Will the theory of ‘virtual asset tax deferral’ triggered by the abolition of the gold investment tax change as promised during the presidential election?

Crypto asset investor: “When the gold investment tax is abolished, coin taxation must also be reexamined from the beginning”
Government: “Tax policy easing is led by the President’s Office and is not being considered by the Ministry of Strategy and Finance”
There are also arguments that the introduction of taxation should proceed as scheduled to stabilize the virtual asset market

When the government formalized its plan to abolish the financial investment income tax (gold investment tax), it was argued that virtual asset taxation, which was scheduled to be introduced from next year, should also be postponed. In addition, President Yoon Seok-yeol’s presidential election pledge to ‘raise the tax exemption limit for virtual assets to 5,000 million won’ also serves as the basis for the argument that the introduction of the system should be delayed. Accordingly, politicians are voicing opposition, emphasizing the tax principle that ‘where there is income, there are taxes’.

Government stance on delaying introduction of virtual asset taxation

According to an official from the Ministry of Strategy and Finance on the 3rd, the government is not currently considering postponing or easing the ‘virtual asset income tax’ scheduled to be introduced from 2025. Virtual asset taxation, which imposes a 250% tax on income exceeding 20 million won from the transfer or rental of virtual assets, was originally scheduled to be introduced in 2022. However, the implementation was postponed by a year as it was pointed out that related businesses such as virtual asset exchanges failed to prepare tax infrastructure. Afterwards, the implementation period was postponed again to 1 due to reasons such as the improvement of the investor protection system and virtual asset market conditions. done.

There has been a steady rise in the market that the tax base for virtual assets could be relaxed ahead of the general election in April. This is because President Yoon Seok-yeol announced that he would raise the tax exemption limit for virtual assets to 4 million won as a presidential election pledge. At the time, President Yoon emphasized, “It is not against fairness to align the tax limit for virtual assets with the tax limit for stock investment profits.” In addition, the fact that the government recently formalized its plan to abolish the gold investment tax, which was scheduled to be introduced next year, is also the reason why there are arguments among investors that virtual asset taxation should be abolished or modified. President Yoon attended the ‘5,000 Securities and Derivatives Market Opening Ceremony’ held at the Korea Exchange on the 3rd and said, “If excessive burdensome taxation harms good investors and distorts the market, it must be improved in accordance with market principles.” “Going beyond the controversy over tax cuts for the rich, we will push for the abolition of the financial investment income tax, which was scheduled to be introduced next year, for the long-term coexistence of citizens, investors, and our stock market,” he said.

The current government’s position is that gold investment tax and virtual asset taxation should be viewed as separate issues. The reason for delaying the introduction of virtual asset taxation in 2022 was that time was needed to establish an investor protection system, such as enacting basic laws related to virtual assets. An official from the Ministry of Strategy and Finance said, “Because virtual assets are classified as ‘other income’ under the Income Tax Act, they cannot be viewed as a separate area from financial investment income, which is the basis for gold investment tax.” He added, “The relaxation of tax policies related to stocks, such as the abolition of gold investment tax, is supported by the President.” “This is a part led by the Office, and the Ministry of Strategy and Finance is currently not separately reviewing whether to adjust the taxation of virtual assets.”

Proponents of taxation of virtual assets “Taxation is natural where there is income”

Some argue that the introduction of taxation should proceed without change in order to stabilize the virtual asset market. In fact, according to the ‘2021 Virtual Asset Taxation Pros and Cons Survey’ conducted by Realmeter in 2022, when discussions on introducing virtual asset taxation were in full swing, there were more people in favor of taxation (53.7%) than against it (38.3%).

Currently, proponents of virtual asset taxation basically maintain the position that the tax principle of ‘where there is income, there is tax’ must be observed. Lee Yong-woo, a member of the Democratic Party of Korea who proposed the Virtual Asset Industry Act, said, “Taxes are levied wherever income is generated. Considering the nature of the virtual asset market, where speculative activities can easily occur due to greater volatility than the stock market, taxation is required.” “We need to reduce these illegal activities to some extent,” he emphasized.

There is also an analysis that if virtual asset taxation is introduced, the position of virtual assets that were not included in the institutional system may change. This is because when subject to taxation, virtual assets are no longer defined as currency but as goods with property value.

However, proponents argue that investor protection measures and fair taxation must come first. An official in the domestic financial investment industry said, “It is necessary to implement gold investment tax and coin taxation, but with systems and laws that can guarantee the safety of virtual currency transactions, etc., properly established,” and “Definition of the concept of virtual assets.” He pointed out, “Investor protection measures, such as transparency of exchange platforms, must also be put in place.”