South Korea’s Cabinet has approved a sweeping tax reform plan that includes the abolition of the financial investment gains tax and a two-year postponement of the tax on cryptocurrency income. The move, announced during a Cabinet meeting on Tuesday at the Government Complex in Seoul, is aimed at bolstering local investors and revitalizing the capital market.
“Measures such as the complete abolishment of the capital gains tax on financial investment income and the two-year postponement on taxing income from virtual asset trading are expected to contribute to the protection of local investors and encourage the capital market,” Acting President Han Duck-soo stated at the meeting.
The reforms come on the heels of the National Assembly’s approval of an income tax revision earlier this month. The scrapped financial investment income tax, which was initially set to be introduced, would have levied a 20 percent tax on capital gains exceeding 50 million won ($34,400) and a 25 percent tax on earnings surpassing 300 million won. This tax was intended to cover financial investments, including stocks, bonds, funds, and derivatives.
The decision followed extensive negotiations between rival political parties. Initially, the main opposition Democratic Party had supported the introduction of the tax but reversed its stance in November, paving the way for an agreement.
Meanwhile, the implementation of the cryptocurrency gains tax has faced repeated delays. Originally scheduled to take effect in January 2022, the proposed tax would impose a 22 percent levy on annual crypto income exceeding 2.5 million won. Concerns about potential negative impacts on market sentiment have led to its postponement three times, with the new implementation date now set for January 1, 2027.
Despite initial opposition, the Democratic Party ultimately supported the government’s decision to delay the crypto tax, citing the need to refine related regulatory measures.
Deputy Prime Minister and Finance Minister Choi Sang-mok emphasized the government’s supportive stance on virtual assets during a press conference with foreign media earlier this month. “The postponement was decided as (the government) deemed it would be appropriate to impose the tax after thorough monitoring of the situation, as related regulations are in the early stage,” Choi explained.
In addition to the tax reforms, Acting President Han announced initiatives to address economic uncertainties tied to recent political instability following President Yoon Suk Yeol’s declaration of martial law. Han revealed plans to appoint ambassadors for international finance and investment cooperation to strengthen South Korea’s global economic ties.
“We are continuously explaining that the fundamentals of the Korean economy are strong and that Korea is a predictable country that adheres to the Constitution and the law,” Han said, reinforcing confidence in the nation’s economic resilience.
These measures mark a significant shift in South Korea’s fiscal and regulatory landscape, signaling the government’s intent to balance innovation, market stability, and investor protection.
