A. Tax Exemption on Virtual Asset Investment Income Up to 50 Million KRW
The revised Income Tax Law considers income from transferring or leasing virtual asset as ‘other incomes’ and decided to levy 20% on virtual asset income exceeding 2.5 million KRW starting from 2023.01.01. However, president-elect Yoon have announced his pledge to exempt tax on virtual asset investment incomes up to 50 million KRW. The background of this pledge was that virtual asset investors argued for equity with stock investors because the amended Income Tax Law applied to stock investors includes all profits gained from listed stocks and the derivatives under Financial Investment Income and levies 20% taxation on profits exceeding 50 million KRW (25% levied if profit exceeds 300 million KRW).
This pledge could be interpreted in two ways. The first interpretation is that 50 million KRW tax deduction limit is applied to investment profit gained from both virtual asset and listed stocks altogether. Another interpretation is that the 50 million KRW tax deduction limit is applied to only virtual asset investment profits. The overwhelming view is the former interpretation (50 million KRW includes investment profits gained from both virtual asset and listed stocks altogether). Because president-elect Yoon emphasized his “renovation first, taxation afterwards” policy, it is expected that taxation on virtual asset income would be postponed to further time point.
B. Enactment of Basic Digital Assets Act (Virtual Asset Industry Act)
The President-elect Yoon pledged allowing ICOs (Initial Coin Offering), enacting a new law to burgeon virtual asset market, tentatively called Basic Digital Assets Act, and restitution of unfair trade of virtual asset industry for the promotion of virtual asset industry and protection of investors. On April 8th, 2022, it has been known that the transition team is laying the groundwork first by deciding the governing department of the industry and establishing Digital Industry Development Administration.
The new Act that will be enacted will include restitution of profit from unfair trading of virtual asset which will prohibit the use of material nonpublic information (Article 174 OF the Korean Financial Investment Services and Capital Markets Act (hereinafter “FSCMA”), and manipulation of market price (Paragraph 4 of Article 176, Article 178 of FSCMA), kind of unfair trading of current FSCMA in virtual assets market as well. Moreover, Yoon plans to allow the ICO concept in phases after enabling an initial exchange offering (IEO). Meanwhile, the experts say that in order to prevent conflict of interests of exchanges, organizations such as Market Surveillance Committee of the capital market, Listing Eligibility Committee, or banks specialized for trading virtual assets shall be established before allowing IEO.