As South Korea enters its fourth postponement of virtual asset taxation, Japan's example—having implemented its regime nine years earlier—is emerging as a key reference point in South Korean legislative discussions on closing gaps. Rather than delaying taxation, Japan has gradually fixed problems that surfaced after implementation, and it recently finalized an overhaul that lowers the rate to the level applied to stocks. South Korea, by contrast, has repeatedly pushed back only the effective date, while income classification, double-taxation adjustment, and taxation standards for new transaction types remain unaddressed.
According to a legislative research response titled "Japan's Virtual Asset Taxation System," prepared by the National Assembly Research Service in January, Japan fleshed out taxation standards for crypto asset transaction income in 2017 and implemented related tax law revisions in April 2019. Crypto asset transaction income is in principle classified as miscellaneous income and subject to comprehensive taxation at progressive rates of 5% to 45%, with the top rate reaching 55% when local inhabitant tax is included.
Japan also initially faced practical problems such as insufficient accuracy of data submitted by exchanges, limits in tracking peer-to-peer (P2P) transactions, and the complexity of calculating the tax base. But it chose to launch the regime first rather than delay implementation, then fix defects identified in operation. A representative example is that it separately organized the timing of taxation and income calculation methods by transaction type, including coin-to-coin exchanges, mining, and hard forks. Coins obtained through mining are valued at market price at the time of acquisition, and income is calculated by deducting necessary expenses incurred in mining; the same method applies to lending. When new coins are received through a hard fork, they are not taxed at the time of receipt, and the acquisition cost is calculated as zero won when they are later sold.
Under South Korea's Income Tax Act, only income arising from virtual asset transfers and lending is classified and taxed as miscellaneous income. The National Assembly Research Service noted that Japan presents standards relatively clearly through income tax and corporate tax provisions and National Tax Service guidelines covering various transactions, whereas South Korea has not specifically stipulated transactions other than transfer and lending income. Accordingly, analysts say future discussions could consider comprehensively defining income arising from transactions overall—not just transfers and lending—as miscellaneous income. Even staking rewards alone can be interpreted differently for tax purposes depending on whether they are viewed as consideration for lending virtual assets or as service fees for blockchain validation work.
There is also a counterargument that grouping items with different income characteristics under a single miscellaneous income category does not fit the current taxation framework. Transfer income is capital gain from asset sale profits, whereas lending income is ordinary income earned repeatedly by lending out assets—different in nature. Professor Ahn Sung-hee of Catholic University said, "Taxing transfers and lending together could improve filing convenience, but there are aspects that do not fit the tax law's taxation framework."
The double-taxation problem for income generated at overseas exchanges is another task to resolve. The National Assembly Research Service pointed out that under a structure of separate taxation of virtual asset income as miscellaneous income, it may be difficult to receive foreign tax credits. Under Article 57 of the Income Tax Act, foreign-source income must be included in comprehensive income or retirement income—not miscellaneous income—for such adjustment to be possible. Proposed remedies include allowing taxpayers to opt for comprehensive taxation so foreign taxes paid can be deducted from domestic tax liability, and maintaining separate taxation while recognizing foreign taxes paid as necessary expenses to lower the tax base.
Some market voices also argue for lowering the investor burden through an expanded basic deduction or low-rate taxation. Professor Kim Woo-chul of University of Seoul said, "Rather than the basic deduction, we should boldly discuss applying low-rate taxation or tax exemption to capital gains of low-income investors who invest to build assets," and stressed, "We need to approach this within the overall framework of capital gains taxation, not limited to virtual assets."
In Japan, the government and ruling party prepared a tax revision plan late last year, and after passage through the Diet in March this year, finalized an overhaul lowering virtual asset income to 20.315% separate taxation, the same as stocks. The key is sequencing. Japan linked the revision of the Financial Instruments and Exchange Act—reclassifying virtual assets as "financial products"—with the rate cut, and tied the new rate to apply from January 1 of the year following the year in which the revised law takes effect. The lower rate applies only to designated assets handled by licensed exchanges, and those exchanges are subject to securities-firm-level discipline, including insider trading bans and enhanced disclosure. Introduction of loss carryforward deductions is also being pursued.
Note: Japan's rates include local inhabitant tax; South Korea's figures are based on the 2020 Income Tax Act revision bill.
Taxation standards for stablecoins also remain unresolved. Through the 2023 revision of the Payment Services Act, Japan defined stablecoins as electronic payment methods and brought them into the regulatory system by restricting issuers to banks, trust companies, and funds transfer service providers. South Korea has yet to enact a Digital Asset Framework Act covering the issuance and circulation of stablecoins, leaving the legal nature of transactions and taxation standards unclear. Since income classification and taxation methods can vary depending on whether a stablecoin is a payment method, an investment asset, or a financial product combined with deposit and lending products, critics say industry legislation and revisions to the Income Tax Act and Corporate Tax Act must proceed in tandem.
South Korea's taxation postponements have each been decided in step with election schedules. The effective date has been pushed back three times—from 2022 to 2023, 2025, and 2027—and this time too a direction toward further postponement has been proposed. The official reasons cited have been insufficient preparation of taxation infrastructure, market and investor protection, and fairness, but it has been pointed out that even after five years, none of South Korea's five major exchanges has a fully equipped taxation system. The National Tax Service and exchanges have held 49 rounds of consultations since 2022, but exchanges say they can begin development only once standards are finalized, and the National Tax Service notice containing the standards had not been issued even two months before the scheduled implementation.
The cost of the institutional gap is shared by investors and the industry. The structure that prevents carrying losses into the next year and the deduction cap fixed at 2.5 million won (approximately $1,900) remain as designed in 2020, and taxation standards for staking and airdrops are still blank. There is also no proper way to verify how to calculate the acquisition cost of assets moved across multiple exchanges and personal wallets. Even the exchange association has acknowledged that the three postponements changed only the timing, with little change to the substance of the regime. If the state of uncertainty continues—over when and under what rules taxes must be paid—uncertainty grows for both long-term investment plans and exchange business plans.
Looking at rates alone, South Korea's 22% and Japan's 20.315% are not far apart. The difference lies not in the numbers but in the process. Japan enshrined the effective date in law and designed the rate cut and loss carryforward together as part of the institutional overhaul, while South Korea has repeatedly delayed the effective date and pushed standards refinement to the next round of discussions. Critics say that while taxation implementation was postponed, the norms for income classification, double-taxation adjustment, and new transaction types never even got a chance to be fixed.
