Virtual Asset Income Taxation, 2027 to 2029: Bill Filed for a Two-Year Deferral

On August 28, Rep. Kim Sang-hoon of the People Power Party and 11 other lawmakers introduced Bill No. 2220914, an amendment to the Income Tax Act that would postpone the start of taxation on virtual asset income by another two years. The provision applying separate taxation to income from the transfer and lending of virtual assets as other income was legislated in 2020, but its entry into force has been delayed three times, and the currently scheduled date is January 1, 2027. The amendment proposes pushing this back another two years to January 1, 2029 (proposed Article 37, Paragraphs 5 and 6). As grounds for the bill, the sponsors cited the fact that the taxation infrastructure needed to trace or verify transaction records outside centralized exchanges, at decentralized exchanges, in peer-to-peer trading and in decentralized finance, is not sufficiently in place. They also presented, as further grounds for deferral, the point that a considerable period of time is required before the cross-border system for exchanging transaction information becomes fully operational, along with the question of fairness relative to the taxation of small shareholders of stocks. Under the current law, income tax of 20% is levied on annual virtual asset income after subtracting a basic deduction of 2.5 million won, and the rate including local income tax is 22%. The amendment does not change this basic deduction or the tax rate; it focuses on delaying the starting date of taxation by two years. The bill is at the stage of introduction and receipt by lawmakers, and it must pass review by the standing committee, a plenary vote, and promulgation by the government to become law. Implementation in 2029 is therefore not confirmed, and the scheduled date under the current law remains January 1, 2027.