South Korean legislators are close to deferring taxes on digital assets for another year, which might be a huge gain for the local crypto business.
Representatives from South Korea’s National Assembly’s Tax Subcommittee struck a bipartisan agreement on Nov. 29 by supporting an amendment that might delay the cryptocurrency tax by a year. If the proposal is approved in a legislative session on Dec. 2, taxing will commence on January 1, 2023, rather than 2022.
Democratic legislators who pushed for the postponement cited inadequacies in the National Tax Service’s proposed data collection techniques (NTS).
For digital currencies that have remained inactive on private wallets where the purchasing price could not be proved, one such technique would assume a 0 KRW ($0) cost basis. Long-term holders who have been keeping bitcoin in private wallets before the tax reform takes effect would face a hefty tax burden. They’d be taxed on the full asset price, not simply the profits they earned.
Representative Kim Young-jin, the Chairman of the Tax Subcommittee, also brought up the issue of people paying taxes on cryptocurrencies when the government has yet to create an official definition of what a digital currency or virtual asset is.
“There is an inconsistent system for imposing taxes without a clear basis on how to legally define cryptocurrencies in our system… but only in Korea does taxation come before regulation.”
Like Finance Minister Hong Nam-ki, tax advocates believe that the system should be fair so that individuals who profit from crypto trading pay their fair amount.
Minister Hong has regularly shut down discussions on the crypto tax in open sessions at the National Assembly over the last several months.
Both public and policymakers have been confused and misled by the year-long fight about the status of the tax postponement. Throughout 2021, conflicting news stories concerning the tax have been produced regularly.
The Financial Services Commission (FSC) recently changed its stance on whether or not NFTs will be taxed, stating that they were moving toward treating them the same as tradable cryptocurrencies.