister nominee Lee Hyung-il stated that FTI implementation would be reviewed only after market conditions stabilize. However, digital asset taxation will proceed under the principle of taxing income where it is generated, with specific guidelines to be published by year-end through National Tax Service notices.

Under current tax law, digital asset gains from sales or rentals starting January 1, 2027, will be taxed as separate income. After deducting acquisition costs and fees up to a KRW 2.5 million threshold, the remaining amount is taxed at 22% including local income tax, with first filings due in May 2028.

The fairness debate centers on differing treatment between digital assets and domestic listed stocks. While FTI was abolished in December 2024, small shareholders' gains from stock trades are generally tax-exempt. Digital asset investors must pay taxes once annual income exceeds KRW 2.5 million, despite similar investment nature.

The government argues that since stocks already face multiple taxes including transaction fees and capital gains tax for certain types, digital assets should also be taxed fairly. Industry groups like DAXA (Digital Asset Exchange Association) are requesting higher basic deductions and minimum five-year loss carryforward provisions to ease initial burdens.