South Korean lawyer: Crypto tax plan faces fairness, clarity hurdles

Ahn Hyun-kook, a lawyer at the law firm Bae, Kim & Lee LLC, argued in a tax and finance column that while there are valid reasons to proceed with the planned taxation of virtual assets, several key challenges must be resolved first. He highlighted the following points: - With the abolition of the financial investment income tax, South Korea's general framework for capital gains taxation has been eliminated. A comprehensive discussion is needed on the rationale for taxing only virtual assets and how to ensure fairness with the current stock tax system, which only taxes capital gains for major shareholders. - The law must clearly define the timing of taxation and the criteria for calculating acquisition costs for various transaction types, including staking, airdrops, hard forks, mining, NFTs, and DeFi. The current legal language, which assumes simple trades under the terms "transfer or lending," is insufficient to cover these complex activities and could lead to loopholes or arbitrary interpretation. - The potential for capital flight to overseas exchanges, decentralized exchanges (DEXs), and peer-to-peer (P2P) transactions is a major concern. While the Crypto Asset Reporting Framework (CARF) is institutionally in place, its success depends on broader international participation and operational stability. Furthermore, since DEXs, P2P trading, and DeFi remain in a reporting blind spot, policymakers must improve information exchange and create incentives for users to remain on domestic exchanges, as simply increasing the tax burden could drive the tax base overseas.