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- Ahead of the introduction of taxation on virtual-asset income in January, a report said South Korea needs policy incentives to encourage use of domestic exchanges.
- It said a system similar to Japan’s — offering a separate low 20% tax rate and loss carryforwards for using registered exchanges — could strengthen incentives for South Korean investors to use domestic exchanges.
- The report said South Korea needs to bolster its tax <a href="https://xpertsstudio.com/from-the-crypto-market-to-financial-infrastructure/” title=”From the Crypto Market to Financial Infrastructure”>infrastructure, including a system that automatically calculates and files taxes based on multiple transactions and clear tax standards for each transaction type.
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South Korea should create policy incentives to encourage investors to use domestic exchanges ahead of the introduction of taxes on virtual-asset income in January, while also building an automated tax calculation and filing system linked to those platforms, according to a report.
The National Assembly Budget Office said in a report published on Sept. 17, titled “Issues and Tasks for Taxing Virtual-Asset Income,” that South Korea needs to bolster both its ability to identify taxable income and the taxpayer infrastructure needed to make the new tax effective.
The office called for strengthening the National Tax Service’s capacity to track and verify virtual-asset transactions. It also proposed reviewing ways to steer investors toward domestic exchanges so tax authorities can secure trading data more easily.
In particular, the report said South Korea needs measures to promote voluntary reporting by investors who use over-the-counter markets or overseas exchanges in countries that do not participate in the Crypto-Asset Reporting Framework, or CARF.
The report pointed to Japan as an overseas example. Japan plans to apply a separate low 20% tax rate and allow three-year loss carryforwards for virtual-asset income generated through registered exchanges. The office said similar incentives for using domestic exchanges in South Korea could make it much easier for tax authorities to identify transaction records.
It also stressed the need to build systems that simplify tax procedures. That would require infrastructure linked to exchanges so investors do not have to manually review multiple transactions to calculate acquisition costs and gains or losses, and can instead have those amounts computed automatically and use the system to file taxes.
The office also said authorities need to provide sufficient advance guidance and public outreach to reduce confusion in the early stages of implementation. In particular, it said the government should specify in advance which tax standards will apply to different types of virtual-asset transactions. Detailed interpretation standards should be established through public notices, administrative guidelines and frequently asked questions, then communicated to taxpayers.
Taxation of virtual-asset income was introduced through a December 2020 amendment to the Income Tax Act, but implementation has since been postponed three times. Under the current schedule, taxes will begin to apply to income from transfers and lending of virtual assets generated on or after Jan. 1, 2027.
The office said key issues that still need to be resolved before the tax takes effect include limits on identifying taxable income, building tax infrastructure, establishing tax standards for each transaction type, and determining how much of losses incurred in trading should be recognized.
Source: en.bloomingbit.io