"Only 9.5 Million Won Tax on Bitcoin Bought for 50 Million Won and Sold for 150 Million Won"...Coin Tax Begins Next Year

Acquisition Price Set at the Higher of Actual Purchase or End-2026 Value
20% Tax Rate After 2.5 Million Won Deduction
No Tax Imposed if Asset Value Declines

If the “2026 Tax Reform Proposal,” which excludes the deferral of virtual asset taxation, is finalized following deliberation by the National Assembly, taxation on gains from virtual asset investments will begin on January 1, 2027. The first filing and payment of taxes will take place in May 2028. The scope of taxable virtual asset income includes earnings realized by transferring or lending virtual assets, such as Bitcoin and Ethereum. Under the current Income Tax Act, an annual profit exceeding 2.5 million won is taxed at a rate of 20%. Taking local income tax into account, the effective tax burden is 22%.

According to the Ministry of Economy and Finance and the National Tax Service on August 4, attention should be paid to the transitional measures regarding assets held prior to the implementation of taxation. For virtual assets acquired before the tax is enforced, a special provision allows the acquisition price to be recognized as the higher of the original purchase value or the market value at the end of 2026. For example, if you purchased 1 Bitcoin in 2021 for 50 million won, its price rises to 100 million won by the end of 2026, and you sell it for 150 million won in August 2027, your actual profit is 100 million won (150 million won minus 50 million won). However, for tax purposes, the acquisition price is accepted as 100 million won (the market price at the end of 2026), not 50 million won. Therefore, only the 50 million won profit accrued after 2027 is subject to tax. After subtracting the 2.5 million won basic deduction, tax is imposed on 47.5 million won at a rate of 20%, resulting in a tax amount of 9.5 million won. Conversely, if you sell in August 2027 for 80 million won, you realize a profit of 30 million won, but since the tax-recognized acquisition price is 100 million won (as of the end of 2026), there is no taxable income. This reflects the government’s principle that unrealized gains accrued before taxes are introduced will not be taxed.

Virtual assets acquired after 2027 will be taxed under the standard procedure. For example, if you acquire Bitcoin for 100 million won and sell it the same year for 250 million won, you must pay taxes on 47.5 million won after subtracting the 2.5 million won basic deduction from the 50 million won in gains. Transaction fees incurred in the process of acquiring or transferring virtual assets are deductible as necessary expenses. If you trade multiple types of virtual assets, net gains may be calculated by offsetting profits and losses. For instance, if you make a profit of 30 million won from Bitcoin, a loss of 15 million won from Ethereum, and a profit of 5 million won from Ripple, your net profit is calculated as 20 million won. The basic deduction is then applied to this amount to determine the taxable base.

If non-residents and foreign corporations trade virtual assets through domestic exchanges, taxes are to be collected at the source. Domestic virtual asset service providers, such as Upbit and Bithumb, are required to withhold taxes at the transaction stage and remit them by the 10th day of the following month. The amount to be withheld is, in principle, the lesser of 10% of the transfer price or 20% of the capital gain. The legislative process in the National Assembly remains a variable. The People Power Party has submitted an amendment to the Income Tax Act seeking the complete abolition of virtual asset taxation, citing parity with the abolition of the Financial Investment Income Tax. There has also been significant pushback from public opinion, as the market is weak due to recent declines in virtual asset prices and there is opposition to enforcing the new taxes under such conditions. Yun Chul Koo, Deputy Prime Minister for Economy and Minister of Economy and Finance, stated, “We will proceed with the taxation from next year as scheduled, but necessary improvements will be made during the implementation process.”

This content was produced with the assistance of AI translation services.