South Korea to Enforce 20% Crypto Tax by 2025 Deadline

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As a seasoned crypto investor who has weathered multiple market cycles and navigated the ever-changing regulatory landscape, I find South Korea’s recent move to raise the tax-free threshold for cryptocurrency gains from 2.5 million won to 50 million won is indeed a breath of fresh air.

In simple terms, South Korea’s Democratic Party of Korea (DPK) is advancing with its plan for crypto taxation in 2025, but with a major change that might favor numerous investors. The party has put forward the idea of increasing the tax-exempt limit from 2.5 million won to 50 million won, which translates to approximately $35,919 USD. This represents a significant adjustment in how South Korea handles digital asset taxation.

The proposed tax law for cryptocurrencies, which has experienced several postponements since its intended start in January 2022, will keep its fundamental 20% rate (22% including local taxes) on cryptocurrency profits. Yet, the significant rise in the threshold for exemptions symbolizes a tactical shift to allay concerns within the crypto community while preserving regulatory supervision.

The revised strategy proposes an easy-to-implement method for traders facing difficulties in recording their initial investment costs. To account for the volatile nature of the cryptocurrency market, it’s proposed that traders can use up to half of their sale price as an estimate for their original purchase price when accurate records are lacking.

New Exemption Threshold Targets High-Volume Traders

An official from the Finance Committee emphasized the importance of the revised exemption limit, noting that investors must oversee portfolios valued at approximately 1 billion won to surpass the 50 million won cap (with a projected return of 5%). Consequently, this modification implies that only a select group of high-volume traders will be subject to taxation.

According to the Finance Committee, since the maximum deduction is capped at 50 million won, if we consider a return of 5%, then the minimum amount needed for investment would be around 1 billion won. This means that the majority of investors, except for a select few wealthy individuals or large-scale investors, might not fall under the tax bracket due to this limit.

After careful consideration and discussions about possible postponements, the Democratic Party has opted to stick with the 2025 schedule for their decision, but they’ve also decided to make adjustments that will benefit individual investors by increasing the exemption limit.

The proposed plan, having been amended, is set to be reviewed by the tax committee of the National Assembly on November 25, 2024. If approved, it will then be put up for a vote in the assembly’s main meeting on November 26, 2024.

Political Implications and Negotiations

The Democratic Party remains resolute in pushing through their tax structure, facing some resistance. They view other suggestions, like postponements, as strategic moves to exploit the topic during upcoming elections, labeling them as political tactics.

The talks between the Democratic Party and the current government are still happening, and it appears that the Democratic Party holds the upper hand in these discussions. If no agreement is made during the Planning and Finance Committee phase, then the tax law will progress automatically to a full session in December 2024 without further approval.

An official from the Democratic Party’s policy committee underlined the significance of arriving at an agreement, noting that discussions would persist until the assembly meeting. Yet, it is also evident that if collaboration falls through, they possess the authority to enact the initial law, effective from January 2025, with the lower exemption threshold set at 2.5 million won.

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2024-11-20 14:25