South Korea moves to scrap crypto tax

TLDR

South Korea is moving to abolish a planned 22% tax on crypto gains, but this is a proposal that still needs National Assembly approval.

1. The conservative People Power Party has filed a bill to delete crypto-gains provisions from the Income Tax Act before the 2027 start date.
2. The push is driven by fairness concerns versus stock taxation and an estimated 110 billion dollars of capital flight to offshore exchanges.
3. The tax is still legally scheduled for 2027, so the key risk now is political gridlock or a watered-down compromise rather than clean abolition.

Deep Dive

1. What Exactly Was Proposed

South Korea planned to start taxing digital asset gains from 1 January 2027 at about 22% on annual profits above 2.5 million won (roughly 1,800 dollars) via a 20% national tax plus 2% local tax.[^1]

The People Power Party (PPP) has now introduced a bill to amend the Income Tax Act and remove digital asset income clauses entirely, aiming to cancel this dedicated crypto tax before it ever takes effect.[^1]

The ruling Democratic Party, which holds the majority, has not agreed yet but says it will review the proposal, so nothing has changed in law for now.[^1]

2. Why Lawmakers Want To Scrap It

PPP and industry groups argue the regime is discriminatory because stock investors enjoy a far higher exemption threshold around 50 million won (about 35,600 dollars), while crypto investors would be taxed above 2.5 million won.[^2]

Reports estimate roughly 110 billion dollars worth of crypto has already left Korean platforms for offshore venues to avoid the planned tax, a drain on local liquidity and onshore market depth.[^3]

They also cite double taxation (crypto already treated as goods for VAT) and practical enforcement issues, especially tracking cost basis for non-resident traders using overseas exchanges.[^1]

3. What To Watch Next

The repeal bill must pass the National Assembly; until that vote, the 2027 crypto tax start date technically still stands and tax authorities are continuing preparations.[^4]

The National Tax Service has already invested about 3 billion won in an AI-based crypto transaction tracking system, which could still be used for other enforcement even if a dedicated crypto gains tax is scrapped.[^4]

Key signals for crypto users will be whether the majority party pivots to full repeal, opts instead for higher thresholds or a unified financial-investment tax, and how exchanges update their reporting and KYC to match.

Conclusion

South Koreas move reflects recognition that a low-threshold, punitive crypto tax plus strict monitoring is pushing capital offshore and weakening its role as a major trading hub.

If lawmakers ultimately abolish the standalone crypto gains tax, Korean traders get short-term relief and local exchanges may regain volume, but the longer-term story is likely a more integrated, data-heavy regulatory regime rather than a regulatory vacuum.

Confidence: high, based on multiple consistent Korean and international reports from March 2026.

[^1]: Opposition bill details and tax design [^2]: Fairness arguments versus stock taxation [^3]: Estimated 110 billion dollars of capital flight [^4]: Repeal bill, 2027 start date, and AI tracking investment