Korea Think Tank Recommends High-Value Digital Asset Investor Taxation

The Korea Financial Research Institute released a report recommending that digital assets be taxed on high-value investors first, following the same equity principle applied to financial investment assets, according to researcher Bae Jin-soo on the 9th. The recommendation stems from the existing financial investment asset taxation system, which taxes only large shareholders meeting criteria such as holding 50 billion won or more in a single stock.

Proposed Taxation Framework

Bae Jin-soo stated that “from a financial investment asset taxation and equity perspective, digital asset taxation of high-value investors can be considered,” and explained that “it would be consistent from an equity standpoint to initially target investors holding above a certain amount of digital assets for taxation, with future expansion considered.”

The expert also emphasized that if comprehensive taxation is introduced, key issues including loss carryover and offset deductions must be reflected in the system design. “Major countries recognize loss carryover and offset deductions from a capital gains tax perspective and apply tax exemptions or preferential rates for long-term holdings, so the taxation system needs to be designed to reflect these approaches,” Bae noted.

Fundamental Policy Discussion Required

Bae Jin-soo highlighted that fundamental discussion regarding the basis and public acceptability of digital asset taxation is necessary. With the capital gains tax base relatively weakened following the abolition of the financial investment income tax, digital asset taxation is currently the only planned tax measure in this category.

While digital asset taxation may be justified from a revenue perspective, the expert emphasized the need to examine whether actual tax revenue is substantial and stable, and whether it represents an efficient taxation method when considering collection costs and taxpayer compliance costs.

Revenue Volatility and Implementation Challenges

Based on the Japan case study, applying a 20.315% tax rate without considering deductions produces an estimated revenue range of 99 billion to 645.4 billion won, showing significant year-to-year volatility. “Digital asset taxation should be viewed as a highly volatile revenue source that can vary greatly depending on market conditions, rather than a stable large-scale tax base,” Bae explained.

The researcher also identified administrative burden concerns: “Since exchanges are not obligated to withhold taxes, taxpayers must report and pay directly, creating high taxpayer compliance costs. Tax authorities may also bear substantial administrative costs in securing transaction data, verifying acquisition prices, and identifying overseas transactions.”

Risk of Tax Base Erosion

Bae Jin-soo cautioned that if taxation incentivizes use of overseas exchanges and decentralized exchanges (DEX), it could create difficulties in capturing the tax base and negatively impact domestic industry and investor protection. He recommended that incentive structures be designed to encourage domestic participation alongside taxation implementation.

Additional recommendations include clarifying taxation timing and income classification by transaction type, and addressing taxpayer trust protection issues arising from repeated implementation delays.