Virtual asset taxation implementation in 2027 imminent sparks renewed debate… The second half of the year will be a watershed moment for Congress

The debate over virtual asset taxation has intensified again on the eve of its implementation in 2027. Although the government has stated that it will proceed with the tax as planned, opposition voices regarding fairness and infrastructure deficiencies are also growing.

The government plans to classify income generated from transferring and lending virtual assets such as Bitcoin (BTC) as “other income” and implement separate taxation starting January 1, 2027. Income up to 2.5 million won annually will be tax-exempt, with amounts exceeding that subject to a 20% income tax plus a 2% local income tax, totaling a 22% rate. The first declaration and payment will occur during the comprehensive income tax filing period in May 2028. The National Tax Service has stated that it is working on obtaining data from domestic exchanges and establishing a declaration system.

This taxation was legislated through amendments to the Income Tax Act in 2020. It was originally scheduled to be implemented in 2022 but was postponed three times due to market opposition and insufficient preparations, now set for the current schedule. Notably, it includes mechanisms such as the “special acquisition price exception” (using the end-of-2026 market price as the acquisition cost) to partially ease the tax burden on existing investors.

Controversy over fairness and infrastructure resurfaces

Opponents point out that “fairness” and “technological limitations” are core issues. A petition on the National Assembly’s electronic petition platform calling for the abolition of virtual asset taxation has gained over 30k signatures, increasing public attention. They argue that while taxation on stocks and other traditional financial products has been delayed or eased, virtual assets are being taxed forcibly, which they see as unfair.

Criticism of unclear tax standards also persists. Some suggest that there is a lack of clarity regarding the timing and standards for taxing gains from mining, staking, airdrops, hard forks, and other methods. Additionally, the difficulty for authorities to track transactions flowing to overseas exchanges, personal wallets, and decentralized exchanges (DEXs) is viewed as a problem.

Political debates continue as well. The People Power Party has proposed a bill to delete the taxation clause and, through discussion forums, claims that the National Tax Service is unprepared and that taxing overseas transactions is practically unfeasible.

Government “no longer delaying”… emphasizing policy credibility

On the other hand, the government and ruling party insist on implementing the plan as scheduled. It is reported that the Ministry of Economy and Finance’s tax law amendments to be announced in July will not include any further postponements. The rationale is that further delays would damage policy credibility and undermine fairness between labor income and business income.

They also emphasize that, unlike taxes on financial investment income, virtual asset taxation is a standalone system that has already been legislated. Regarding the issue of tracking overseas transactions, they explain that it can be gradually addressed through the overseas financial account reporting system and the Automatic Exchange of Information (AEOI) system.

The second half of the year will be a critical turning point in the National Assembly

Whether the implementation proceeds and what additional measures are taken will be decided during the tax reform discussions in the National Assembly in the second half of this year. Key contentious points include increasing the basic deduction, allowing loss carryforwards, and clarifying tax standards.

The taxation of virtual assets is of great significance; it is not merely a tax measure but also the starting point for institutionalizing the market. However, some argue that to ensure the system’s credibility, the fairness and effectiveness of the taxation must be addressed as prerequisites.

TP AI Notice: This article uses a language model based on TokenPost.ai for summarization. The main content may be incomplete or differ from the actual details.