The Korean government’s declaration to abolish the financial investment income tax (FIIT) has brought the topic of cryptocurrency income taxation to the forefront of investment market discussions. As per the Ministry of Economy and Finance, the cryptocurrency income taxation system, which will now start in January 2025, plans to impose a 22% tax rate on any annual income over KRW 2.5 million that arises from the sale or lending of cryptocurrency assets.
The delay in implementing the cryptocurrency tax system seems to echo the market’s concerns over potential investment shrinkage and the need for enhanced investor protection. This stance dovetails with the government’s aim to dissolve the ‘Korea Discount’, seeking to maintain tax fairness between financial investments and cryptocurrency investments and addressing the apprehension that the tax structure might suppress the growth of the cryptocurrency market.
The government’s announcement to do away with FIIT has given rise to public sentiment in favor of abolishing cryptocurrency taxes. Jung Jeong-hoon, Director of the Tax Policy Office at the Ministry of Economy and Finance, has stated in a community forum that the abolition of FIIT, along with the discourse on cryptocurrency taxation, should be deliberated upon in the National Assembly. This comment signifies an acknowledgment of the rising significance of the cryptocurrency market as an alternate financial market, deserving of corresponding tax support.
Despite these discussions, the Ministry stands firm on its decision to enforce the cryptocurrency tax as planned in the coming January. It has underscored a lack of detailed analysis on the tax revenue implications of cryptocurrency transactions, pointing to the market’s volatility and unpredictability. Furthermore, the decision on whether to abolish or postpone cryptocurrency taxes is expected to correlate closely with the situation of FIIT.
