[Edaily Choi Hoon Gil Reporters Seo Min-ji and Jeong Yun-young] As the government and the ruling party plan to implement taxation on virtual assets starting next year, proposals have emerged to introduce a tax similar to the Financial Investment Income Tax (FIT). The rationale is that a tax covering both the capital market and the entire virtual asset market is necessary. Attention is focused on the National Assembly’s deliberations, as the issue of virtual asset taxation could spread to stock market taxation and reignite discussions on the revival of the FIT.

According to the final report of the National Assembly Budget and Policy Office’s commissioned study, “Research on Issues and Improvement Measures for Virtual Asset Taxation,” released on the 24th, the research team stated that “in the long term, a separate classification and taxation system similar to the Financial Investment Income Tax should be introduced for capital gains on virtual assets.”

Previously, the National Assembly had considered a financial investment tax that would impose a tax of at least 22% (including local taxes) and up to 27.5% (for amounts of 300 million won or more) on investors earning annual profits of 50 million won or more from financial investments such as stocks, bonds, funds, and derivatives. Although there were plans to apply this tax scheme to virtual assets as well, the financial investment tax was scrapped without taking effect in 2024 due to opposition from stock and virtual asset investors, among other factors.

Under the current Income Tax Act, taxation on virtual assets will take effect on January 1 of next year. Income generated from the sale or lending of virtual assets will be classified as “other income” and taxed accordingly. A total tax rate of 22%—comprising a 20% other income tax and a 2% local income tax—will apply to the portion of annual virtual asset income exceeding the basic deduction of 2.5 million won. The taxation applies to all 13.26 million investors (based on Upbit’s cumulative membership as of December of last year).

In this regard, researchers who conducted a study on virtual asset taxation commissioned by the National Assembly Research Service raised the need to introduce a financial investment tax, citing the necessity of global consistency, tax equity, and the elimination of “tax silos”—where different asset classes are taxed differently.

Regarding the taxation of virtual assets, the researchers pointed out, “It is necessary to transition to a separate classification and taxation system similar to the financial investment tax to ensure tax consistency with major overseas countries,” adding, “It is necessary to institutionalize the system to allow for the offsetting of losses and carryover deductions across capital gains.” While South Korea does not allow the carryover of virtual asset losses, developed countries such as the United States apply the same taxation method to both stocks and virtual assets, permitting the carryover of losses.

Furthermore, the researchers pointed out that “if this trend continues, it could lead to structural asymmetry in the taxation of virtual asset income between individuals and corporations.” This is because individuals cannot carry forward losses or offset gains against other income, whereas corporations can claim deductions within the limits for carrying forward losses (80% of income for general corporations and 100% for small and medium-sized enterprises).

The researchers noted, “It is unclear whether the fundamental issue behind the deferral of virtual asset income tax has been resolved,” adding, “With the financial investment tax now abolished, there is a high likelihood that issues of equity will arise once again from taxing only virtual asset income.”

The research team further emphasized, “In the long term, to resolve the issue of compartmentalized taxation of financial assets, it is necessary to subject capital gains from token securities to either capital gains tax or the financial investment tax, which was previously proposed.” Token securities are scheduled to be traded following the enforcement of the law related to security token offerings (STOs) in February of next year.

This research report was co-authored by Professor Ahn Seong-hee of the College of Business Administration at the Catholic University of Korea, Professor Cho Hyung-tae of the College of Business Administration at Hongik University, and Kim Ik-hyun, an attorney at Yulchon Law Firm. Professor Ahn Seong-hee, the principal investigator, said in an interview with E-Daily, “In the long term, it is necessary to consolidate the fragmented taxation system on capital gains and implement a comprehensive taxation system for financial products.”