South Korea Raises Crypto Tax-Free Threshold to 50 Million Won by 2025
South Korea's Democratic Party of Korea (DPK) is advancing its crypto taxation plan for 2025, proposing to increase the tax-free threshold from 2.5 million won to 50 million won ($35,919). This change signifies a notable shift in digital asset taxation.
The tax initiative has experienced multiple delays since its planned implementation in January 2022 but will maintain a core tax rate of 20% (22% including local taxes) on cryptocurrency gains. The raised exemption limit aims to address concerns from the cryptocurrency community while ensuring regulatory oversight.
The amended plan allows traders without precise records of their initial investment costs to use up to 50% of their sale price as a proxy for determining their original purchase price, acknowledging the market's volatility.
New Exemption Threshold Targets High-Volume Traders
A Finance Committee official noted that investors would need to manage portfolios worth approximately 1 billion won, assuming a 5% return, to exceed the new 50 million won limit. This adjustment means only a small group of high-volume traders will be subject to taxation.
“The deduction limit is set at 50 million won, but assuming a 5% return, the investment amount should be at least 1 billion won [...] This could mean that most investors, except for a very small number of ‘big players,’ are not included in the tax target,” stated the Finance Committee.
The DPK's decision follows discussions on possible delays, including a proposal to postpone implementation until 2028. The party opted for the 2025 timeline while enhancing the exemption limit for retail investors.
The legislative process is progressing quickly, with the amended plan slated for review by the National Assembly's tax subcommittee on November 25 and a vote in the general meeting on November 26, 2024.
Political Implications and Negotiations
The DPK is committed to implementing the tax framework despite some opposition, viewing alternative proposals for further delays as political tactics for future elections.
Negotiations between the DPK and the ruling party are ongoing, with the DPK holding leverage. If no agreement is reached at the Planning and Finance Committee stage, the tax law will automatically progress to the plenary session in December 2024.
A Democratic Party policy committee official emphasized the necessity of reaching consensus, indicating that negotiations will persist until the plenary session. However, the party also stated that if cooperation fails, they could implement the original law with the lower 2.5 million won exemption threshold starting January 2025.