South Korea is getting closer to re-engaging in discussions regarding the planned 22% income tax on cryptocurrencies. Officials are set to meet with five major exchanges on October 20th, following a proposal by a ruling party lawmaker that could delay the implementation until 2029.

• South Korean officials are scheduled to meet with five major cryptocurrency exchanges on Tuesday to discuss the tax arrangements that were originally set to be implemented in January.
• A new bill proposes to impose a tax on cryptocurrencies only after an international transaction data sharing mechanism is put into operation.
• The current framework imposes a tax rate of 22% on annual encrypted income that meets certain criteria, applicable to the amount above the tax exemption threshold.
• The exchange stated that the rules for activities such as staking, airdrops, and DeFi have not yet been clarified, which is causing difficulties in the preparatory work.
• The tax authorities are preparing guidelines to be released in November, while legislators are also considering extending the deadline again before the implementation date in January.

According to a report by Yonhap News on October 18, representatives from Upbit, Bithumb, Coinone, DigitalX, and Gopax are expected to attend these consultations alongside senior executives from the Digital Asset Exchange Alliance DAXA.

The background for this meeting is that trading platforms are concerned about the unclear tax regulations for various cryptocurrency activities, and there is not much time left to prepare before the implementation date of January 1, 2027.

The government has not yet announced another extension. The tax authorities are still working on the preparations to implement the guidelines, while legislators are reviewing a proposal that links the start of taxation with the sharing of international cryptocurrency transaction data.

South Korean crypto tax faces another call for postponement

A meeting on October 20th will bring together representatives of major trading platforms and senior government officials to discuss the preparations for taxing earnings from cryptocurrencies.

Expected officials to attend include the First Deputy Ministers of the Planning and Finance Ministry, Kwon Dae - young, as well as senior officials from the Financial Services Commission responsible for digital finance policies, Yoo Young - jun.

Prior to this, at the congressional hearing on October 6th, Finance Minister Lee Hyoung - il stated that the government would seek the opinions of affected groups before proceeding with the taxation of cryptocurrencies.

Exchange representatives have raised concerns, stating that it is currently unclear how the proposed rules will apply to different activities and whether their systems are capable of providing the required information.

An industry official told Yonhap that the standards for several types of transactions have not yet been finalized, and the remaining preparation time is becoming increasingly tight.

This official stated that there is support within the industry for postponing the implementation. South Korea was the first to introduce a framework for cryptocurrency income tax by amending the "Income Tax Act" in 2020.

Thereafter, legislators have postponed the implementation three times, adjusting the effective date several times, ultimately setting it for January 2027.

According to the current arrangements, qualified income from cryptocurrency transfers and lending will be subject to taxation starting from January 1st.

Investors are entitled to a basic deduction of 2.5 million Korean won per year, and any income exceeding this amount is subject to a combined tax rate of 22%. This tax rate consists of a 20% national income tax and an additional local income tax.

This proposed tax is aimed at taxable income, not the total value of all cryptocurrencies held in wallets, nor the total amount that circulates through exchanges.

The new tax bill may push the implementation date back to 2029.

The latest legislative proposal introduces new arrangements for when taxation on cryptocurrencies will begin.

On October 16th, Democratic legislators Park Min - gyu proposed an amendment to the Income Tax Act, intending to link its implementation date with international exchange of encrypted transaction data. According to their published legislative records, the bill is numbered 2221923 and is co-sponsored by 14 other legislators.

The core proposal is to change the effective date to: January 1 of the year following the first year in which cryptocurrency transaction information is exchanged under the relevant international tax reporting frameworks.

If the first exchange of information that meets the criteria occurs in 2027, then according to this formula, the implementation date will fall on January 1, 2029. This legislation does not simply change the current date to an unconditional January 2029, but rather depends on when the specified requirements for information sharing are met.

