Crypto Taxation from 2027: What Are the Key Issues?

Recent discussions on tax reform have focused on real estate-related taxes, leading to relatively low interest in virtual asset (crypto) taxation. Among experts, there is a perception that the taxation discussion has already been abandoned, which is also linked to the lack of clarity in the taxation system. The current law is inadequate in defining virtual assets and specifying taxation methods, causing confusion.

There are concerns that the technical tracking systems required for virtual asset taxation are still inadequate. In particular, clandestine transaction methods such as decentralized exchanges (DEX) or peer-to-peer (P2P) transactions remain difficult for tax authorities to track. Tax accountant Lee Jang-won pointed out the limitations of the current system, stating, "I wonder if this system has been perfectly introduced yet, because the system for tracking taxation seems insufficient."

Among crypto investors, opposition to taxation is low, which is directly related to the decline in asset values. Many investors believe they don't need to pay taxes because they are already experiencing negative returns. Tax accountant Lee Jang-won articulated this investor sentiment, saying, "If I'm already at a minus 30% or 50% loss, then what do I care about taxation? There's nothing to tax."

Under current law, virtual asset taxation is set to begin on January 1, 2027. If the taxation period is to be postponed or the existing law amended, a separate provision must be enacted through legislative action by National Assembly members. Tax accountant Lee Jang-won explained, "Since taxation is scheduled from January 1, 2027, we would actually have to add a new provision. Unless a separate provision is added," emphasizing the strictness of current regulations.

The National Assembly Budget Office (NABO) conducted research on virtual asset taxation and published its findings in a report. This report thoroughly analyzes general information about crypto users and taxation-related content, reportedly exceeding 100 pages. Tax accountant Lee Jang-won stated, "The National Assembly Budget Office conducted research. They did research and even included general information about crypto users in it."

Currently, investors holding less than 1 million won in virtual assets account for about 70% of the total. Consequently, the number of investors actually subject to taxation is estimated to be around 1 million, which is about 10% of the total. Tax accountant Lee Jang-won noted, "In fact, as of the second half of 2025, nearly 70% of people hold less than 1 million won, so even if taxation occurs, as mentioned earlier, only about 10% are actually within the tax jurisdiction," suggesting that the actual impact range of taxation might not be as large as perceived.

The current virtual asset taxation method involves deducting 2.5 million won from capital gains against the acquisition cost, then applying a 22% tax rate as separate 'other income.' Tax accountant Lee Jang-won explained, "You pay 22% after deducting 2.5 million won from the sale price against the acquisition cost. And this is paid as other income." This method is similar to stock capital gains, where a certain amount is deducted before taxation.

The classification of virtual assets as 'other income' limits the application of consolidated gains/losses and carry-forward deductions. For overseas stocks or real estate capital gains, losses and gains from multiple transactions can be consolidated to calculate taxes, or losses can be carried forward to the next year for deduction. However, virtual assets currently lack such a system for reflecting losses, making it difficult to combine negative returns with other income or carry them over to the next year for deduction. Tax accountant Lee Jang-won pointed out, "Will it be consolidated with other income? For capital gains, like real estate, if you sell two or three properties in a year, they are aggregated. There is a concept of consolidation. But there's also a carry-forward deduction," raising concerns about the fairness of virtual asset taxation.

Under virtual asset tax regulations, exchanging one coin for another can also be classified as a 'transfer' and thus subject to taxation. This has sparked controversy, as it implies that even exchanging for stablecoins, which have low price volatility, could incur taxes on exchange rate gains. Tax accountant Lee Jang-won questioned the practicality of taxing exchange rate gains on virtual asset exchanges, unlike gold or dollars, asking, "Exchange is also listed as a transfer here. But there's also talk, then, of continuously taxing exchange rate gains when exchanging for settlement-purpose stablecoins?"

