South Korea lawmakers mull crypto tax delay until January 2029 citing US data concerns

The South Korean government is reportedly considering another postponement of its 2020 income tax policy concerning digital assets, citing difficulties in obtaining necessary data from United States officials.

Newsis reported on October 26 that South Korea is likely to defer its crypto income tax for a fourth time, following confirmation from a Blue House official that discussions regarding a delay are underway. The most probable new commencement date is January 2029, coinciding with the United States' anticipated entry into the OECD's crypto information-sharing network.

A Blue House official stated on October 25 that "Taxation of virtual assets is being discussed with a view to delaying implementation." Lawmakers and the government are anticipated to amend the Income Tax Act during the tax law reform debate commencing in November, with consultations with pertinent organizations beginning as early as October 26. A government official indicated the final determination will likely occur between late November and early December.

The United States is central to this issue, as an official noted that "Almost half of the virtual asset market is there, the biggest obstacle is that the United States does not provide us with taxation information." Without this data, tax officers would need to track American exchange activity on a per-account basis, potentially shifting the tax burden primarily onto users of domestic exchanges.

The OECD's Crypto-Asset Reporting Framework (CARF) begins operation next year, initiating data exchanges involving 46 nations, including South Korea. Twenty-nine countries, such as Canada, Switzerland, Hong Kong, and Singapore, are slated to join in 2028, with Washington's participation scheduled for 2029.

Initially, Seoul favored a January 2027 start, suggesting that overseas financial account reporting could assist in gathering foreign tax information. However, calls for a moratorium from both the opposition and the ruling party, alongside related legislative proposals, steered the government toward a suspension.

The proposed levy, introduced through an Income Tax Act revision, applies a 22% rate (inclusive of local taxes) on profits exceeding 2.5 million won, after acquisition costs are subtracted. Despite this, the Korean parliament has already suspended the measure three times.

The uncertainty extends beyond the tax rate for market participants. The existing law includes a special opening cost basis for coins held prior to the tax start, and a change in the commencement date alters the date used in that calculation. Under current rules, the law compares the original acquisition cost against a prescribed market value at the start and selects the higher amount.

This ongoing legislative process highlights a wider trend where institutional preparedness for regulatory shifts is complicated by political deliberation. Market participants must differentiate between a political statement regarding 2029 and an operative rule, as the National Tax Service's published guide still references January 1, 2027, pending parliamentary approval.

Why it matters

This ongoing delay highlights the regulatory hurdles in implementing crypto taxation, particularly concerning international data sharing. Readers should watch the November tax law reform debate to see if the 2029 target date is officially set by the legislature.