South Korean authorities have yet again postponed imposing crypto tax until 2025, mentioned in the official announcement. This new proposal aligns with the new President Yoon Suk-yeol’s view, which is of the opinion that crypto taxation is secondary.
The primary task at hand is to ensure that the market infrastructure is in place. Once the market infrastructure is established then the taxation of the asset class will be imposed. The 20% capital gains tax on crypto was initially expected to come into effect from the beginning of 2023.
After that decision, there has been number of reasons for the delay in imposing digital asset taxes. The tax plan was already delayed before. Now the new President has decided to postpone the taxation by two more years.
Once this reform is accepted then the crypto tax will be brought into action in the year 2025. The 20% tax shall be applied on crypto gains that surpass $1,900 in one year. Market enthusiasts are not completely on board with the decision as they feel that taxation above the $1,900 threshold is a little harsh. There are chances of small investors being negatively affected by the same.
Reason For Delay In Crypto Tax Blamed On Volatile Market Conditions
The South Korean officials have announced these new tax reforms recently, the major reason behind the reformation is the market volatility. For taxation to be imposed, the market needs to be stable along with time needed to prepare policies that will be directed towards protecting investors. The plan of imposing the additional 20% tax on crypto gains above $1,900 (2.5 million won) remains unchanged.
Crypto taxation has been a priority for the government as the industry progressed tremendously over the last few years. Thailand too had proposed a 15% crypto gains tax but it had received flak from retail traders which forced Thai authorities to do away with that policy.
Financial Regulators Have Been Working To Strengthen Crypto Regulation
Financial regulation of crypto South Korea has been always in focus and now they are finding ways to strengthen the same. In recent times, the authority has begun to probe into foreign exchange transactions at commercial banks used for illegal use of the digital asset.
South Korea is also concentrating on the “Digital Asset Basic Act” which is a regulatory framework for the digital asset ecosystem in the country. This Act might be introduced in the year 2024. It is also to be taken into account that the crypto tax regime reformation is in line with the economic policy roadmap. It also mentions that the upcoming Digital Asset Basic Act should regulate ICOs and the listing of cryptos.
Additionally, this delay of planned tax on the industry is a part of the broader tax reform which shall help corporate investments.
Finance Minister Choo Kyung-ho also has mentioned,
The government plans to help companies actively expand investment and create jobs…. If the tax cut boosts economic vitality, this will prop up the economic growth and boost tax revenue in the long term. Then, we could achieve the goal of enhancing fiscal soundness
Suggested Reading | South Korea To Pour $177 Million Into Metaverse Projects
Featured image from OhFact, and chart from TradingView.com