The proposed tax would impose a 20% capital gains surcharge on bitcoin transactions. According to critics, this has resulted in a large amount of volume being moved overseas.
South Korean legislators have opted to delay a high cryptocurrency tax until 2023. According to the newly enacted measure, the tax would take effect on Jan. 1, 2023. Opposition politicians and members of the local digital asset business have expressed concern over why crypto is taxed differently than stocks. The new proposed capital gains tax on shares would similarly be 20%, but would exclude the first $42,000 (50 million Korean won) earned.
Local politicians seem to be particularly concerned about tax avoidance, since authorities passed a regulation earlier this year requiring Korean exchanges to collaborate with a local bank to provide a fiat gateway in order to improve tax reporting and know your customer (KYC) procedures.
Oleg Smagin, Head Of Strategy at Delio, a Korea-based software business focused on digital assets, feels that this action is an attempt to mobilise the young vote ahead of the March presidential election. Smagin highlighted statistics from the Federation of Industries poll, which indicates that 40% of Koreans in their twenties and thirties had invested in cryptocurrency.
“Both parties are vying for the votes of a youthful demographic that is deeply invested in digital assets,” he said. “Second, the proposed strategy has far too many loopholes and much too little time to close them. Primarily, since the travel regulation has not been finalised, people who choose not to disclose capital gains will have enough opportunity for tax evasion.”
Smagin previously discussed planned high capital gains taxes on cryptocurrency and forthcoming limits on Korea’s unique house rental loans known as Jeonse, in which tenants advance money to the landlord and are reimbursed at the conclusion of the lease. These factors have combined to create a market for crypto loans.
Earlier this week, the chairman of Korea Market, the country’s main stock exchange, advocated for more fair crypto regulations that would place it on an equal footing with stocks.
“The virtual asset market, like the capital market, must safeguard investors and provide transaction stability,” Sohn Byung-doo, the exchange’s CEO and a former regulator, stated at the 2021 Global ETP Conference. “Now that virtual assets have attained the status of’major’ investment assets, the time has come to establish an institutional structure.”
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