S. Korea Seeks Incentives for Domestic Crypto Exchanges Ahead of Tax Rollout

South Korea's National Assembly Budget Office has released a report highlighting the need for policy incentives to encourage investors to use domestic cryptocurrency exchanges ahead of the introduction of taxation on virtual-asset income in January. The report suggests that a system similar to Japan's, which offers a separate low 20% tax rate and loss carryforwards for using registered exchanges, could strengthen incentives for South Korean investors to use domestic exchanges.

The office also emphasized the need to bolster the National Tax Service's capacity to track and verify virtual-asset transactions. This includes measures to promote voluntary reporting by investors who use over-the-counter markets or overseas exchanges in countries that do not participate in the Crypto-Asset Reporting Framework, or CARF.

According to the report, South Korea needs to build systems that simplify tax procedures, including infrastructure linked to exchanges to automatically calculate acquisition costs and gains or losses. The office also stressed the need for advance guidance and public outreach to reduce confusion in the early stages of implementation.