[Tax Gaps] ① Unclear Tax Basis for Infinite Futures of Overseas Virtual Assets
The implementation of taxation on digital assets (virtual assets) is just four months away. The taxation on digital assets is set to take effect on January 1, 2027, with a basic deduction of 2.5 million KRW and a tax rate of 20% (up to 22% including local taxes).
One of the shortcomings pointed out by the political sphere and the industry has been the lack of loss carryover deductions. Income from digital assets is classified as other income, and loss carryover deductions do not apply.
However, as taxation approaches, there are concerns that there are other gaps in the system beyond just the carryover deductions.
Under the current digital asset income tax system, there seems to be no appropriate method to tax the profits from infinite futures. Taxation is based on an 'enumeration principle' that taxes only the items listed in the law, and in the case of infinite futures, there is no legal definition, so they are not classified as taxable.
The government plans to implement taxation on digital asset income tax starting January 1, 2027. The taxation on digital assets will apply a deduction limit of 2.5 million KRW and a tax rate of 20% (up to 22% including local taxes).
The taxable items for digital assets include income from transfers and loans. The main type of transaction is the spot trading of digital assets. For example, if a digital asset is purchased for 10 million KRW and sold for 20 million KRW on a domestic exchange, the income of 10 million KRW will be taxed on 7.5 million KRW after excluding the deduction limit of 2.5 million KRW.
However, infinite futures are not included in the taxable items under the income tax law. Infinite futures are a unique derivative product of the digital asset market, characterized by having no expiration date and being available for trading 24 hours a day.
The income tax law defines digital asset income in Article 21, Paragraph 1, Item 27 as income generated from the transfer or loan of digital assets under the 'Act on the Protection of Users of Virtual Assets.' However, there is no mention of digital asset derivatives, which is why there is a tax gap for infinite futures.
This is different from the taxation of derivatives in the capital market. Profits from individual futures and other derivative transactions are taxed as capital gains under the income tax law. The tax rate is 10% (up to 11% including local taxes), with a deduction limit of 2.5 million KRW.
The reason for the difference in taxation between capital market derivatives and digital asset derivatives is the absence of a legal definition for digital asset derivatives in the legislation. The laws governing digital assets are the Specific Financial Information Act and the Act on the Protection of Users of Virtual Assets. The Specific Financial Information Act deals with anti-money laundering and business registration, and does not address derivatives. The Act on the Protection of Users of Virtual Assets also regulates unfair trading but does not govern derivatives.
It is also difficult to incorporate infinite futures into the capital market law as derivatives. Under the capital market law, a future is a contract to buy or sell an asset at a predetermined price at a specific point in the future. This means that products with a set expiration date are considered futures under the capital market law, but infinite futures have no expiration date, necessitating a new legal definition.
The domestic income tax law adopts an 'enumeration principle,' meaning that if taxable items are not listed, they cannot be taxed. If something is not mentioned in the law, it cannot be taxed, and in the case of infinite futures, they are not legally defined in Korea, so they cannot be enumerated or taxed.
It is noteworthy that domestic users are also participating in the futures market through global exchanges. While domestic exchanges do not support futures trading, users transfer assets to utilize the global market. Uniquely, the scale of futures trading in the digital asset market surpasses that of spot trading. According to data from CryptoQuant on the 23rd, the futures trading volume on Binance, the world's largest digital asset exchange, was 13.3 billion USD (approximately 18.4 trillion KRW), about eight times greater than the spot trading volume of 1.6 billion USD (approximately 2.2 trillion KRW).
Domestic users are actively utilizing this market as well. According to SimilarWeb, from May to July, the proportion of traffic from Korea to Binance was 8.61%, ranking second after India (8.9%). The reported amount of overseas digital asset accounts in 2025 also reached approximately 11.1 trillion KRW. This reported amount is for voluntary reporting when holding more than 500 million KRW in digital assets abroad. Last year, the individual holding size was approximately 9.3 trillion KRW, surpassing the corporate size (1.8 trillion KRW) for the first time since the reporting system was implemented in 2023.
Kim Ji-ho, a tax accountant at Seum Tax, stated, "Infinite futures are currently not considered derivatives under the capital market law, so they do not fall under capital gains, nor do they fall under the income tax law's regulations on digital asset income." He added, "In many cases, both spot and futures trading occur together, and if futures are not captured as taxable items, losses incurred from futures trading will not be deductible, which could be disadvantageous for taxpayers."
Kim Ik-hyun, a lawyer at Yulchon Law Firm, said, "Due to the fundamental principle of tax law, it is difficult to immediately impose taxes on ambiguous gaps regarding whether infinite futures and other items are taxable under current law." He continued, "However, rather than viewing the current digital asset taxation system as fundamentally flawed due to some gaps, it is a matter of starting with typical transaction types and ensuring a consistent and less gap-prone taxation system through future review and supplementation."
-- Price
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