Virtual Asset Taxation Delayed Again for Two Years... "Loss Carryforward for Three Years"

The taxation on virtual asset income, which was scheduled to begin starting next year, will be postponed for another two years.

Deputy Prime Minister and Minister of Economy and Finance Lee Hyung-il held a briefing at the Government Complex-Seoul today (the 5th) and announced that the government will pursue a two-year deferral of virtual asset income taxation through consultations with the National Assembly.

Initially, the government planned to apply a 20% tax rate to the portion of gains from trading virtual assets, including Bitcoin, that exceeds the basic annual deduction of 2.5 million won.

This taxation policy for virtual assets was formalized through an amendment to the Income Tax Act in December 2020, but this marks the fourth postponement plan put forward by the government.

Virtual asset taxation was originally scheduled to take effect in 2022, but it has been repeatedly delayed due to reasons such as lack of preparation, the need for investor protection, equity, and insufficient institutional arrangements.

It was first postponed by one year to 2023, and after being additionally deferred twice by two years each, it had been pushed back to January 1 of next year.

As it has been decided to postpone it once again with less than two months remaining before the implementation of taxation, controversies surrounding policy reliability and consistency are also expected.

Deputy Prime Minister Lee stated, "I take it heavily that we are announcing another tax deferral following three previous postponements of the taxation implementation. Even if the implementation timing is adjusted, the basic tax principle that 'taxation follows income' must be upheld. The government will utilize the upcoming two-year preparation period to ensure that virtual asset taxation is implemented smoothly in 2029."

The government explained that it took into account the fact that the exchange of virtual asset information with the United States will take place starting in 2029.

This reflects opinions from experts, the industry, and the National Assembly pointing out that starting taxation next year could put the domestic market at a relative disadvantage compared to overseas markets.

It also added that as significant changes are expected in the institutional foundation regulating virtual assets once the Digital Asset Act is enacted, preparing for two more years is desirable.

The government plans to overhaul the taxation system during the deferral period by considering market conditions and trading methods.

In particular, considering the high price volatility of virtual assets, it will pursue a plan to tax by consolidating losses and gains over a three-year period.

To this end, it plans to consult with the National Assembly on allowing loss carryforwards.

Loss carryforwards are also recognized in major countries such as the United States and the United Kingdom.

Once the Digital Asset Act is enacted, the government plans to establish an institutional foundation for user protection and rationally refine the taxation system by taking into account market changes resulting from it.

To enhance the effectiveness of taxation, overseas transaction information will also be secured.

The government plans to grasp trends in establishing international information exchange systems and expand infrastructure to seamlessly tax overseas virtual asset transactions by linking and analyzing domestic and overseas tax data.

Information exchange with the United States through the Organisation for Economic Co-operation and Development (OECD)'s Crypto-Asset Reporting Framework (CARF) is projected to take place starting in 2029.

The government also plans to closely inspect the conditions for securing tax data accordingly.

In addition, a working-level team involving experts, the industry, and related ministries will be operated.

The working-level team will discuss rationalizing the tax system, establishing detailed taxation criteria, and devising ways to enhance taxpayer reporting convenience.

It plans to formulate institutional improvement measures in the first half of next year and submit related legislative amendment bills to the regular session of the National Assembly.

In the first half of 2028, detailed taxation criteria are scheduled to be announced and guided to the industry and taxpayers.

(Photo: Yonhap News)
※ Please note: This article was translated by AI and may contain errors.