The government has decided to postpone virtual asset income taxation, which was scheduled to be implemented next year, for another two years.
Following the revision of the real estate tax reform plan, it is being pointed out that the reliability and predictability of government tax policy is decreasing as virtual asset taxation is also being postponed for the fourth time.
Virtual asset income taxation was originally scheduled to be implemented in January 2022.
However, due to reasons such as taxation infrastructure maintenance and investor protection system establishment, it was postponed to January 2023 and twice further to 2025 and 2027.
◇ ‘Deferral policy’ one day after the ruling party’s request… “Increasing uncertainty”
The government announced its plan to postpone the postponement on the 5th, one day after the ruling party's official request, explaining that it was the result of a comprehensive review of opinions from experts, industry, and the National Assembly.
As claims were raised in the virtual asset industry that taxation was premature, the Democratic Party of Korea discussed the issue of deferral at a general meeting of lawmakers on the 27th of last month. Subsequently, a party-government council was held on the 28th, but no conclusion was reached, and a meeting was held with representatives of virtual asset exchanges on the 30th.
Then, on the 3rd, Democratic Party members of the Finance and Economic Planning Committee proposed the idea of deferring taxation to the party leadership, and Representative Kim Min-seok officially proposed deferment to the government the day before.
The government officially announced its plan to promote deferment, citing reasons such as securing overseas tax information and rationalizing the tax system.
However, some say that the decision was made in consideration of the youth and investor public opinion who are sensitive to asset formation. It is interpreted that the political burden would have been great to enforce taxation even while enduring opposition from the 2030 generation, which has a high proportion of virtual asset investments.
The problem is that the government has consistently stated that it will continue to tax virtual assets as planned starting next year.
Even in July, the government reaffirmed this policy in the National Assembly, and last month, the National Tax Service's audit explained that it was preparing to issue a notice containing the taxation standards for virtual assets in November.
There are concerns that changing the tax schedule, which has already been postponed several times, could reduce predictability for taxpayers and the market and reduce trust in government policy.
Some point out that the government is somewhat contradictory by repeatedly emphasizing the basic tax principle of 'taxing income where the income is', but repeatedly delaying the actual timing of taxation.
The government said in a press release that day, "This adjustment to the implementation period is intended to maintain the basic tax principle of 'taxation where there is income,' while increasing the effectiveness of taxation in domestic and foreign transactions and fairness among taxpayers, and establishing a reliable and stable tax base."
Jeong Se-eun, a professor of economics at Chungnam National University, said, "Retreating from the announced policy could cause tax uncertainty and affect investors' asset management," and added, "Virtual assets are also being used as a means of tax evasion, so there are concerns about tax avoidance during the deferred period."
◇ Real estate non-residential deduction ‘U-turn’… Are electric vehicles also included in the production tax credit?
This is not the first time that the government has changed the direction of tax policy this year.
As for the real estate tax system, in this year's tax law amendment, it was announced that the basic comprehensive real estate tax deduction for non-resident homeowners would be reduced from the current 1.2 billion won to 900 million won, but then returned to 1.2 billion won.
The government emphasized the 'principle of actual residence' and sought to make a difference by increasing the basic deduction for those who actually reside in a single home from 1.2 billion won to 1.4 billion won and reducing the deduction for non-residential homeowners.
However, as opposition from the ruling party and the market grew stronger, saying that it was unfair to tax residents and non-residents separately, they changed direction to maintain the existing deduction level just 29 days after the announcement of the tax system reform plan.
It was also decided to temporarily ease the heavy taxation of capital gains tax in the adjusted region for those who own multiple homes. The four-year deferment ended and heavy taxation resumed on May 10th of this year. It was explained that the purpose was to open a way out for people to sell their homes with the comprehensive real estate tax reform.
The domestic production tax credit is also at a crossroads.
The government initially explained that since secondary batteries, which are materials for electric vehicles, are included in the domestic production tax credit, this will indirectly increase competitiveness in the electric vehicle industry.
However, as industry and the National Assembly continue to demand that electric vehicles be included in the domestic production tax credit, the government appears to have begun the process of collecting opinions again.
Deputy Prime Minister and Minister of Finance and Economy Lee Hyung-il held a meeting on economic issues on the 25th of last month to discuss ways to supplement the domestic production tax credit, and First Vice Minister of Finance and Economy Kwon Dae-young also heard industry suggestions through a meeting with economic groups that day.
