AI-Powered Tax Monitoring System Planned by South Korea for Cryptocurrency Enforcement
South Korea's tax authority is seeking contractors to develop an artificial intelligence system designed to examine cryptocurrency transaction records and identify possible tax violations.
The National Tax Service of South Korea is getting ready to implement artificial intelligence technology for monitoring gains from cryptocurrency investments, a move that signals the country's advancement toward enforcing a postponed taxation framework for digital currencies.
The Korea Times published a report on Thursday revealing that South Korea's taxation agency has launched a procurement process to develop an artificial intelligence-powered infrastructure for examining digital currency transaction records, in preparation for the scheduled 2027 implementation of taxes on digital asset profits.
With an estimated cost of approximately 3 billion Korean won (roughly $2 million), the initiative will create a comprehensive platform with the capability to handle extensive amounts of cryptocurrency trading information. According to The Korea Times' reporting, the NTS intends to leverage artificial intelligence and machine learning technologies to recognize atypical transaction categories and patterns while discovering potential cases of tax evasion.
This development arrives as South Korea is reportedly gearing up to introduce taxation on cryptocurrency investment profits starting January 2027, implementing a total 22% tax rate on gains that surpass 2.5 million won ($1,700).
NTS plans a system to analyze crypto transaction data
The Korea Times reports that the taxation authority expects to choose a contractor by March. The design phase for the system is anticipated to commence in April, with various testing stages planned to occur throughout the year. A pilot program has been scheduled for November, with the full system deployment expected to take place between November and December.
According to the NTS, the platform will enable authorities to manage and examine substantial quantities of virtual asset transaction information in a systematic manner.
The infrastructure is anticipated to facilitate tax audits, uncover concealed income from taxpayers who are delinquent and discover potential tax evasion activities connected to cryptocurrency trading.
According to the tax agency, it intends to distribute analysis information and rosters of individuals suspected of violations with additional agencies, including the Korea Customs Service and the Bank of Korea.
South Korea prepares for 2027 crypto tax rollout
The cryptocurrency taxation framework in South Korea has experienced multiple postponements even though it received approval many years ago.
During 2024, legislative members engaged in discussions regarding whether to put into effect the nation's proposed cryptocurrency gains tax in 2025 or postpone it once again in light of resistance from the industry and political disputes concerning tax threshold amounts. The implementation has experienced three delays since the legislation received approval in 2020.
Under this policy, a 20% income tax along with an additional 2% local tax would be imposed on yearly cryptocurrency gains that exceed 2.5 million won. The Korea Times reports that the tax is currently scheduled to become effective in January 2027.