Crypto Taxation Starts Next Year, but U.S. Transaction Data Won't Arrive Until 2029

[Financial News] Taxation on virtual asset income will begin next year, but transaction information exchanges with the United States and some other countries will not take place until one or two years later. Unlike domestic exchanges, overseas exchanges, decentralized exchanges (DEXs), and transactions conducted through personal wallets are difficult for tax authorities to track. This raises concerns that gaps in identifying taxable income could emerge, particularly from overseas transactions, in the early stages of the tax system.
According to a report published on the 20th by the National Assembly Budget Office (NABO), titled 'Issues and Challenges in Taxing Virtual Asset Income: Ahead of Its Implementation in 2027,' taxation on virtual asset income will apply to assets transferred or lent on or after January 1 next year. The system was initially scheduled to begin in 2022 but was postponed three times.
Under the current Income Tax Act, income generated by transferring or lending virtual assets is classified as other income. After acquisition costs and incidental expenses are deducted, income exceeding KRW 2.5 million per year is subject to a 22% tax rate, including local income tax.
The main issue is overseas transactions. Domestic virtual asset service providers must submit transaction records and other information to tax authorities, but overseas crypto-asset exchanges have no obligation to submit or report transaction details to Korean tax authorities. NABO therefore noted, "There may also be limitations in detecting transactions conducted through overseas exchanges."
The government plans to obtain overseas transaction information through the Organisation for Economic Co-operation and Development (OECD)'s Crypto-Asset Reporting Framework (CARF). South Korea is among the 46 countries and jurisdictions scheduled to participate in the first information exchange in 2027.
However, the timing of participation differs by country. Twenty-nine countries, including Canada, Switzerland, Singapore and Hong Kong, are scheduled to begin their first information exchanges in 2028, while the United States is set to start in 2029. Compared with the start of virtual asset taxation in South Korea, this means there will be a two-year gap before the United States begins exchanging information. NABO analyzed, "Differences in implementation timelines among countries could create gaps in identifying taxable income."
DEXs and over-the-counter transactions have also been identified as blind spots. When individuals exchange virtual assets with one another, there is no entity responsible for submitting transaction records. NABO also pointed out that over-the-counter transactions conducted through hardware wallets such as cold wallets could be abused as a means of evading taxes because it is difficult to verify the beneficial owners.
Some transaction types also lack clear tax rules. Although current law designates income from transferring or lending virtual assets as taxable, clear taxation standards have yet to be established for income generated through staking, lending, hard forks and airdrops.
The National Tax Service (NTS) established a Digital Asset General Affairs Division in July to address these issues. It plans to complete development by the end of this year of a tentatively named 'Integrated Virtual Asset Analysis System' for analyzing transaction data and other information. The NTS is also developing detailed taxation standards through research projects and consultations with experts on virtual asset taxation.
Japan plans to apply a 20% separate tax and allow losses to be carried forward for three years on virtual asset income earned through registered exchanges. For transactions through overseas exchanges, however, it is pursuing a system that would impose progressive taxation of up to 55% and prohibit the carryforward of losses. NABO suggested, "South Korea could consider measures to encourage the use of domestic exchanges by referring to cases such as Japan's."
[email protected] Kim Kyung-min Reporter