The Cabinet on Tuesday approved a tax reform plan that allows the cancellation of the financial investment gains tax, and postpones the implementation of the crypto gains tax for another two years.

"Measures such as the complete abolishment of the capital gains tax on financial investment income and two-year postponement on taxing income from virtual asset trading are expected to contribute to the protection of local investors and encourage the capital market," Acting President Han Duck-soo said at the Cabinet meeting held at the Government Complex Seoul, Tuesday.

The announcement follows the National Assembly’s approval of the income tax revision on Dec. 10.

The Yoon Suk Yeol administration pushed to repeal the introduction of the financial investment income tax, which would levy a 20 percent tax on capital gains of over 50 million won ($34,400) and a 25 percent tax on earnings exceeding 300 million won from financial investments, including stocks, bonds, funds and derivatives.

The rival parties were able to reach an agreement after the main opposition Democratic Party reversed its plan to introduce the financial investment income tax in November.

The crypto gain tax was initially planned for implementation starting next year. The original plan proposed a 22 percent tax on annual crypto income exceeding 2.5 million won, starting in January 2022, but has been delayed three times on concerns that taxation could dampen market sentiment.

With the latest postponement, taxation on crypto gains will be levied from Jan. 1, 2027.

Though the main opposition party was initially against the government and the ruling party’s decision to delay the crypto gain tax for another two years, it eventually gave in, citing the need to improve related measures first.

"The government does not have a negative stance on virtual assets," Deputy Prime Minister and Finance Minister Choi Sang-mok said at a press conference with foreign media held in central Seoul on Dec. 18.

"The postponement was decided as (the government) deemed it would be appropriate to impose the tax after thorough monitoring of the situation, as related regulations are in the early stage.”

At Tuesday's Cabinet meeting, Han also unveiled a set of measures to address economic uncertainties linked to the recent political turmoil caused by President Yoon Suk Yeol’s declaration of martial law.

Han said the government will appoint an ambassador for international finance cooperation and for international investment, respectively, to promote the country’s economic strength to partnering nations.

“We are continuously explaining that the fundamentals of the Korean economy are strong and that Korea is a predictable country that adheres to the Constitution and the law,” Han said.

By Im Eun-byel (silverstar@heraldcorp.com)