Korean Crypto Exchanges Seek Tax Deferral Amid Acquisition Cost Challenges

South Korea's crypto exchanges have formally requested a deferral of next year's virtual asset tax, citing difficulties in verifying acquisition costs and implementing non-resident withholding taxes. The Digital Asset Exchange Alliance (DAXA), representing 27 South Korean virtual asset service providers (VASPs), argues that enforcing taxation without infrastructure to verify acquisition costs could shrink domestic trading and drive capital overseas.

The industry's biggest challenge is calculating acquisition costs, particularly when assets are transferred from overseas exchanges or personal wallets. Exchanges may not have records of the original purchase price, making it difficult to calculate capital gains. Non-resident withholding taxes also pose a problem due to insufficient identification documents and account verification data.

DAXA has consolidated its position that the taxation timeline should be further postponed until relevant infrastructure and information-exchange systems are in place. It advocates for revising related systems, including raising the annual basic deduction limit of 2.5 million won, allowing loss carryforward deductions for at least five years, and building a voluntary reporting platform.

The industry also expressed concern about potential conflicts between statutes when liquidating withheld virtual assets into cash. Exchanges are restricted from proprietary trading, and selling on another exchange requires internal decision-making, disclosure, and distributed selling procedures.