South Korea’s Democratic Party (KDP) is keen on its plan to introduce a 20% tax on gains made from digital assets. The legislated tax is set to come into operation in January 2025. To the community, the party will seek to increase the number of taxable capital gains from $1,800 to $36,000, which they claim only affects ‘big fish.’
The KDP’s position is even bleaker than that of the ruling People’s Power Party (PPP), which has suggested pushing back the crypto tax until 2028.
Finally, on November 20, local media informed about the KDP, which said that PPP’s delay plan was, in actuality, a political ploy to use this proposal in the next elections. The KDP complained that this delay would buy large investors time to escape tax for as long as possible.
KDP Proposes Higher Crypto Tax Threshold to $36,000 for 2025 Implementation
Under its new proposal, the KDP seeks to tax crypto investors based on gains in excess of 50 million won ($36,000), down from an initial amount of 2.5 million won ($1,800). The previous plan, which would have subjected capital gains from bitcoins to 20% for any value over $1,800, has been criticized by cryptocurrency stakeholders and investors, arguing that the taxation was too punitive for small traders.
The KDP seeks to restore solvency in the crypto tax policy by increasing the bar to $36,000, mirroring the tax policy in the stock market, where individuals are charged based on gains over $200. To these meager profits, the KDP thinks this change would remove the tax sting because few investors earn more than this number anyway. As per the party, this reform would propose that only considerable players in the crypto market would feel the pinch of the tax.
The South Korean crypto capital gains tax was planned to be effective early this year, in 2021. However, after serious opposition from the industry, the government delayed the tax to 2023. The poor performance raised concern and shifted to January 1, 2025. However, with KDP’s insistence on the tax being implemented next year, 2025, South Korea’s crypto tax Li’s fate remains debatable.
The KDP’s proposal has not been concluded, and whatever deal is made with the PPP will determine whether the tax will be implemented the following year as scheduled or extended to 2028.
Regarding the South Korean experience, the debate on crypto taxation shows the problem of establishing an adequate level of regulation that would meet the objectives of both itself and investors and the crypto industry as a whole.
The KDP presented the plan to implement the 20% tax in 2025 with a higher threshold, but the PPP counterproposed the decision to postpone the tax into 2028, meaning that this question has not been solved yet. When the discussion continues, South Korean crypto investors and industry leaders will observe any changes related to possible amendments to the tax rates.
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