South Korea’s National Assembly Research Service has urged broader changes to the country’s virtual-asset tax framework before the planned levy is put into effect. In a report dated Nov. 5, the agency argued that the current design does not match the economic character of crypto gains and leaves major practical gaps in reporting and enforcement.
The report, titled “Should Digital Asset Taxation Be Implemented as Is?,” says the present approach could weaken tax fairness, create opportunities for avoidance, and leave key parts of the digital-asset market without clear rules. At the same time, it warned that simply pushing back the tax schedule again could damage policy credibility.
Mismatch between tax label and asset reality
The research service said gains from the transfer and lending of virtual assets are currently treated as “other income,” but that classification does not reflect how those returns are actually generated. According to the report, profits from crypto trading are closer in nature to capital gains because they come from increases in asset value.
That distinction matters because similar forms of investment return are not being handled consistently. The report pointed to overseas-listed spot crypto exchange-traded funds, which are taxed under the capital-gains framework applied to foreign stocks, while direct sales of virtual assets are taxed differently despite producing comparable economic gains. In the agency’s view, that inconsistency raises questions about neutrality and fairness in the tax system.
Avoidance risks and unresolved categories
The report also warned that taxpayers may be able to lower their burden through family gifts. It said virtual assets are not subject to carryover taxation under the capital-gains regime, which could leave room for burden reduction strategies that are not available in the same way elsewhere in the tax code.
Beyond that, the agency said several common crypto activities still lack clear standards for when income arises and how it should be taxed. It specifically cited mining, staking, airdrops, hard forks, and decentralized finance, arguing that the system needs more detailed rules on taxable items and the timing of recognition before enforcement begins.
Exchange systems and offshore data remain weak points
A second major concern in the report is the readiness of tax-reporting infrastructure. The research service said progress at domestic exchanges has been insufficient, naming Upbit, Bithumb, and Coinone as platforms that are either still developing reporting systems or have postponed work while waiting for clearer standards.
The agency added that obtaining transaction data from abroad will be essential, since foreign exchanges and decentralized exchanges are much harder to monitor. Even if the Crypto-Asset Reporting Framework, or CARF, is adopted in 2027, the report said information gaps are still expected to remain across major countries. That means compliance and enforcement problems may persist even after international reporting channels expand.
Recommended next steps before implementation
Rather than leave the framework unchanged, the National Assembly Research Service called for revisions to the classification of crypto-related income and to the tax principles applied across different transaction types. It also said authorities should build data-secure reporting structures and make sure service providers have the systems needed to support compliance.
At the same time, the report did not frame delay as a simple solution. It cautioned that postponing the tax timetable could undermine confidence in policy execution, suggesting the next confirmed step is not merely deciding when the levy starts, but whether the underlying rules, reporting channels, and exchange systems can be revised enough to support enforcement on a credible basis.
Source: en.bloomingbit.io