South Korea to Tax Crypto Gains from 2027, Enhancing Enforcement with Blockchain Tracing

Starting January 1, 2027, the National Tax Service (NTS) of South Korea is ready to apply a 20% income tax on cryptocurrency profits including those from lending and transfers. Whether held in domestic or foreign markets or in private wallets, this tax will apply independent of where the digital assets are kept. Before the tax, a 2.5 million won (about $1,850) reduction will apply, with first complete reporting for 2027 income due in May 2028.

The NTS will track on-chain transactions using business blockchain-tracing software to help to solve the present problem of restricted visibility into self-custody wallets and decentralized platforms by so enabling the enforcement of this new tax. Foreign exchanges data will be gathered through international conventions such the OECD's Crypto-Asset Reporting Framework (CARF). South Korea is also strengthening its "Travel Rule" for virtual asset service providers by deleting the 1 million won (about $700) limit for reporting originator and beneficiary information on all cryptocurrency transactions.

Tracking and reporting developments notwithstanding, issues still exist. Citing inadequate infrastructure for monitoring decentralized exchange (DEX) and DeFi activity, some politicians have suggested postponing the tax's debut to 2029. Officials also admit restrictions in tracking down all private wallet transactions and some non-CARF locations. Retail investors are worried about the tax rate and the lack of loss carryforward rules; they are comparing stock gains to tax-free ones.