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South Korea’s 27 virtual asset exchanges plan to formally petition the government to defer the virtual asset income tax scheduled for January next year. The industry points out that South Korean operators cannot verify the acquisition costs of virtual assets that have passed through overseas exchanges or personal wallets, and that non-resident withholding tax systems and transaction-type-specific taxation standards have not yet been established. With regulatory overhauls—including amendments to the Act on Reporting and Using Specified Financial Transaction Information, voice phishing refund systems, and revisions to the Foreign Exchange Transactions Act—piling up in succession, the industry argues there is insufficient preparation time to simultaneously build taxation infrastructure. Equity concerns were also raised that the information-exchange gap with overseas exchanges could concentrate investigative burdens solely on South Korean users. The industry proposed that during the deferral period, the government should raise the basic deduction limit, introduce loss carryforward deductions, build a voluntary reporting platform, and establish the legal nature of virtual assets through enactment of the Digital Asset Framework Act.
Key Elements
South Korean virtual asset exchanges plan to submit a formal opinion letter to the government requesting deferral of the virtual asset income tax scheduled for January next year. The core argument is that enforcing taxation without infrastructure to verify acquisition costs and a non-resident withholding tax system in place could shrink domestic trading and drive capital overseas.
According to the “Opinion on Virtual Asset Income Taxation” obtained by Edaily on the 10th, the Digital Asset Exchange Alliance (DAXA)—representing 27 South Korean virtual asset service providers (VASPs)—has consolidated its position that the taxation timeline should be further postponed and plans to deliver it to the government shortly.
The opinion letter states: “Virtual asset taxation requires a re-examination of the implementation timeline until the relevant infrastructure and information-exchange systems have been substantively verified and preceding regulatory reforms have stabilized.” It adds: “Since it is reasonable to tax only after the legal nature of the asset has been defined, consistency between the Digital Asset Framework Act’s implementation and the taxation system must first be secured.”
A structure that stalls from the very first step: calculating acquisition costs
The industry’s biggest challenge is calculating acquisition costs. Even if the moving-average method is applied starting next year, South Korean operators cannot verify the initial acquisition time and price of virtual assets that enter domestic exchanges from overseas exchanges or personal wallets.
For example, if an investor buys virtual assets on an overseas exchange, moves them through a personal wallet, and then transfers them to a South Korean exchange to sell, the domestic exchange may have no record of the original purchase price. The industry’s assessment is that if even one transaction among those moving across multiple domestic and international exchanges and personal wallets has an unverifiable acquisition cost, calculating the entire capital gain becomes difficult.
Non-resident withholding is also practically difficult to implement. This is because the identification documents, account verification, and mobile phone authentication data that exchanges obtain during the know-your-customer (KYC) process are insufficient to accurately determine whether a user is a tax resident or non-resident. The industry also noted that the current system—which treats a non-resident’s “withdrawal” of virtual assets as a transfer—is unclear about whether moving assets to one’s own personal wallet constitutes a withdrawal, and which point among withdrawal request, approval, or completion should serve as the taxable event.
Regulatory overhaul and tax infrastructure collide simultaneously
DAXA stated: “In the short period surrounding virtual asset income taxation, operators find themselves in a situation where they must simultaneously implement regulatory reforms of entirely different natures. Building infrastructure with limited personnel requires sufficient preparation time.”
The industry must prepare for strengthened regulations under the Act on Reporting and Using Specified Financial Transaction Information in August this year, followed by the voice phishing victim refund system in October, and the construction of an overseas-transfer computer network under the Foreign Exchange Transactions Act revision around November. On top of this, starting January next year, they must build an entirely new virtual asset taxation system for acquisition cost calculation, withholding, and reporting and payment.
DAXA pointed out: “The amendment to the Act on Reporting and Using Specified Financial Transaction Information granted even existing operators a one-year grace period to reorganize their organizations, systems, and financial requirements, yet the taxation infrastructure is being implemented immediately with no deferral.” It continued: “The acquisition cost calculation and withholding systems are interlinked with customer verification, travel rule, refund, and overseas-transfer data structures, so the tax system design will inevitably keep changing until the preceding amendments are finalized.”
Potential conflicts between statutes were also raised in the process of liquidating withheld virtual assets into cash. Exchanges are in principle restricted from proprietary trading, and selling on another exchange requires internal decision-making, disclosure, and distributed selling procedures under VASP sale guidelines. The industry expressed concern that this process could take longer than the withholding tax payment deadline, and if prices fall in the interim, operators could be forced to absorb the losses.
Equity concerns vis-à-vis overseas exchanges
Another point of contention is that while South Korean tax authorities can effectively exercise investigative powers over domestically registered operators, information access to overseas exchanges and personal wallets is limited—potentially concentrating investigative burdens solely on users of domestic exchanges.
In particular, the industry expects that while South Korea plans to apply the Crypto-Asset Reporting Framework (CARF) starting in 2027, a significant number of jurisdictions hosting major overseas exchanges will join from 2028, creating an information-exchange gap of at least one year.
A standardized electronic linkage system is also absent. Financial companies can query and submit financial data through a standardized computer network connected to the National Tax Service, but no such common electronic system exists for virtual asset service providers. Data structures differ across exchanges, and virtual assets involve complex information to process—not just Korean won deposits and withdrawals, but also wallet addresses, holdings, split executions, and airdrops.
The industry demanded that the scope and criteria of information that tax authorities can query be clarified in advance. Virtual assets trade 24 hours a day and can move freely to personal wallets outside exchanges, limiting the ability to query information in the same manner as existing financial assets. The industry expressed concern that if the query scope extends beyond exchange accounts to personal wallet addresses or blockchain fund-movement trails, privacy infringement controversies could arise.
Taxation standards by transaction type also lacking
The industry also demanded clear taxation standards for transaction types such as staking, lending, airdrops, and hard forks. While National Tax Service research contracts have outlined some criteria, they carry no legal binding force until reflected in official notices or statutes. Specific taxation standards also remain absent for emerging transaction types including Decentralized Finance (DeFi), Real-World Assets (RWA), non-fungible tokens (NFT), and token swaps.
Under the current Income Tax Act, starting January 1 next year, income from virtual asset transfers and lending will be classified as miscellaneous income, with a 22% tax rate (including local income tax) applied to annual gains exceeding 2.5 million won (approximately $1,900). The first reporting and payment is scheduled for May 2028.
DAXA proposed that related systems be revised during the deferral period. It advocates raising the annual basic deduction limit of 2.5 million won, allowing loss carryforward deductions for at least five years, and building a voluntary reporting platform that consolidates transaction records from multiple domestic and international exchanges to support profit-and-loss calculations.
In the long term, DAXA also presented redesigning the system into an asset-income taxation framework encompassing financial investment income such as stocks alongside virtual asset income. It further argued that the legal nature and classification system of virtual assets should first be finalized, with the taxation system then designed accordingly.
DAXA stated: “The research findings on the four types—staking, lending, airdrops, and hard forks—should be reflected in official notices and statutes after industry feedback, and standards for emerging transaction types such as DeFi, RWA, NFT, and token swaps must be established.” It added: “If stablecoins are recognized as a means of external payment, a parallel review should consider excluding them from taxation.”
It emphasized the need for a phased approach similar to major overseas jurisdictions’ model of “establishing taxation standards → practical application → feedback → revision,” stating: “We must prevent taxpayer confusion that could arise from immediate implementation without reflecting research findings in official notices and statutes.”
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Source: finance.biggo.com