The South Korean government plans to move forward with the implementation of a 20% tax on Cryptocurrency profits starting in January 2025, ruling out further postponements, according to local media “Seoul Shinmun.”
Initially, this measure was to come into effect on January 1, 2022. However, strong criticism from investors and industry experts led to its postponement twice, with the new date set for 2025.
The tax will be applied to profits exceeding 2.5 million won (approximately $1,795), which includes an additional 2% tax at the local level, raising the effective rate to 22%.
Although proposals to postpone the plan until 2028 had been discussed, the “Democratic Party of Korea” (DPK) reaffirmed its commitment to implement the tax within the established deadline. Additionally, the DPK proposed an amendment raising the tax deductible limit from 2.5 million won to 50 million won (about $35,919).
According to the DPK, this extension of the limit seeks to protect the majority of retail investors, although some critics argue that it could amount to a tacit abolition of the tax.
“We have set the deduction limit at 50 million won, but with a 5% rate of return, only a few large investors will be subject to tax, which could lead to contrary results,” said the South Korean Strategy and Finance Committee.
Increased profits on South Korean centralized exchanges
The amended tax plan also includes measures to facilitate tax calculations, allowing taxpayers to use a percentage of the sale price as a reference if they do not have accurate purchase records, a measure designed to address the inherent volatility of the crypto market.
In parallel, the cryptocurrency market in South Korea has shown significant growth. According to data from the “Financial Services Commission”, the number of cryptocurrency investors reached 7.78 million in the first half of 2024, an increase of 21% compared to the 6.45 million recorded in the second half of 2023.
This growth has boosted the cumulative operating profits of the top 21 local centralized exchanges (CEXs) to more than 5.9 trillion won (approximately $4.2 billion), marking a year-on-year increase of 106%.
However, more than 67% of investors own cryptocurrencies worth less than $362, while only 10% hold more than $7,254 in digital assets.
The Democratic Party of Korea hopes the tax plan will be approved during the tax subcommittee vote of the National Assembly on Nov. 25, followed by its ratification at the general meeting on Nov. 26, Seoul Shinmun reported.
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