Korea to Tax Crypto as Other Income, Drawing Fairness Complaints

Lee Hyung-il, the nominee for deputy prime minister and minister of economy and finance, said on the 13th that "specific standards will be announced through a National Tax Service notice within this year," referring to the taxation of cryptocurrencies. The remarks reaffirmed that crypto taxation will take effect next year.

Market participants broadly agree that taxation is necessary but say much still needs to be fixed. The same applies to levying taxes on stablecoins, which serve as a payment instrument. Below are the four main issues the industry has raised over crypto taxation.

Government Promises Detailed Standards This Year, but Fairness Questions Persist

Starting Jan. 1 next year, income from transferring or lending cryptocurrencies will be taxed separately as other income. A basic deduction of 2.5 million won will be applied to annual crypto income, with the remainder taxed at 20%. Including local income tax, the effective rate is 22%.

Other income covers one-off or incidental earnings such as lottery winnings and prize money. When the crypto tax framework was first drawn up in 2020, the legal nature of cryptocurrencies was unclear, so they could not be classified as financial investment income alongside stocks and bonds and were instead placed under other income.