South Korea Delays Crypto Tax by Two Years, Now Set for 2027
The Democratic Party of South Korea’s KDP has reversed its efforts to enforce a crypto capital gains tax starting in 2025, accepting an agreement to postpone the policy to 2027. The compromise between both parties was announced on Dec. 1, the result of hard bargaining between the KDP and the ruling People’s Power Party (PPP), which earlier pressed for a longer delay.
Bipartisan Agreement Reached
In a news conference, KDP floor leader Park Chan-dae confirmed the party’s agreement to the two-year postponement of the tax. The tax, due to start in January 2025, is now expected to be introduced in January 2027. The decision comes in tune with proposals by the government and the PPP for a grace period with the objective of ensuring market stability and protection for investors.
The Case for Delaying the Tax
The PPP has argued that imposing the tax prematurely could drive investors away from South Korea’s crypto market. Emphasizing the need for clarity and infrastructure, the party first proposed a three-year delay to 2028. Although the KDP initially opposed any delay, it eventually agreed to a two-year grace period as a middle ground.
KDP’s Initial Opposition
Before agreeing to the delay, the KDP had criticized the ruling PPP’s proposals, accusing the party of using the tax deferral as a political strategy. The Democratic Party felt the tax could have been applied in 2025 if combined with a higher threshold for taxation, proposing an increase from $1,800 to $36,000. This approach, they claimed, would target high-value traders without punishing smaller investors.
A Long History of Postponements
The crypto tax policy of South Korea has faced several delays since its announcement in 2021. It was first postponed from 2022 to 2023, then from 2025 to 2027. Each delay has been influenced by factors such as concerns about market readiness, regulatory clarity, and investor sentiment.
What Does 2027 Hold?
Once enforced, the crypto tax will charge 20% on annual gains over $2,300. Lawmakers say that this extra time will provide them with ample opportunity to implement a sound regulatory framework and enhance stability in the market.
The latest delay demonstrates how South Korea is being cautious with regard to the regulation of its rapidly changing crypto sector while striking a balance between innovation and investor protection.
