South Korea Expands Crypto Tax Network: Key Changes Under Lee Jae-Myung’s Administration
- How Is South Korea Expanding Crypto Taxation?
- Why Is South Korea Easing Crypto Startup Restrictions?
- What Does This Regulatory Shift Mean for Investors?
- FAQs: South Korea's Crypto Policy Changes
South Korea is tightening its crypto tax framework while loosening restrictions on blockchain startups, marking a pivotal shift in digital asset regulation. The National Tax Service now requires income reporting for crypto earned from foreign firms, even outside traditional employment structures. Simultaneously, the government proposes removing crypto trading from its "restricted industries" list, unlocking benefits for innovative ventures. These changes reflect evolving public perception and stronger legal safeguards since the 2024 VIRTUAL Asset User Protection Act.
How Is South Korea Expanding Crypto Taxation?
The National Tax Service (NTS) issued a landmark clarification on July 9, 2025: Workers must declare comprehensive income tax on virtual assets received from foreign corporations as labor compensation, regardless of payment structure. This closes a loophole where employees could receive crypto payments through complex international arrangements without tax liability. For example:
- A South Korean developer signed directly with Singapore-based Corporation B (subsidiary of Japan's Corporation A)
- Received Ethereum payments for coding work without involvement from Corporation C (the group's Korean entity)
- NTS ruled these assets fall under Articles 127 (withholding obligation) and 70 (final tax return standard) of the Income Tax Act
- Similar cases involved designers paid in Bitcoin by German firms and marketers receiving Solana from Australian startups
- The policy aligns with global trends like the EU's DAC8 crypto reporting framework
This enforcement follows President Lee Jae-Myung's campaign promise to "modernize tax systems for the digital economy," with crypto tax revenue growing 217% YoY according to CoinGlass data.
Why Is South Korea Easing Crypto Startup Restrictions?
The Ministry of SMEs and Startups simultaneously proposed amending the Special Venture Business Act to remove blockchain-based crypto trading/brokerage from restricted industries. Originally blacklisted due to market volatility concerns, these sectors now benefit from:
- The 2024 Virtual Asset User Protection Act's legal framework
- Improved exchange security standards (85% of Korean platforms now use cold storage)
- Mandatory insurance coverage on major exchanges like BTCC and Upbit
- 24/7 transaction monitoring systems implemented since 2023
- Public sentiment shift - 68% now support crypto innovation per TradingView surveys
The amendment WOULD allow crypto ventures to access tax exemptions, public procurement preferences, and R&D subsidies previously reserved for biotech/AI startups.
What Does This Regulatory Shift Mean for Investors?
Market analysts at BTCC note three immediate implications:
- Tax Clarity: Reduced uncertainty for freelancers and DAO participants receiving cross-border crypto payments
- Market Growth: Expected 30-40% increase in licensed Korean crypto businesses by 2026
- Institutional Entry: Traditional finance firms exploring compliant crypto products
However, the changes come with stricter compliance requirements - exchanges must now integrate real-time tax reporting APIs with NTS systems, a MOVE some smaller platforms are struggling with according to DepositPhotos industry reports.
FAQs: South Korea's Crypto Policy Changes
When do the new crypto tax rules take effect?
The NTS clarification applies immediately to all virtual asset income received after July 9, 2025, with first declarations due in May 2026.
Which crypto activities remain restricted in South Korea?
Privacy coin trading, unregistered ICOs, and crypto gambling services stay prohibited despite the broader liberalization.
How does this affect foreign crypto companies?
International firms must now register Korean representatives for tax withholding unless using licensed local partners like BTCC for payroll services.
