Daily Crypto Deep Dive: South Korea’s 22% Crypto Tax — Will Traders Move Offshore?

**SPEAKER_1** (0:00)
Welcome back to the Daily Crypto Deep Dive. South Korea is about to conduct one of the most important experiments in the world. From January 1st, 2027, millions of Korean investors will face a 22% tax on their annual cryptocurrency profits. The government says the tax creates fairness, brings crypto into the normal financial system, and prevents a rapidly growing asset class from remaining outside the tax net. Critics believe it could achieve the exact opposite. They warn that the policy may punish ordinary investors, reward people who move their money offshore, weaken South Korea's domestic exchanges, and deliver far less tax revenue than the government expects. And there is already evidence that Korean cryptocurrency capital is moving abroad before the tax has even started. Before we begin, follow the podcast and leave us a five-star rating. It helps more people discover the show and allows us to continue producing two new cryptocurrency episodes every day. First, a quick word from Kraken. Kraken is one of the world's longest running cryptocurrency exchanges, offering access to Bitcoin, XRP, Ethereum and many other digital assets. You can support Crypto News Today and enter our current 20 XRP giveaway by using the Kraken link in the description. Always do your own research before buying or trading. This is not financial advice, and crypto trading involves risk of loss. South Korea's cryptocurrency tax is scheduled to begin on January 1st, 2027, after being postponed three times. The tax was originally expected to begin in 2022
It was delayed until 2025, and then delayed again until 2027, while the government, exchanges and tax authorities attempted to build the necessary reporting infrastructure. Deputy Prime Minister and Finance Minister Koo Yun Chae-ol has now told lawmakers that the government intends to proceed according to schedule rather than approving a fourth delay.
A bill attempting to abolish the tax remains under parliamentary consideration, so repeal is technically still possible. But the government is actively preparing for implementation. Profits generated from transferring or lending cryptocurrency will be classified as other income.
Investors will receive an annual tax-free allowance of 2.5 million Korean Won, currently worth approximately $1,700.
Profits above that allowance will face a 20% national income tax, with an additional 2% local income tax bringing the combined rate to 22%.
The tax is calculated on profits rather than the total amount sold. Imagine an investor purchases cryptocurrency for 10 million Won and later sells it for 20 million Won. Their profit is 10 million Won. After subtracting the 2.5 million Won annual allowance, 7.5 million Won remains taxable. Applying the combined 22% rate would create a tax bill of approximately 1.65 million Won. Transaction fees and eligible acquisition costs can generally be deducted when calculating the profit. Gains and losses occurring within the same tax year will also be combined before the investor files their return during May of the following year. The first returns covering income earned during 2027 would therefore be filed in May 2028 Government has also attempted to avoid retroactively taxing profits accumulated before the law begins. For cryptocurrency already owned before January 1st, 2027, the acquisition value will generally be treated as whichever is higher. The investor's genuine purchase cost or the assets market value immediately before the tax begins. That means an investor who bought Bitcoin cheaply several years earlier should not automatically be taxed on the entire historical increase in value. On paper, this sounds like a fairly normal tax on investment profits. The controversy appears when crypto is compared with other investments in South Korea. Ordinary retail investors generally do not pay capital gains tax when selling domestic shares unless they are classified as major shareholders. South Korea previously planned to introduce a broader financial investment income tax, but that policy was abolished.
Crypto investors could therefore pay 22 percent on relatively modest gains, while many stock market investors continue paying no capital gains tax at all. That difference has become one of the central arguments against the policy. A National Assembly petition demanding the complete abolition of cryptocurrency taxation collected more than 50,000 signatures in only 8 days, forcing it into the parliamentary review process. Ever, the biggest criticism is not necessarily the 22 percent rate. It is the absence of loss carry forwards. A loss carry forward allows an investor to use a loss from one year to reduce their taxable profit in a later year.
Under South Korea's current cryptocurrency framework, profits and losses can be combined within the same year, but losses cannot simply be carried into future years. Consider an investor who loses 10 million won during 2027 and then makes a 5 million won profit during 2028
Across the two years, that investor remains 5 million won down. However, because the 2027 loss cannot be carried forward, the 2028 profit is treated separately. After the 2.5 million won allowance, the remaining 2.5 million won could generate a tax bill of approximately 550,000 won. The investor would therefore owe tax despite still being significantly underwater overall. People Power Party lawmaker Kim Sang-hoon warned that this disadvantage could encourage Korean investors to seek overseas exchanges, decentralized platforms and peer-to-peer markets. Finance Minister Koo has defended the structure. He argues that South Korea does not operate the same broad capital gain system used by countries including the United States and United Kingdom, and says classifying crypto profits as separately taxed other income can provide investors with certain benefits.