South Korea's National Tax Service has said it will introduce commercial crypto tracing software used by domestic and overseas investigative agencies as it prepares to tax income generated through private wallets from 2027.
Tracing Private Wallet Transactions
The NTS plans to use software capable of tracing and analyzing digital asset movements between wallets, similar to tools used by prosecutors, police and the U.S. Internal Revenue Service. The plan addresses the main enforcement problem surrounding South Korea's incoming cryptocurrency income tax: authorities have limited visibility into transactions conducted through wallets controlled directly by taxpayers.
22% Combined Tax on Crypto Income
The tax will apply to qualifying digital asset income generated from Jan. 1, 2027. Annual gains above a 2.5 million won deduction will face a 20% national income tax, with a 2% local income tax bringing the combined rate to 22%. The first filing period is scheduled for May 2028, when investors will report qualifying income generated during the previous calendar year. Self-custody does not remove a taxpayer's liability — income from transferring or lending digital assets can be taxable regardless of whether assets are held in a private wallet or on an overseas exchange.
CARF Covers Overseas Transactions
For cryptocurrency held through foreign platforms, South Korea plans to rely partly on the OECD's Crypto-Asset Reporting Framework to obtain transaction information from participating jurisdictions. Information exchanged in 2028 is expected to cover crypto activity conducted during 2027. The UAE's first CARF information exchange in 2028 is expected to cover transactions attributable to 2027, aligning with South Korea's filing schedule.
Exchange Preparations Underway
The NTS has been preparing implementation guidance with Upbit operator Dunamu, Bithumb, Coinone, Korbit and Gopax, covering records and information needed to calculate taxable cryptocurrency income. The Cabinet approved rules in August that tighten overseas crypto transfers by applying risk-based controls to transactions involving foreign exchanges and personal wallets. Transfers of at least 10 million won involving overseas exchanges or private wallets require domestic exchanges to operate internal suspicious-transaction monitoring systems.
