22% Crypto Tax Nears, Valuation and Fairness Issues Remain

An investor who earns 10 million won ($7,256) in net gains from cryptocurrency investments could face a tax bill of 1.65 million won under the tax system set to take effect on Jan. 1 next year. While investor sentiment is recovering on expectations of further gains in Bitcoin prices, the planned cryptocurrency tax has emerged as a major variable for the market.

Starting next year, the government plans to classify income from the transfer or lending of virtual assets as other income for tax purposes. A 22% tax rate, including local income tax, will be applied to annual gains after deducting necessary expenses and a basic exemption of 2.5 million won. Income earned this year will not be subject to the tax, with the first tax returns and payments scheduled for May 2028.

With the tax taking effect in about four months, concerns persist over the lack of clarity in the detailed rules. A key issue is how to determine the cost basis of assets transferred from overseas exchanges or personal wallets to domestic exchanges. If investors cannot prove their acquisition costs and only 50% of the sale proceeds is recognized as a deductible expense, they could end up paying taxes far exceeding their actual gains.