Virtual Asset Taxation Four Months Away, Lacks Detailed Standards... Needs Reorganization

"Virtual Asset Taxation Four Months Away, Lacks Detailed Standards... Needs Reorganization"

'Structural Flaws' Pointed Out at National Assembly Forum

Concerns have been raised that with the implementation of the virtual asset taxation system just four months away, the taxation framework and infrastructure remain inadequate.

It was pointed out that the income classification by transaction type is unclear, the calculation of necessary expenses and acquisition costs is not specific, and issues of fairness with other incomes persist.

On the 3rd, Rep. Moon Jin-seok of the Democratic Party of Korea held the '2027 Virtual Asset Taxation System Review Forum' at the National Assembly Members' Office Building, together with the Digital Asset eXchange Alliance (DAXA) and the Korean Association of Tax Law.

Professor Park Jong-soo of Korea University Law School argued in his presentation that "the virtual asset taxation system needs to be reorganized."

Professor Park stated that it is necessary to establish income classifications for seven transaction types, including mining, staking (deposit-type reward products), lending, deposits, liquidity provision (LP), airdrops, and hard forks.

According to the current system, income obtained from transferring or lending virtual assets from January 1st next year is classified as 'other income' and separately taxed, but due to the nature of virtual assets, it is difficult to encompass various types as transfers or loans.

Investor inconvenience due to inadequate infrastructure was also pointed out. While calculating acquisition costs requires integrating data from both domestic and international exchanges as well as personal wallet histories, investors must directly secure quantities and fees, and there are limitations in data provision as transaction histories between Virtual Asset Service Providers (VASPs) cannot be confirmed.

Furthermore, in cases where it is difficult to calculate the acquisition cost, up to 50% of the transfer price is deemed as necessary expenses, but it was noted that the proof requirements are not specifically presented, making the judgment criteria unclear.

Professor Park said, "Under the Income Tax Act, business income carried-over losses are allowed for deduction for 15 years," adding, "Considering the characteristics of virtual assets, which have high price volatility and where profit and loss realization can occur over a long period, it is necessary to establish a mechanism (for loss carry-over deductions)."

Professor Kim Gap-soon of Dongguk University's Department of Accounting pointed out in the discussion, "Virtual assets are repeatedly traded and have the character of capital gains, but forcibly fitting them into traditional intangible assets like trademarks is the starting point of the structural flaws in virtual asset taxation."

Professor Kim Kyung-ha of Hanyang Cyber University's Department of Finance, Accounting, and Taxation suggested, "It is necessary to build an infrastructure where acquisition cost information can be continuously accumulated," adding, "This could involve creating a standard form to allow the transfer of virtual assets between Virtual Asset Service Providers (VASPs) along with their acquisition costs under tax law."

Kim Tae-kyung, a legislative researcher at the National Assembly Research Service, stated, "It is necessary to re-examine whether it is appropriate to maintain the income classification system as it was established in 2020 when the virtual asset taxation system was introduced, considering institutional, economic, and environmental changes."