Government proposes three-year loss carryforward as it moves to address gaps in overseas trading data
South Korea plans to push back cryptocurrency income taxation by another two years to 2029, the government said Thursday, responding to calls for more time to prepare time and proposing to let investors carry losses forward for up to three years.
Finance and Economy Minister Lee Hyeong-il said the government would work with the National Assembly to postpone the introduction of the tax, which is due to take effect in January. If approved, the move would mark the fourth delay since the tax was legislated in 2020 for a 2022 start.
"It weighs heavily on me to propose another delay after the tax has already been postponed three times," Lee said at a press briefing in Seoul.
The announcement follows calls from exchanges, investors and lawmakers for more time to prepare. Exchanges have said unclear reporting requirements have held up system development and testing.
Overseas transactions pose another challenge. When investors transfer tokens bought abroad to a Korean exchange, the exchange may have no record of the purchase price needed to calculate taxable gains.
"Once we begin receiving cryptocurrency transaction data from the United States in 2029, we will have enough information to tax investors who use US exchanges on the same basis as those who trade in the domestic market," Lee said.
The two countries will exchange the data under the OECD-backed Crypto-Asset Reporting Framework, or CARF. The government also cited the need to align tax rules with the proposed Digital Asset Act, which would set rules for digital asset businesses and strengthen investor protection.
Alongside the delay, the government will seek legislation allowing investors to carry losses forward for up to three years to offset future gains, citing the volatility of cryptocurrency prices.
As the law stands, individuals would pay 22 percent, including local income tax, on annual net income above 2.5 million won from selling or lending virtual assets. Only losses from the same year could offset gains, so an investor could owe tax in a profitable year even after losing more the year before.
Under the new proposal, investors could use losses realized in 2029 to offset gains through 2032. Losses realized before the tax takes effect would be ineligible.
Lee said the government would seek lawmakers' approval for both the delay and the loss carryforward during this year's regular session. To postpone the tax, the National Assembly must amend the Income Tax Act before January.
The government would use the extra time to collect overseas trading records and analyze them alongside domestic tax data. A working group of industry representatives, experts and government officials will review tax rules for different types of transactions and ways to simplify filing through the first half of 2027.
If the review identifies a need for further legislation, the government plans to submit amendments during the National Assembly's 2027 regular session. It plans to publish detailed tax guidelines in the first half of 2028.
jwc@heraldcorp.com