The current virtual asset taxation system relies on matching tax declarations with data received from domestic virtual asset service providers like Upbit, Bithumb, and Korbit. However, this method has limitations in capturing transactions on foreign exchanges, decentralized exchanges (DEX), and informal transactions such as P2P (peer-to-peer) trades. Tax accountant Lee Jang-won explained, "At least, because the system for virtual assets is set up to match proper tax declarations with data received from virtual asset service providers like Upbit, Bithumb, or Korbit," raising concerns that these tracking limitations could lead to the formation of a black market.

Many point out that the current basic deduction for virtual assets, set at 2.5 million won, is unrealistically low. This amount is about 20 times lower than the 50 million won deduction for financial investment income tax. Tax accountant Lee Jang-won simply stated that "2.5 million won is too low, as it literally just reduces the tax by that much," raising concerns about fairness compared to other financial investment products.

Currently, virtual asset taxation applies the same 2.5 million won loss deduction as that for overseas stock investors (so-called 'Seohak Gaemi', or 'Western ants'). The government explains that this measure aims to prevent domestic capital outflow. Tax accountant Lee Jang-won stated, "Overseas investors, the 'Seohak Gaemi,' their loss deduction is currently 2.5 million won. Yes. And that's applied here, isn't it?" implying that virtual asset taxation is being approached from a similar perspective as overseas stock investment.

A differentiated tax rate system has been proposed, suggesting lower tax rates for users of domestic virtual asset exchanges to secure transparent tax sources. This aims to encourage diligent tax payment and prevent capital outflow to foreign exchanges. Tax accountant Lee Jang-won proposed, "Let's apply a lower tax rate if you use domestic exchanges. We established a diligent tax payment system, and then apply 20% if you use other exchanges." However, he also noted that tracking technology for foreign exchanges like Binance is constantly improving, making it difficult to prevent outflow.

Concerns are raised that if virtual asset taxation is implemented, there could be an increase in informal channels, such as peer-to-peer (P2P) transactions, to evade taxes. The government is likely to adopt a 'scare tactic' policy for such informal transactions, essentially saying, 'Report it yourself, but you'll be penalized if caught.' Tax accountant Lee Jang-won explained, "They say, 'If you get caught, you're done for.' Most countries use this method when collecting taxes. So they say, 'I don't know everything, but if you get caught, you're done for, so take care of it yourself.' They kind of scare you," suggesting that such policies reflect the difficulty of enforcement rather than their effectiveness.

It has been pointed out that the current absence of a tax credit for virtual asset taxation means there are insufficient incentives for diligent tax payment. Tax accountant Lee Jang-won stated, "There is no tax credit. I brought this up. I am saying this on air to ask for it to be included," strongly advocating for the introduction of a tax credit to encourage tax reporting.

For overseas stocks, brokerage firms have systems to represent or support investors in their tax filings. Similarly, there is growing demand for virtual asset exchanges to introduce dedicated tax filing support systems to help investors easily file their taxes. Tax accountant Lee Jang-won emphasized, "Virtual asset exchanges also need to implement a system for free tax filing on their apps."

The system of carry-forward losses, which allows losses from virtual asset investments to be deducted in subsequent years, does not apply to individual investors but is recognized for corporations. Tax accountant Lee Jang-won pointed out, "It's a part where carry-forward losses are not recognized, but the interesting point is that corporations receive it," expressing concern that this difference could popularize the establishment of virtual asset corporations to indirectly gain tax benefits, similar to real estate corporations.

Virtual asset investors must thoroughly retain documentation proving acquisition costs in preparation for future taxation, as the burden of proof for taxes lies with the investor. Fortunately, the acquisition cost as of December 31, 2026, will be recognized, so even if not prepared in advance, documents can be organized based on this date. It is important to verify and keep all documents that can prove the acquisition cost, such as transaction history and transfer records. Tax accountant Lee Jang-won advised, "Since the burden of proof is on me, I have to do it. Fortunately, the acquisition cost as of December 31, 2026, will be recognized, so even if you haven't prepared it, it's okay."