Earlier this year, the South Korean government announced that a 20% tax on digital currency transactions would go into effect in 2022.
They also stated that beginning with the 2022 tax year, stock and bond investors will be taxed on capital gains exceeding $45,000 or KRW50 million. In addition, non-sale transfers of digital currency asset ownership will also be subject to up to 50% statutory gift and inheritance tax rates.
According to the new rules, gains from digital currency transactions are classified as “miscellaneous income.” In addition, when investors file their taxes in May 2023, they must report virtual asset gains.
The new tax law has sparked some controversy, particularly because investors have strongly disagreed with the government and accused officials of failing to protect digital currency investors adequately.
Some digital currency investors believe the new tax law is unfair because digital currency income over KRW2.5 million (approximately US$2,105) will be taxed, whereas stock capital gains taxes begin at KRW50 million (approximately US$42,600). In addition, the stock capital gains tax will be implemented in 2023, a year after the taxation of digital currencies.
A petition requesting that digital currency assets’ taxation be postponed was also posted on the Cheong Wa Dae public petition bulletin board. The petition had 25,000 signatures as of October 14th.
The legislator’s proposal
Some National Assembly members suggested that the new digital currency taxation be postponed until the industry matures. Finance Minister Hong Nam-ki, on the other hand, was vehemently opposed to the lawmakers.
In his statement, Hong Nam-ki insisted that the amended tax law, which states that 20 percent of digital currency income or more than 2.5 million won (approximately US$2,132) should be taxed beginning January 1st, 2022, should be maintained.
The impact of the digital currency tax legislation on the election
The presidential candidates’ plans for taxing virtual assets such as digital currency are now an important variable influencing voters in the election next year. It appears that the leading presidential candidates from both the opposition and the ruling parties believe that the tax law should not be implemented just yet.
This could be because young citizens in their twenties and thirties have a high proportion of investment in virtual assets and have quickly emerged as a major factor that will change next year’s presidential election.