South Korea seeks two-year crypto tax delay to 2029, three-year loss carryforward

South Korea's government will seek to push back taxation of cryptocurrency gains by two years to 2029, Deputy Prime Minister and Minister of Finance and Economy Lee Hyung-il said at a briefing on crypto income taxation at the Government Complex Seoul on Nov. 5, adding that it will work with the National Assembly on the plan. The levy had been scheduled to start in January 2027. The government will also seek to introduce a rule allowing crypto investment losses to be carried forward for three years.

The delay requires a change in the law. Under the current Income Tax Act, income from selling or lending crypto assets on or after Jan. 1, 2027, is taxable, so lawmakers would need to pass an amendment before then for the postponement to take effect.

Timed to the start of data sharing with the U.S.

The government's first reason was information on overseas trading. South Korea is due to begin exchanging data with the United States in 2029 through the Crypto-Asset Reporting Framework (CARF), a system under which countries automatically share crypto transaction information. The government said it took into account views that taxing right away, before then, could leave the domestic market at a relative disadvantage.

The second reason was the Digital Asset Act. The government said it also weighed the expectation that enacting the law would substantially change the regulatory framework for the digital asset industry, and concluded that it would be better to implement the tax after an additional two years of preparation. It also said it will work with the Financial Services Commission (FSC) and other agencies to speed up passage of the Digital Asset Act.

The government said it will first review conditions for securing tax information on overseas trades. It said it will track the development of international information-exchange systems, link and analyze domestic and overseas tax data, and expand its tax infrastructure so it can effectively tax overseas transactions as well.

A year's loss offset against the next three years' gains

The loss carryforward the government is also pursuing would let a loss from one year be deducted from gains in later years. Under current law, gains and losses are netted only within a single year. For example, if an investor loses 10 million won in the first year and makes 10 million won the next, under the current method the second year's 10 million won gain is taxed after only the basic deduction of 2.5 million won, regardless of the first year's loss. With a carryforward, the first year's loss could be subtracted from the second year's gain.

The government said it will work with the National Assembly to set the carryforward period at three years. It noted that major economies such as the United States and the United Kingdom allow loss carryforwards, and said the plan reflects proposals from experts that, given the high price volatility of crypto assets, it is reasonable to allow an exception under which gains and losses can be offset over a set period.

How the tax is calculated under current law

According to the National Tax Service, crypto income under current law, which has yet to take effect, is classified as "other income" and subject to separate taxation. Income is the sale proceeds minus the actual acquisition cost and incidental expenses such as fees. Gains and losses are netted over the year, an annual basic deduction of 2.5 million won is applied, and the remainder is taxed at 20%. Returns are filed during the comprehensive income tax filing period in May of the following year.

For coins held before taxation begins, the acquisition cost is deemed to be the higher of the market price as of Dec. 31, 2026, and the actual acquisition cost. The announcement did not address what happens to that reference date. This is not the first postponement. In December 2024, the National Assembly amended the Income Tax Act to push crypto taxation, then set to start in 2025, back two years to 2027.

Detailed rules due in the first half of 2028

The government will form a public-private digital asset taxation working group of experts, industry representatives and relevant ministries to discuss improving the crypto tax framework, detailed tax rules for various types of transactions and easier filing for taxpayers. It will hold a launch meeting as soon as possible and prepare reform measures after intensive discussions through the first half of next year. The government's timeline is as follows.

The Ministry of Finance and Economy said adjusting the start date is intended to make taxation of domestic and overseas trades more effective, improve fairness among taxpayers and build a reliable tax base. It listed its income tax division and fund market policy division, along with the FSC's virtual asset division, as contacts.