Koo Yun-cheol confirms virtual asset tax to proceed as planned next year

The government reaffirmed Wednesday that it will proceed with taxing virtual assets starting next year as scheduled, while leaving the door open to refining the regime after implementation.

Deputy Prime Minister and Minister of Economy and Finance Koo Yun-cheol made the remarks at a briefing before the National Assembly's Finance and Economy Planning Committee on Wednesday. "The virtual asset tax will take effect next year," Koo said. "If there are areas that need attention after implementation, we are fully prepared to review them."

People Power Party lawmaker Kim Sang-hoon used the session to criticize the current virtual asset tax framework for excluding a loss carryforward provision.

"If an investor loses 10 million won ($6,820) on virtual assets this year and earns 5 million won next year, the net result is still a 5 million won loss — yet under the current system, next year's 5 million won gain would be taxed," Kim said. "Major advanced economies treat virtual asset investment gains as capital gains and allow loss carryforwards."

Kim also questioned the timing of the tax. "Why impose a tax on virtual assets at this particular moment, especially while easing the burden on share investors?" he said, warning that once the tax takes effect, investors are likely to route activity through decentralized exchanges or peer-to-peer transactions to avoid paying.

Kim added that taxation should wait until the OECD's Crypto-Asset Reporting Framework, which enables the automatic annual exchange of virtual asset transaction data between countries, is fully operational.

"Australia and 28 other countries are set to begin operating CARF from 2028, and the United States from 2029," Kim said. "Taxing at the point when CARF is properly functioning makes sense, but the Ministry of Economy and Finance should consider from investors' perspective whether it is truly necessary to start taxing as early as next year."

Koo pushed back, saying South Korea's virtual asset tax structure differs from the capital gains models used abroad. "The United States and the United Kingdom tax virtual assets under a capital gains framework, but we classify virtual asset income as miscellaneous income, apply a flat 22 percent rate with a basic deduction, and tax it separately," he said. "Shifting to a capital gains framework would require a comprehensive review not just of virtual assets but of the entire capital market."

On the loss carryforward issue, Koo noted that stock investments are also currently ineligible for loss carryforwards. "Let's implement the tax next year and then address any areas that need to be institutionalized," he said.

Meanwhile, starting Jan. 1, tax authorities plan to apply a 22 percent rate — including local income tax — to annual virtual asset income exceeding 2.5 million won derived from the transfer or lending of virtual assets by individuals. The tax was originally set to take effect in 2022 but has been delayed three times over the need to build out the necessary infrastructure and refine the regulatory framework.