The South Korean government announced Thursday the suspension of the 20% tax imposed on crypto incomes set within the limit of 2.5 million won ($1,942.20) till January 2025, citing “the lack of an investor protection system as the background for the deferral of taxation.” The taxation is placed on income generated from transferring or lending crypto assets.
Korean Authorities Suspend Crypto Taxation
According to a local news report, the 20% tax was supposed to take effect starting January 2023. However, the government has deferred the move for another two years, allowing investors to recoup their losses following the May Terra (LUNA) blockchain saga.
The government also stated that unstable market conditions contributed significantly to the delay. As per the report, the Korean authorities plan to enact a comprehensive regulatory framework for consumer protection rights before proceeding with the taxation in 2025.
The 2022 Taxation Reform
Under the 2022 tax reform, which was set to be implemented next year, Korean investors will be entitled to a 20% income tax if the gains generated from the sale of digital assets are within the limit of $1,942.
Additionally, the government included an extra 20% levy on incomes exceeding the set limit in one year. This additional tax will remain unchanged and will kick off as scheduled.
The new tax legislation also revealed that profits generated from the sale of cryptocurrencies by a foreign individual or company are classified as “other income,” and it’s subject to withholding tax of 11% and 22% of net capital gains.
Additionally, the tax reform allows authorities to conduct a partial investigation on taxpayers based on tax-treaty exceptions to examine the appropriateness of a tax exemption filed under the application of a tax treaty regarding incomes generated from non-resident individuals.
Government to Enforce the ‘Digital Asset Framework Act
The South Korean government hinted that it would enforce the “Digital Asset Framework Act,” established to oversee the virtual asset rights corporation come 2025 when the tax is implemented. The authorities also said they would launch a regulatory policy for cryptocurrencies as early as October.
Recall that in June, Coinfomania reported that the country is planning to set up a framework for crypto exchanges operating within its jurisdiction to prevent what happened to Terraform from repeating itself.
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