South Korea Moves to Scrap Its Crypto Tax: The 22% Levy Has Been Delayed Three Times Already

South Korea’s People Power Party has introduced a bill to abolish the country’s planned 22% cryptocurrency gains tax, which is currently scheduled to take effect on January 1, 2027, setting up a legislative confrontation with the Democratic Party over how to handle one of the most contested tax proposals in the country’s crypto history.

What the Bill Actually Proposes

Floor leader Song Eon-seok introduced a partial amendment to the Income Tax Act that would overturn the tax entirely rather than modify its structure. The current plan, if left unchanged, would impose a 22% levy composed of a 20% national tax and a 2% local surcharge on annual crypto profits exceeding 2.5 million won, equivalent to approximately $1,665.

The fairness argument driving the proposal is specific. South Korea repealed taxes on other financial investments including stocks in 2024. Lawmakers are now arguing that maintaining a crypto-specific gains tax creates an uneven treatment of investment income across asset classes. That framing gives the abolition push a principled basis beyond simple industry lobbying.

Three Delays and Still Counting

The crypto gains tax was originally intended to take effect in 2022. It has been postponed three times since then, each time citing industry pushback and administrative unreadiness. The pattern is relevant context. A tax that has been delayed three consecutive times on the same grounds carries a different political weight than a first-time proposal.

The People Power Party is framing abolition as a victory for public sentiment, a deliberate positioning in one of the world’s most active retail crypto markets. South Korean retail participation in crypto is structurally significant, and political parties on both sides have proven sensitive to investor sentiment as an electoral variable.

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Where the Democratic Party Stands

According to the information, the Democratic Party holds a majority in the National Assembly and has expressed willingness to discuss the bill. That is not the same as supporting abolition. The party has previously favored raising the tax-free threshold to 50 million won rather than eliminating the tax entirely. That position represents a meaningful compromise point between the current 2.5 million won threshold and full abolition, but the two sides are not aligned on the fundamental question of whether the tax should exist at all.

The bill must now undergo National Assembly debate before any outcome is determined. The Democratic Party’s majority means the People Power Party cannot pass abolition unilaterally. Negotiation toward a higher exemption threshold is the more likely path than outright elimination.

The Government Is Still Building Enforcement Infrastructure

The most telling detail in the current situation is what the National Tax Service is doing in parallel. Despite the legislative push for abolition, the NTS is proceeding with development of an AI-based crypto tax evasion detection system at a cost of 3 billion won, targeting deployment by December 2026. That timeline sits one month before the tax is currently scheduled to take effect.

A government agency spending 3 billion won on enforcement infrastructure for a tax that may never be implemented reflects either institutional inertia or a strong expectation that some form of the levy will survive the legislative process. Either interpretation suggests the abolition bill faces a harder road than its introduction implies.

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