Virtual Asset Taxation Policy Has Become More Likely to be Postponed.  (Updated 2022.05.) 

[Executive Summary]  

◼ With the upcoming launch of Yoon Suk-yeol government, taxation on virtual asset, which was scheduled to be enforced on January 1st, 2023 has become more likely to be postponed again. On May 2nd, Deputy Prime Minister and Minister of Economy and Finance-nominee Choo Kyung-ho announced that if Financial Investment Income Tax is given a two-year grace period, taxation on virtual asset which was scheduled to be enforced next year could also be granted a two-year grace period.  

 In his presidential election campaign, President-elect Yoon Suk-yeol had put forward ‘Renovation first, Taxation afterwards’ policy as one of his virtual asset-related pledges. This policy reflects the opinion that taxation should not be imposed on investors when policies and regulations on virtual assets are not yet established and secured. According to the already-existing Income Tax Act, taxation on virtual asset starts on January 1st, 2023. If Income Tax Act goes into effect as scheduled, investors who had invested in virtual asset and acquired capital gain worth more than 2.5 million KRW (basic deductible) will be imposed a 20% tax rate. Income from virtual asset transfer and rental (including withdrawal) of non-residents or foreign corporates will be taxed under Korea Source Other Income. However, the opinion of Choo Kyung-ho, Deputy Prime Minister and Minister of Economy and Finance-nominee of Yoon Suk-yeol government, shows the possibility of additional deferment of taxation on virtual asset income mentioned above. At a confirmation hearing held on May 2nd, People’s Power party member Ryu Seung-geol raised a question on the timing of imposing taxes on virtual asset. Nominee Choo mentioned, “if Financial Investment Income Tax is given a two-year grace period, taxation on virtual asset will also be postponed for two years under the same framework.” He also commented, “regarding virtual assets, legislations on digital assets are being established to prepare investment protection systems and to secure the safety and transparency of virtual asset transactions.” “Our basic policy is that we will levy tax on virtual assets if such legislations are fully equipped and the market matures,” he added. 

However, please keep in mind that this change will only be applied to the transfer income tax for the individual.