The taxation of virtual asset income, originally scheduled to take effect in January 2027, will be delayed by another two years until 2029. This marks the fourth postponement since the Income Tax Act was amended in December 2020. The tax was initially scheduled to take effect in 2022, but was first deferred to 2023 and subsequently postponed to 2025 and 2027 before being delayed again.
Deputy Prime Minister and Minister of Economy and Finance Lee Hyeong-il announced at a briefing at Government Complex Seoul on Nov. 5 that the government would work with the National Assembly to pursue a two-year postponement. The government had originally planned to impose a 20% tax on annual virtual asset trading gains exceeding 2.5 million won, or approximately $1,843, but the implementation date was revised with about two months remaining before the scheduled start.
The postponement reflects concerns over the availability of international tax information. Information exchange with the United States through the Organisation for Economic Co-operation and Development’s (OECD) Crypto-Asset Reporting Framework (CARF) is not expected to begin until 2029. The government took into account concerns raised by industry representatives and experts that introducing taxation before the information-sharing mechanism is in place could put South Korea’s domestic market at a disadvantage relative to overseas markets. Information exchange with other CARF-participating countries is expected to begin in 2027, while the exchange with the United States is scheduled to start in 2029.
Institutional changes expected under the proposed Digital Asset Act also contributed to the decision. With comprehensive legislation covering stablecoin regulation and user protection currently under preparation, the government considers additional time necessary to update the tax framework in line with market developments. It plans to establish rules that strengthen oversight of service providers, market stability and user protection while supporting innovation in the digital asset industry.
The government will consult with the National Assembly on introducing a loss carryforward system to account for the high price volatility of virtual assets. The system would allow losses incurred in one year to be deducted from gains in the following three years, a mechanism already used in major economies including the United States and the United Kingdom. For example, a loss incurred in 2029 could be carried forward and deducted from gains through 2032. This does not mean the system would operate for only three years; rather, each loss could be carried forward for up to three subsequent tax years.
When calculating taxable income, the annual basic deduction of 2.5 million won would be applied first, followed by deductions for eligible losses carried forward from previous years. Investors would not be allowed to choose when to use a carried-forward loss or defer its application to a later year.
Losses realized through sales before the tax takes effect would not qualify for the carryforward deduction. However, when taxation begins in 2029, the deemed acquisition cost rule will treat the market value of virtual assets as of Dec. 31, 2028, as their acquisition cost. If the actual acquisition cost is higher than that value, taxpayers may opt to use the actual cost when calculating gains and losses.
The loss carryforward system will not apply to minority shareholders of domestically listed companies, potentially raising questions about tax fairness across asset classes. Jo Man-hui, director general of the Tax Bureau at the Ministry of Economy and Finance, said the government was not currently considering extending the system to domestic stocks because gains earned by minority shareholders are generally exempt from capital gains tax. The government said it must also consider the difference in tax treatment between overseas stocks, which are taxable, and domestically listed stocks held by minority shareholders, which are generally exempt.
Repeated postponements are likely to invite criticism over the consistency and credibility of the government's policy. Lee acknowledged that the latest delay followed three previous postponements and said the government took the decision seriously, while emphasizing that the principle of taxing income remains unchanged.
The government plans to use the additional two years to strengthen the infrastructure needed to implement the tax. It will establish a public-private working group to develop detailed tax rules for different types of transactions, including staking and airdrops, and aims to inform taxpayers of the rules by the first half of 2028. It also plans to draw up broader measures to improve the system by the first half of 2027 and submit related legislative amendments during the National Assembly's regular session.
Building a data-sharing and reconciliation system to address tax blind spots, including transactions conducted through overseas exchanges and over-the-counter markets, is another key challenge. Although CARF is expected to provide information on transactions through overseas exchanges in participating jurisdictions, it will not necessarily cover all activity on exchanges in non-participating countries, decentralized platforms or OTC markets. Authorities will also need systems to verify the acquisition costs of assets transferred across multiple exchanges and personal wallets, and to reconcile domestic transaction records with information received from overseas.
Tax rules for newer transaction types, including stablecoins and perpetual futures traded on overseas exchanges, have yet to be finalized. The government plans to develop detailed standards after considering the legal classification and transaction structures of stablecoins, as well as regulatory assessments of perpetual futures by financial authorities.
