A comparison of tax laws: South Korea

    By Ross Harman, Tom Kwon and Park Jeongwoo, Lee & Ko



    Cryptocurrency is a hugely popular investment option among younger people in South Korea, where it is seen as a solution to difficult economic conditions and a way to make a lot of money fast. Taxation of cryptocurrency is accordingly a hot political issue.

    Ross Harman
    Ross Harman
    Foreign Attorney
    Lee & Ko in Seoul
    Tel:+822 6386 7876

    In this article, the authors provide an up-to-date explanation of how cryptocurrency is taxed, with the caveat that any explanation of the rules quickly becomes out of date. A few months from now, the position may change again.

    At the time of writing, except in the case of domestic corporations, no cryptocurrency-related transaction or event is subject to any form of taxation in the country. The previous Korean administration under former president Moon Jae-in originally announced plans to make certain cryptocurrency transactions taxable as of 1 January 2022, before pushing that date back a year. Currently, in-force law states that certain cryptocurrency transactions for resident individuals will become taxable as of 1 January 2023.

    But current President Yoon Suk-Yeol, who took office in May this year, has proposed pushing back the effective taxation date to 2025, and the Ministry of Economy and Finance has accordingly published proposals to this effect.

    It is likely that proposals will be approved by the National Assembly in due course, although this approval is not automatic. In seeking to postpone taxation of cryptocurrency, it is likely that President Yoon was at least in part motivated by the need to appeal to younger voters.

    With these repeated changes to cryptocurrency taxation plans, it is difficult for a tax adviser to keep up-to-date on the latest situation. It will be unsurprising if the plans change yet again, or if taxation is delayed yet further, beyond the envisaged 1 January 2025 start date.


    Tom Kwon
    Tom Kwon
    Senior Foreign Attorney
    Lee & Ko in Seoul
    Tel:+822 6386 6627
    Email: tom.kwon@leeko.com

    The precise definition of cryptocurrency can be debated extensively, not least because there are thousands of different types. Nonetheless, there are some often occurring characteristics common to many of them, key ones being use of blockchain technology, decentralisation and virtual-only existence.

    From a tax perspective, there is only one really important distinction, and that is whether cryptocurrency is indeed a type of currency, as the word cryptocurrency suggests, or a type of asset.

    In common with many member countries of the Organisation for Economic Co-operation and Development (OECD), South Korea’s position on this is clear. For tax purposes, it should be treated as an asset. Indeed, a more accurate English translation of the Korean term for a cryptocurrency (가상자산) would be virtual asset.


    Once it is understood that cryptocurrencies should be treated as an asset, the taxation treatment becomes clearer, as it basically follows the same South Korean taxation rules that apply to transactions involving other types of assets.

    There are several possible events involving cryptocurrencies that might at first glance be potential candidates as taxable events, namely creation (or acquisition), disposal (including transferring from an exchange platform to a personal wallet), and lending.

    Creating or acquiring a cryptocurrency is a non-taxable event in South Korea. That is true whether it is created through mining, some other means, or acquired through purchase with money or other non-monetary consideration.

    Park Jeongwoo
    Park Jeongwoo
    Senior CPA and Certified Tax Accountant
    Lee & Ko in Seoul
    Tel:+822 6386 6276
    Email: jeongwoo.park@leeko.com

    However, the creation or acquisition of a cryptocurrency still has some relevance for tax purposes, since its value at this point in time will be used to calculate the taxable gain when there is disposal.

    As with other assets, when a gain is realised on disposal of cryptocurrency, that gain is subject to tax. More specifically, a disposal means the cryptocurrency is either transferred, loaned or withdrawn (the latter in the case of non-residents only) in return for consideration.

    The gain equals the consideration received for the transfer, less the acquisition price (which includes incidental expenses relating to the creation or acquisition). For cryptocurrency held earlier than 1 January 2023, the acquisition price will be deemed to be the larger of the market value as of 1 January 2023 or the actual acquisition price. For the latter, for accounting purposes, either the moving average method or the “first in, first out” method should be used, depending on the particular circumstances.

    One of the basic principles of Korean tax law is that only items that are expressly mentioned in the tax law can be subject to taxation. In this case, the proposed legislation clarifies that cryptocurrency gains will be categorised as other income, and should be recorded as such on tax returns.

    The tax rate and method of payment will differ for residents and non-residents, and for individuals and corporations.

    Resident individuals. From January 2023 onwards, worldwide cryptocurrency gains over KRW2.5 million (USD1,750) will be taxed at a flat rate of 22%, with the gain reported annually during the income tax return period (May). Since the tax applies to worldwide gains, it cannot be avoided by holding cryptocurrency in accounts outside South Korea.

    Domestic corporations. Although cryptocurrencies are not specifically mentioned in the existing tax law applying to domestic corporations, it is generally accepted that cryptocurrency gains will be taxed according to general taxation principles. Therefore, in the case of domestic corporations, no specific amendment to the law is required to bring cryptocurrency gains within the scope of taxation.

    As with other types of taxable gains, cryptocurrency gains are added to the other annual taxable corporate income with income over KRW200 million taxed progressively at 22% (for the KRW200 million to KRW20 billion portions of income); 24.2% (for the KRW20 billion to KRW300 billion portions); and 27.5% for any income over KRW300 billion.

    The gain is reported on the annual corporation tax return, which is filed within three months of the last day of the business year. As with resident individuals, the tax is applicable to worldwide cryptocurrency gains, so cannot be avoided by holding it in foreign accounts.

    Non-resident individuals or foreign corporations without South Korean permanent establishment. As is the case for resident individuals, the currently law at the time of writing states that South Korean-sourced cryptocurrency gains will be taxable as of 1 January 2023. However, although the proposal to push back taxation until 2025 strictly speaking only applies to resident individuals, in practice it will likely also apply to non-resident individuals and foreign corporations.

    As of 2023 (or 2025, as the case may be), the position for non-resident individuals or foreign corporations without a South Korean permanent establishment will be as follows: For international tax purposes, cryptocurrency gains with some Korean connection (e.g., a trading platform based in South Korea used for relevant transactions) will be considered South Korean-sourced income, and taxed in the same way as other domestic taxable gains, namely, the lower of either 22% of gain or 11% of transfer price.

    However, although non-resident individuals or corporations with cryptocurrency gains will suffer the economic burden of the tax, they will not be responsible for tax filings or payments. As with other types of gains, these will be through withholding taxes, with the virtual asset operator acting as withholding agent. Having said that, the good news for non-resident individuals or corporations with this sort of gain is that provided they live in a country that has a tax treaty with South Korea they will be able to apply to the virtual asset operator for tax exemption.

    This would involve submitting a relatively simple application form along with supporting documents proving their country of residence.

    Value-added tax (VAT). No legislative provision expressly mentions the applicability or not of VAT to cryptocurrency transactions. However, the tax authority provided guidance in 2021, suggesting that cryptocurrency transactions are outside the scope of VAT. So, although there is not complete certainty, this appears to be the position for now.


    The good news for individual (but not corporate) investors is that for the time being at least, cryptocurrency gains are totally untaxed, and this is unlikely to change for at least the next two years.

    It remains to be seen whether taxation comes into effect in January 2025, or whether it will be pushed back further, allowing cryptocurrency investors yet another reprieve from taxation.

    LEE & KO

    LEE & KO
    Hanjin Building, 63 Namdaemun-ro, Jung-gu

    Seoul – 04532, South Korea

    Tel: +822 2772 4000

    Email: mail@leeko.com