South Korean investors seek to delay cryptocurrency tax by two years

South Korean investors collect 50,000 signatures to push for legislative review of cryptocurrency tax extension

South Korean investors have successfully obtained 50,000 signatures, submitting a petition calling for another postponement of cryptocurrency tax to Congress for legislative review. The number of signatures triggered the formal review process of the petition in Congress.

According to current plans, starting from January 2027, South Korea will impose a nationwide tax of 22% on eligible cryptocurrency earnings. Specifically, annual digital asset gains exceeding 2.5 million won will be included in the tax system. The tax authorities plan to formulate detailed implementation standards within this year to prepare for the introduction of income tax on January 1, 2027.

Petition Claims and Current Tax Law Status

It should be pointed out that the transfer of a petition to the Committee for review does not mean that the law will be automatically revised or the effective date will be automatically postponed. Congress's public petition system has called for a two-year delay in the tax plan originally scheduled to take effect on January 1, 2027, while finance officials have said preparations are still in progress.

South Korea plans to impose a national tax rate of 20% on annual income derived through the transfer or loan of digital assets, plus a local income tax of 2%, bringing the comprehensive tax burden to 22%. Each resident enjoys a basic deduction of 2.5 million won (approximately US$1,850) per year.

The petition, which crossed the signature threshold, asked Congress to transfer it to the relevant permanent committee. However, this transfer will not change the Income Tax Law, nor will it guarantee that the committee will vote, nor will it prevent the State Administration of Taxation from preparing for the implementation of the new tax system.

Reason for petition: Computing difficulties and market pressures

The latest petition points out that South Korea lacks a complete system to calculate profits between domestic exchanges, overseas platforms and private wallets. The petitioners requested a two-year delay so that lawmakers and tax authorities could resolve issues involving transaction records, acquisition costs and enforcement.

"Most cryptocurrency investors are suffering heavy losses," the petitioners claimed in the filing, arguing that an immediate tax could put additional pressure on young investors. The document describes digital assets as a possible "wealth ladder" for young people, but this only represents the petitioners 'position rather than an official assessment.

Concerns raised in the petition include the possibility of causing investors to relocate to offshore exchanges and limited tax revenue during periods of sluggish trading activity. However, the document does not provide independent estimates of how much tax the government will collect or how many investors will move assets abroad.

Precedent: Previous similar petitions have not changed the law

As early as May this year, another petition calling for the complete abolition of the cryptocurrency tax also reached the 50,000 signature threshold and entered the committee review stage. But as of September 14, it had not resulted in any changes in the law. This shows that satisfying the signature requirement only opens the legislative process and does not determine the final result.

Detailed analysis of the 2027 cryptocurrency tax system

According to the current guidelines of the State Administration of Taxation, income generated from digital asset transfers and loans will begin to be taxed on January 1, 2027. Parliament passed an amendment to the Income Tax Act in December 2024, approving the most recent two-year extension.

The implementation date was initially set for 2022, and was subsequently postponed to 2023 and 2025 several times, and was finally determined to be 2027. If the new petition is successful, it will be the fourth extension.

Tax calculation method and reporting process

For resident taxpayers, taxable income is equal to the balance of annual sales, exchange or lending income less acquisition costs and eligible transaction fees. The deduction of 2.5 million won is applied after the annual profit and loss consolidation.

Such income will be classified as "other income" and taxed separately from ordinary comprehensive income. Investors are required to declare their taxable cryptocurrency income for the previous year within South Korea's annual tax filing period (May 1 to May 31). As a result, income earned in 2027 will produce the first tax returns in May 2028.

As previously reported, South Korea has retained a January 2027 start date in its final tax reform plan, which means that any new extensions will still have to be implemented through the legislative process by Parliament.

The rules cover direct sales gains from digital asset lending. Since authorities calculate the value of exchanged assets by referring to the value of cryptocurrencies and their corresponding legal tender, currency exchanges may also generate income that needs to be declared.

Preparation and implementation measures of tax authorities

Formulation of detailed standards

According to Yonhap News Agency, Deputy Prime Minister and nominee for Minister of Economy and Finance Lee Hyung-sung said that the State Administration of Taxation plans to release specific tax standards before the end of 2026. Lee Hyung-il said officials aim to prevent taxpayers from experiencing difficulties when filing. He cited factors such as compliance costs, basic deductions and a single tax rate to defend classifying cryptocurrency gains as "other income."

The nominee elaborated on the government's policy stance at his confirmation hearing scheduled for September 15 and compared the planned cryptocurrency tax system with taxes already levied on certain stock transactions and overseas, unlisted or major shareholder equity gains. He said that taxing digital assets will improve tax fairness.

Historical cost identification and collection techniques

The State Administration of Taxation guidelines have addressed several calculation issues. For assets held before the start of tax, the acquired value is usually the higher of the purchase price recorded by the investor and the market value recorded on December 31, 2026.

If investors are unable to determine the actual acquisition cost of assets purchased after implementation, regulations may allow the calculation of constructive expenses based on a percentage of sales. Specific eligibility criteria and allowed ratios still depend on subordinate rules.

Foreign platforms and self-managed assets do not enjoy general exemptions. Relevant reports pointed out that tax authorities have confirmed that private wallets and overseas exchange accounts remain within the scope of the plan's regime.

In terms of preparation for execution, the Korea State Taxation Service acknowledged the difficulty of directly identifying every unreported private wallet transaction. The bureau told lawmakers it plans to acquire commercial tools that can track the flow of funds between blockchain addresses. As previously reported, tax authorities plan to use wallet tracking software before launch in 2027. Similar software has been used by law enforcement and tax authorities to connect transactions on public blockchains.

While transaction tracking itself cannot identify the actual beneficiary of each wallet, exchange records, bank records, transfer history and taxpayer disclosures can provide supporting evidence when authorities attempt to link blockchain addresses to individuals.

International collaboration and future outlook

South Korea expects international reports to become another source of data. Participating jurisdictions intend to exchange information in accordance with the Organization for Economic Co-operation and Development (OECD) Crypto Asset Reporting Framework, and data exchanged in 2028 is expected to cover eligible transactions conducted in 2027.

The rules on pledges, airdrops and blockchain fork income are not as clear as the handling of transfers and loans. The government said the detailed standards would address issues that need clarification before taxpayers submit their first return.

For the requested extension to take effect, lawmakers must pass another amendment to change the January 1, 2027 start date. As of September 14, Congress had not announced a committee hearing or vote date for the latest petition.