South Korea plans to tax crypto gains over $1,740 as political battle moves to parliament

South Korea is set to begin taxing cryptocurrency gains that exceed 2.5 million won (approximately $1,740) starting January 1, 2027. The tax rate will amount to a combined 22%, including a 20% national tax and local income tax. This development marks the country’s third postponement of the tax, which was originally slated to take effect in January 2022 but was delayed until 2025, and now further deferred until 2027. Deputy Prime Minister Koo Yun-cheol confirmed during a National Assembly Finance and Economy Planning Committee meeting on July 29 that the government plans to proceed with the taxation on schedule next year.

Under the current tax framework, income derived from the transfer or lending of cryptocurrency will be classified as "other income." Taxpayers are allowed an annual deduction of 2.5 million won, and only the gains exceeding this threshold will be taxed. Despite the government’s push, the plan faces criticism. Kim Sang-hoon, a member of the opposition People Power Party, highlighted concerns regarding the lack of provisions for loss carry-forwards, which he warned might undermine domestic demand and encourage investors to move their activities to foreign centralized exchanges, decentralized platforms, or peer-to-peer markets. Kim also suggested that implementation would be premature until the OECD’s cross-border Crypto-Asset Reporting Framework is fully operational.

The introduction of the tax is not yet guaranteed due to ongoing legislative challenges. A bill introduced in March proposes abolishing the crypto tax by removing crypto income from the Income Tax Act. This bill was reviewed on July 29 and referred to a subcommittee for further consideration. If no repeal or further delay occurs, the tax will be enacted on January 1, 2027. Deputy Prime Minister Koo noted that any proposals for change would require a comprehensive review of South Korea’s broader capital-market tax regime, particularly regarding whether cryptocurrency profits should be treated as capital gains.