South Korea to tax virtual assets next year, with possible adjustments

South Korea will proceed with taxing virtual assets starting next year, according to Deputy Prime Minister and Minister of Economy and Finance Koo Yun-cheol. He stated that the government would "implement it next year and pursue a direction of supplementing it if necessary."

The announcement came in response to a question from Kim Sang-hoon of the People Power Party during a National Assembly committee meeting on June 29. Kim had raised the need to postpone the virtual asset tax, pointing out that countries like the United States and Japan allow the deduction of losses from capital gains on virtual assets, a provision not available in South Korea.

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We will implement it next year and pursue a direction of supplementing it if necessary.

Koo explained that "loss carryforward is not currently allowed for stock investments either," adding that virtual assets are classified as "other income," which already offers certain benefits. He reiterated that "if necessary, we will pursue a direction of supplementing it after the taxation is implemented."

Starting January 1, 2023, profits from virtual asset transactions exceeding 2.5 million won will be subject to a 22% tax rate, including local taxes, as "other income." The virtual asset tax was initially introduced through an amendment to the Income Tax Act in 2020 but has been postponed three times due to insufficient investor protection measures and inadequate taxation infrastructure.

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Loss carryforward is not currently allowed for stock investments either. There are also benefits given by classifying it as other income, so if necessary, we will pursue a direction of supplementing it after the taxation is implemented.