proposed to postpone cryptocurrency taxes until 2028

According to the newspaper Freeze the heartbeatsSouth Korea’s ruling party is considering delaying the introduction of a cryptocurrency tax until 2028.

This way, all profits, understood as capital gains from trading digital assets and other cryptocurrency-related activities, will be exempt from taxation for another 3 years.

The proposed tax overhaul comes after 2 other postponements, which occurred in 2021 and 2023. All this could favor the growth of the markets in South Korea, supporting the development of the crypto sector.

Let’s see all the details below.

South Korea Considers Delaying Cryptocurrency Capital Gains Tax to 2028

The party currently in power in South Korea, known as the “People’s Power Party,” recently proposed postpone payment of cryptocurrency taxes.

According to a document published on the website of the “National Assembly of the Republic of Korea”, the intention is to postpone the event to January 2018.

In this way the implementation of the tax on earnings on cryptocurrencies in the country would be postponed by 3 years, starting from the date of entry into force currently set for January 2025.

As stated by the main party of South Korea, the current sentiment towards cryptocurrency-based activities is deteriorating and it is necessary to remedy it.

Politicians believe that this is not the best time to enforce this tax law. In fact, under the current conditions, several investors may decide to leave the market if the tax were to be implemented soon.

It is worth noting that on February 19, ahead of the South Korean general election in April, the People’s Party had promised to delay the introduction of cryptocurrency taxes.

As part of its campaign pledge, the group had argued that before diving in taxation, the country should create a proactive crypto framework.

Only when the basic framework is fully defined will we be able to think about capital gains taxes.

According to a party representative, the minimum time to resolve this regulatory obstacle is at least 2 years.

Confirmation of this political position is expected by the end of the month, when the revision of the tax law will probably be announced.

7-Year Delay Since Original Cryptocurrency Regulation

The first plan to impose a cryptocurrency tax program in South Korea was initially scheduled for 2021.

The original tax bill, introduced during the Moon Jae-in administration, had been approved by the South Korean National Assembly with a deadline set for October of that year.

As reported by the “Korea Economic Daily”, due to political tensionsthe country’s government had decided at the time to postpone the tax issue.

Subsequently, due to the 2022 presidential election, the first capital gains tax in South Korea was set to take effect in January 2023.

However, under the administration of Yoon Suk-yeol, the date was further postponed to January 2025, citing concerns about investor interests.

Now the proposal focused on completing the taxation of cryptocurrencies in the Asian country risks being delayed by as much as 7 years compared to the initial schedule.

The law in question aims to impose a 20 percent tax on capital gains from cryptocurrency-based activities if the profits exceed 2.5 million won, or about $1,800.

This threshold limit is much higher in the field of actionswhere taxes are paid only on profits above 50 million won, equivalent to $36,000.

New monitoring system for cryptographic activities

In all this, South Korea’s tax reform and the issue of cryptocurrency taxes, passing through new monitoring systems.

As reported in the new law “Virtual Asset User Protection Act”, The government will establish an organization to monitor the crypto activities of the country’s users.

In particular, the activities of cryptocurrency exchanges will be monitored, with the aim of reporting operations of a “dubious” nature linked to money laundering and tax evasion.

In addition, unfair trading operations with crypto tokens and attempts to market manipulation will be targeted.

This approach is expected to come into force at the end of July. and it will be the first step on a path towards the implementation of a tax law.

Indeed, it is clear that before imposing a capital gains tax rate it is necessary to have a body dedicated to tax monitoring.

As reported by the Financial Supervision Service (FSS) of South Korea, the country has developed a system that aims to distinguish irregular transactions from others.

However, the collaboration of centralized exchanges will be essential to eliminate suspicious activities in the cryptocurrency market.

Specifically, CEX would be asked to create a team dedicated to this type of activity, following the FSS guidelines.

As recently reported by the same supervisory authority:

“We have compared the criteria for extracting anomalous transactions and trained models and metrics through various simulations. We expect that these will meticulously filter out anomalous transactions.”

South Korea’s proposal could boost the growth of the country’s cryptocurrency sector

It is clear that if the tax on cryptocurrency-based businesses in South Korea is postponed to 2028, the country would have greater opportunities for growth in this sector.

Usually investors, especially the most greedy ones typical of the cryptocurrency world, are constantly looking for tax havens where they can make money. capital gain in peace.

Many of these could gain significant economic benefits by abstaining from paying capital gains taxes, especially at the end of the current market on the rise.

This would unilaterally stimulate the development of the crypto industry for at least another 3 years, supporting the growth of a crypto hub in South Korea.

Following this logic, in fact, the profits made in the current year or in 2025 could be reinvested in digital or real infrastructures on Korean territory.

On the other hand, the entry into force of the taxes starting from January 2025 would already limit the activity of buying and selling cryptocurrencies.

In fact, anyone who bought a token now would immediately feel the weight of it. regulation coming soon on potential profits.

In this scenario, investors may lose interest in these markets, moving to other locations and other less taxed activities.

We also remember that cryptocurrency-based activities are by their very nature very volatile and dangerous: this particular discourages investments especially if there is no law that promotes tax exemption.

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