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

Lee Hyung-il, Deputy Prime Minister and Minister of Economy and Finance, held a briefing at the Government Complex-Seoul today (Nov. 5) and announced that the government will push forward with a plan to defer virtual asset taxation for two years through consultation with the National Assembly.

Initially, the government planned to apply a 20% tax rate to the portion of profits from Bitcoin and other virtual asset transactions 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 insufficient preparation, the need for investor protection, fairness concerns, and a lack of institutional infrastructure.

It was first postponed by one year to 2023, and after being further delayed twice by two years each, it was set to take effect on January 1 of next year.

With the decision to defer taxation once again when less than two months remain before its implementation, controversies surrounding policy credibility and consistency are expected.

Deputy Prime Minister Lee said, "I take heavily the fact that after being postponed three times, I am once again announcing a deferral of taxation." He added, "Even if the implementation timeline is adjusted, the basic tax principle of 'taxing where income exists' must be upheld. The government will utilize the next two-year preparation period to ensure that virtual asset taxation is implemented without a hitch 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 the opinions of experts, the industry, and the National Assembly, who pointed out that launching taxation next year could put the domestic market at a relative disadvantage compared to overseas markets.

In addition, as significant changes are expected in the institutional framework governing virtual assets once the Digital Asset Act is enacted, the government added that it is desirable to spend two more years in preparation.

During the grace period, the government plans to refine the taxation system by taking market conditions and transaction methods into account.

In particular, considering the high price volatility of virtual assets, the government will pursue a system that taxes gains and losses consolidated over a three-year period.

To this end, it plans to consult with the National Assembly to allow loss carryforward deductions.

Loss carryforward deductions are also recognized in major economies 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 overhaul the tax system in consideration of ensuing market changes.

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

The government plans to monitor trends in building international information exchange systems, link and analyze domestic and overseas tax data, and expand infrastructure so that overseas virtual asset transactions can be taxed without omission.

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

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

In addition, a working-level team comprising experts, industry figures, and relevant ministries will be operated.

The working-level team will discuss ways to rationalize the tax system, establish detailed taxation criteria, and enhance reporting convenience for taxpayers.

System improvement measures are planned to be formulated in the first half of next year, with related legislative amendment bills submitted to the regular session of the National Assembly.

Detailed taxation criteria are scheduled to be announced in the first half of 2028 to guide the industry and taxpayers.

(Photo: Yonhap News)