South Korean lawmakers are ready to postpone taxation of digital assets for another year, which could be a huge win for the local crypto industry.
Representatives of the National Tax Subcommittee, the South Korean Legislative Assembly, reached a bipartisan agreement on November 29 that approved a change that could delay the introduction of crypto tax by one year. If the change is adopted at a meeting of Parliament on December 2, taxation will start on January 1, 2023, instead of 2022, as previously planned.
Democrats, who have called for the delay, have condemned deficiencies in the information-collection procedures that the National Tax Agency will implement.
One such measure might be to accept a base cost of 0 won ($0) for crypto assets that have been dormant in private wallets, and the purchase price cannot be proven. This will place a significant tax burden on long-term owners who held coins in private wallets before the tax legislation took effect. In fact, they will be taxed on the full value of the assets, not just the profits.
Representative Kim Young Jin, Chairman of the Tax Subcommittee, also pointed out the problem of requiring citizens to pay taxes on cryptocurrencies, while the government has yet to adopt an official definition of what a cryptocurrency or virtual asset is.
“It is an inconsistent tax system with no clear basis for how cryptocurrency is legally defined in our system…but only in Korea is taxation applied before regulation.”
Tax advocates, especially Finance Minister Hon Namke, believe that the tax system must be fair so that those who profit from cryptocurrency trading contribute their fair share.
In recent months, Minister Hong has repeatedly suppressed the debate on taxing cryptocurrencies at a general meeting of the National Assembly.
Related: South Korea’s leading blockchain faces increased competition in the NFT market.
The annual battle for tax evasion status has led to misinformation and confusion among both citizens and lawmakers. During 2021, controversial news about the tax was published periodically.
Recently, on November 23, the Financial Services Commission (FSC) changed its opinion that the NFT will not be taxed and said it is working on treating it as a tradable cryptocurrency.