South Korea’s Virtual Asset Taxation Plan Blocked by Opposition Party; Local Elections May Trigger Policy Changes

According to ZDNet, the South Korean government plans to impose taxes on virtual assets starting in January next year, but faces opposition from the opposition party, increasing policy uncertainty. Moon Kyung-ho, head of the Income Tax Division at the Ministry of Economy and Finance, made the government’s first official statement on the matter during a National Assembly discussion, affirming that taxation on virtual assets will proceed as scheduled beginning January 1, next year, emphasizing that “income must be taxed.” Under the current amendment to the Income Tax Act, gains exceeding 2.5 million KRW from the transfer or lending of virtual assets are subject to a 22% tax rate. However, the opposition People Power Party argues that taxing only virtual assets—while abolishing the financial investment income tax—is unfair, and is advancing a bill to abolish the virtual asset income tax. This bill has already been submitted to the National Assembly’s Committee on Strategy and Finance and will be discussed by its Tax Subcommittee. Analysts believe that, ahead of next year’s local elections, the ruling party may join discussions on delaying or scrapping the tax to win support from younger voters.