South Korea, which is keen on cryptocurrency trading, will decide when the virtual asset tax law will be implemented at the end of July! Will it affect the market?

According to Korean media reports, the South Korean Ministry of Finance has begun reviewing the virtual asset tax law and will decide whether to implement it as scheduled in 2025 before announcing the Tax Law Amendment at the end of next month. However, tax experts believe that there are two major obstacles to the implementation of the virtual asset tax - anonymity and decentralization, and it will not be so fast.

The South Korean government has decided to postpone the implementation of the virtual asset tax to January 2025 in its tax revision plan at the end of 2022. According to South Korean media reports today (21), the Ministry of Finance of South Korea has begun reviewing the virtual asset tax law and will decide whether to implement it as scheduled before announcing the "Tax Law Amendment" at the end of next month.

Earlier, South Korean Finance Minister and Deputy Prime Minister Choi Sang-mok said in an interview at the government's Sejong Office on the 17th: We still have time before the tax law amendment is formulated, so we will consider (postponing the implementation of the virtual asset tax)

The virtual asset tax system is not yet perfect

The virtual asset tax, which was originally scheduled to be implemented in 2022, has been postponed twice because the tax authorities and virtual asset exchange-related systems are not ready.

The main reason is that the income from the transfer or trading of virtual assets is classified as other income tax. When the income exceeds 2.5 million won, the applicable tax rate is 22%. This policy has sparked controversy over "tax unfairness" because the tax exemption for stocks is as high as 50 million won, while the tax exemption for virtual assets is only 2.5 million won.

According to South Korea's new financial policy to be launched in 2023, the tax rate for investing in stocks, bonds, funds, and financial derivatives is 20% when the total income does not exceed 300 million won in a year, and the tax rate is 25% when it exceeds 300 million won.

In addition, tax accountant Zheng Yanda said that the virtual asset tax itself is an unreasonable legislation: it is still forced to legislate without establishing a sound tax base for virtual asset tax. In the process, the government has not even been able to make tax estimates.

Zheng Yanda also predicted that the virtual asset tax could not be smoothly implemented in January 2025: it has been postponed twice, and the situation has not changed for more than three years. If this situation continues, the implementation in 2025 will also be unclear.

Anonymity and decentralization are a problem

On the other hand, Zheng Yanda pointed out that the anonymity and decentralization of virtual assets are the main obstacles to the implementation of virtual asset tax: the fatal flaw of the current regulations is that the tax base for the essential characteristics of virtual assets, namely "anonymity" and "decentralization", has not been fully prepared, which is the main obstacle to the implementation of virtual asset tax.

Zheng Yanda also said that if the virtual asset tax is to be implemented smoothly, the identity of investors and transaction details must be centrally managed: in order to find the source of taxation, the identity of investors and transaction details must be centrally managed. When a realistic countermeasure that can narrow this gap is found, we can expect the implementation, stability and success of the virtual asset tax.

Will it affect investors' willingness after implementation?

Since the current tax law is not friendly to the tax exemption for cryptocurrencies, if the virtual asset tax law is really implemented, it may indeed affect investors' willingness to trade cryptocurrencies, or cause more Koreans to choose to transfer money to overseas exchanges through gray means... The subsequent impact remains to be observed.