South Korean lawmaker calls for two year delay to crypto tax

South Korean lawmaker Han Dong hoon has called for the country’s cryptocurrency tax to be delayed again before its Jan. 1, 2027 start, arguing that authorities still lack enough overseas trading data to enforce the levy consistently.

News1 reported that Han, an independent lawmaker and former leader of the People Power Party, raised the issue in a Sept. 15 Facebook post as South Korea moves closer to introducing the long delayed tax. He questioned whether taxation should begin when crypto can move legally from domestic exchanges to foreign platforms and private wallets.

Han said the tax was postponed while he was leading the People Power Party in 2024, but argued that the problems surrounding its implementation have not been resolved during the past two years.

“Is it right to rush into starting this cowardly taxation?” Han said.

Under South Korea’s current rules, qualifying income from transferring or lending virtual assets will become taxable from Jan. 1, 2027. Annual gains above a 2.5 million won basic deduction will face a 20% national tax, with a 2% local income tax bringing the combined rate to 22%.

Han Dong hoon says overseas trading could complicate crypto tax collection

Han focused much of his criticism on the government’s ability to identify taxable activity after crypto leaves South Korean trading platforms.

Investors are legally allowed to transfer cryptocurrency held on domestic exchanges to accounts under their own names on overseas platforms or move the assets into private wallets, Han said. Once the assets leave those platforms, he argued that following every subsequent transfer becomes close to impossible.

Han predicted that investors expecting annual profits above the 2.5 million won deduction could move their trading activity overseas after taxation begins.

“Virtual assets are assets that change hands without borders,” he said.

Han argued that differences in how easily domestic and overseas activity can be identified could leave investors who continue using regulated exchanges easier for authorities to tax.

South Korea’s government has maintained that overseas activity will remain within the tax regime. In August, crypto.news previously reported that the Ministry of Economy and Finance and National Tax Service had confirmed the tax would cover income generated through overseas exchanges and private wallets.

The government has pointed to overseas financial account reporting requirements and the Organisation for Economic Co-operation and Development’s Crypto-Asset Reporting Framework as tools that can provide information on qualifying activity outside the country.

Han disputed whether CARF would provide sufficient coverage when taxation starts. He claimed the framework could cover less than 20% of cryptocurrency trading and said participating countries are scheduled to begin exchanging information at different times.

The source material provided for this report does not give supporting data for Han’s 20% figure, making it his stated estimate rather than an independently established measurement.

South Korea plans to use CARF and wallet tracing tools

South Korean authorities have been building several systems intended to address the enforcement problems raised by Han.

The government expects CARF to provide overseas virtual asset transaction information from participating jurisdictions as international information exchange begins. In August, the Finance Ministry said South Korea expected to receive transaction data from 48 participating jurisdictions, including Japan, Germany and France.

Information obtained through CARF would form part of the government’s effort to identify taxable transactions conducted through foreign platforms.

Private wallets present a separate enforcement problem because blockchain addresses do not automatically identify the person controlling them.

The National Tax Service has acknowledged practical limits in identifying every unreported private wallet transaction, even though holding assets through self custody does not exempt qualifying income from the planned tax.

To address part of that gap, South Korea plans to introduce commercial wallet tracing software capable of following transfers between blockchain addresses. The NTS has completed a tax source management system and is developing an integrated analysis system for virtual asset taxation.

Preparations have involved South Korea’s major crypto exchanges as well. The NTS has worked with Upbit operator Dunamu, Bithumb, Coinone, Korbit and Gopax on guidance covering transaction records and other information needed to calculate taxable income.

South Korea has already applied separate reporting requirements to some overseas crypto holdings. Digital assets have been included in the country’s overseas financial account reporting system since 2023 filings, with qualifying residents required to disclose accounts when combined foreign balances cross the applicable threshold.

The NTS recently ruled that qualifying overseas crypto accounts can remain subject to reporting requirements even when an overseas exchange has entered bankruptcy and customers cannot freely trade or withdraw their assets.

South Korea has kept the January 2027 crypto tax date

The government has so far maintained the 2027 implementation timetable despite repeated attempts to postpone or remove the tax.

South Korea’s Ministry of Economy and Finance kept the Jan. 1, 2027 launch when it finalized its 2026 tax reform proposal in August.

The tax dates back to amendments to the Income Tax Act approved in 2020. Implementation was initially planned for 2022 before being postponed to 2023, then 2025 and finally 2027 as lawmakers debated reporting infrastructure and administrative readiness.

Under the current framework, taxable income will generally be calculated from annual proceeds after acquisition costs and eligible transaction expenses are deducted. Gains and losses are combined before the annual 2.5 million won basic deduction is applied, while qualifying income is classified separately as other income.

Investors earning taxable crypto income during 2027 are expected to file their first returns in May 2028.

Finance officials have argued that the infrastructure needed for implementation has progressed considerably since the earlier delays.

During a Sept. 15 National Assembly confirmation hearing, finance minister nominee Lee Hyoung il said the government intended to proceed with taxation next year after lawmakers had already postponed implementation to 2027 during discussions in 2024.

Lee said government statistics showed 85% of crypto investors held less than 5 million won in assets. He argued that the tax impact on most investors would therefore be limited because of the 2.5 million won basic deduction and rules governing acquisition costs.

Han took a different position on how investment income should be treated. He argued that income from domestic stocks, overseas stocks and cryptocurrency should not receive substantially different tax treatment if the government considers investment returns unearned income.

Calls for another crypto tax delay have reached Parliament

Political opposition to the 2027 timetable has continued alongside the government’s preparations.

A National Assembly petition seeking a two year delay crossed the 50,000 signature threshold required for legislative review in September. Reaching the threshold sent the petition to the relevant parliamentary committee but did not automatically postpone the tax or change existing law.

The petition asks lawmakers to move implementation back by another two years, which would represent the fourth postponement of the crypto tax.

A separate petition seeking to abolish the tax had crossed the 50,000 signature threshold in May.

Legislative proposals have moved in a similar direction. People Power Party lawmaker Jeong Seong guk has proposed moving implementation from 2027 to Jan. 1, 2030, while another opposition proposal seeks to remove cryptocurrency income taxation from the Income Tax Act entirely.

Han referred to the petition campaigns in his Facebook post, saying more than 50,000 people had supported efforts seeking a delay this year.

He said he intended to intervene again after taking part in the political effort that resulted in the previous postponement.

“I will step forward and stop it again, as I did in 2024,” Han said.