At the same time, the proposal mentioned the Cryptocurrency Reporting Framework of the Organization for Economic Co-operation and Development ( OECD ), namely CARF . This framework is intended to help tax authorities of participating countries exchange information on cryptocurrency transactions involving residents of other jurisdictions.

In the explanation of the bill, Park believes that while South Korean authorities may be able to obtain transaction information from domestic exchanges, collecting similar data from overseas trading platforms could pose difficulties.

He warned that implementing taxation before the international reporting system is fully established could lead to unfair treatment between users of domestic and foreign exchanges. The bill proposes to give more time to obtain and verify transaction data.

However, legislative records show that this measure is still in the proposal stage, and as of October 19th, there has been no record of congressional approval. Therefore, the current implementation date of January 2027 remains unchanged.

Exchanges seek clearer rules for staking and DeFi

The trading platform pointed out that there are practical issues with the tax declarations for several cryptocurrency activities.

According to industry concerns mentioned by Yonhap, staking rewards, airdrops, hard forks, and decentralized finance (DeFi) transactions all require more meticulous handling in order for exchanges to be able to consistently calculate taxable income.

Pledge usually refers to investing cryptocurrency to support the operation of a blockchain network in exchange for rewards. Industry representatives question whether certain rewards should be considered as income from digital asset lending or as compensation for participating in network verification.

Airdrops bring about another type of issue, as recipients may not purchase tokens through conventional exchanges but instead obtain them directly. A hard fork could result in holders acquiring assets related to the newly created blockchain network.

DeFi Arrangements may involve token deposits, lending, and transactions conducted through software that does not operate via traditional centralized exchanges.

The current legal framework classifies gains from transfers and loans as taxable items, but industry insiders suggest that the handling of these specific activities still needs to be further clarified.

Another concern relates to cryptocurrencies stored in private wallets or assets traded through overseas platforms, as domestic exchanges may not have access to a complete transaction history.

Investors who transfer assets between multiple wallets and exchanges may leave records across various services, which can complicate the calculation of purchase costs and taxable gains.

Industry representatives question whether the proposed system can be consistently applied when some transaction information is available while other information is incomplete.

They also raised concerns regarding the absence of carry-forward deductions for losses, as well as the tax treatment of cryptocurrency income compared to other investment assets.

Earlier this month, crypto.news reported that after relevant questions were raised at a congressional hearing, tax guidelines were expected to be issued in November.

The South Korean National Tax Service stated that they are preparing detailed guidelines and working with exchanges to establish the reporting procedures.

Tax authorities continue to prepare for January 2027

Despite the renewed political pressure, the National Tax Service of South Korea is still proceeding with its preparatory work according to the current legal schedule.

At the congressional hearing on October 13th, Tax Commissioner Lim Gwang - hyeon stated that the agency expects to release guidelines for taxing cryptocurrencies around November.

Legislators told officials that unless Congress officially modifies the effective date, administrative preparations should continue.

According to the current framework, income earned in 2027 is typically included in the first relevant annual filing period in May 2028.

To change this arrangement, a postponement proposal must first obtain legislative approval. In fact, pressure for a postponement was already accumulating before Park submitted the latest bill.

In September, a petition requesting another extension reached the required 50,000 signatures for consideration by Congress.

This petition will not automatically change the law, but it does lead to another request for postponement being submitted to the legislators.

Previous legislation regarding digital assets also involved the proposed "Digital Assets Basic Law," as well as the upcoming crypto tax.

The Financial Services Commission is advancing the relevant legislation of the government version, and consultations are expected to continue after the end of the congressional audit period.

It is reported that the controversies include: setting a limit of 15% to 20% on the shares held by major shareholders in cryptocurrency exchanges, and whether South Korean won stablecoins should initially require banks to hold a majority stake in the issuing consortium.

These conditions are still under discussion and have not yet been finalized as the ultimate requirements.

Yonhap News Agency reported that financial authorities may complete the government draft as early as the end of October, after which they will begin consultations with members of the ruling party.