[Edaily Reporter Jung Yoon-yeong ] The government is pushing for a plan to postpone the taxation of virtual asset income—scheduled to take effect next January—by two more years, until 2029. During this grace period, the government plans to establish a system for collecting tax data on overseas transactions and introduce a loss carryforward deduction that will allow investors to offset investment losses against profits generated over the next three years. A joint public-private working group will be formed to refine detailed taxation standards for various transactions involving virtual assets, including stablecoins and perpetual futures.
Deputy Prime Minister and Minister of Finance and Economy Lee Hyung-il announced on the 5th during a briefing on virtual asset income taxation held at the Seoul Government Complex that the government would consult with the National Assembly on a plan to defer the implementation of virtual asset income taxation—scheduled to take effect next year—for two years.
Deputy Prime Minister Lee explained, “After gathering input from experts and the industry and reviewing the matter in the National Assembly, we took into account the view that, given the automatic exchange of virtual asset information system (CARF) with the United States is set to begin in 2029, imposing taxes immediately could put the domestic market at a relative disadvantage compared to overseas markets.” He added, “We determined that it would be preferable to implement the measure after an additional two-year preparation period.”
The Ministry of Economy and Finance plans to conduct three key reviews during the grace period. First, it plans to analyze domestic and international tax data to establish the infrastructure necessary to tax overseas transactions as well. Second, it will allow a three-year carryforward deduction for losses—a provision recognized by major countries such as the United States and the United Kingdom—in Korea. Finally, it will collaborate with the Financial Services Commission to expedite the enactment of the Framework Act on Digital Assets, ensuring that the sound growth of the digital asset sector is no longer delayed.
If everything proceeds as planned, taxation on virtual assets was scheduled to take effect starting next January; however, with this additional grace period, it has now been postponed for the fourth time. According to the existing Income Tax Act, income generated from the transfer or lending of virtual assets will be classified and taxed as miscellaneous income starting January 1 of next year. A total tax rate of 22%—comprising the miscellaneous income tax (20%) and local income tax (2%)—will apply to virtual asset income exceeding 2.5 million won. This applies to approximately 13.26 million investors (based on Upbit’s cumulative membership as of last December), and the first tax filing was originally scheduled for May 2028.
The following is a Q&A regarding the deferral of taxation on virtual asset income with Deputy Prime Minister Lee, Cho Man-hee, Director General of the Tax Policy Bureau at the Ministry of Economy and Finance, and Yoo Young-jun, Director of Digital Finance Policy at the Financial Services Commission.
- How long will the deferral of virtual asset income taxation last?
△ (Director of the Tax Policy Bureau) With this deferral decision, implementation has been pushed back by two years and is now scheduled for January 2029. Since this is a self-reporting and payment system, gains and losses incurred in the previous year are reported and paid in May of the following year. Therefore, the first filing will take place in May 2030.
-What is the specific rationale behind the tax deferral?
△ (Deputy Prime Minister) Considering opinions that imposing taxation immediately could put the domestic market at a relative disadvantage compared to overseas markets, as well as the expectation that the institutional foundation of the digital asset industry will undergo significant changes following the enactment of the Framework Act on Digital Assets, we determined that it would be preferable to implement the tax after an additional two-year preparation period. This adjustment to the implementation schedule is intended to uphold the fundamental principle of taxation—“tax where income is generated”—while enhancing the effectiveness of taxation on domestic and international transactions, ensuring equity among taxpayers, and establishing a reliable and stable tax base.
- What specific plans are in place during the grace period?
△ (Deputy Prime Minister) First, we will rationally overhaul the tax system. Second, we will expand the tax infrastructure, and third, we will establish tax criteria in a timely manner. Regarding the revision of tax criteria, we will allow loss carryforward deductions—which are recognized in major countries—so that investors can offset price volatility.
This is in preparation for the implementation of the tax in 2029, and I believe it needs to be discussed during this regular session of the National Assembly. Second, regarding tax infrastructure, we will expand the system for collecting and utilizing information on overseas transactions. We will enhance the effectiveness of taxation on both domestic and overseas transactions by linking and analyzing overseas transaction data collected through KAF with domestic tax information. Finally, we will clarify the tax criteria so that taxpayers can file their returns in a predictable and convenient manner, and we will continue to improve the tax filing support system.
- This tax is not being abolished; rather, its implementation has been deferred to January 2029. When will the detailed tax criteria be released?
△ (Director-General of the Tax Policy Bureau) We plan to finalize and announce the detailed taxation criteria in the first half of 2028, and they will be communicated to the market and taxpayers. The criteria currently being drafted (draft notice) require further refinement. Once the Framework Act on Digital Assets is enacted and a definition for stablecoins is established, corresponding taxation criteria must also be developed. The Ministry of Economy and Finance plans to develop measures for institutional improvements by the first half of next year and, for matters requiring legislation, prepare amendment bills to be submitted to the regular session of the National Assembly in 2027.
- Does allowing a three-year carryover deduction for losses mean the system will be in effect for only three years?
△ (Director-General of the Tax Policy Bureau): “Allowing a three-year carryforward of losses” does not mean the system will be in effect for only three years. The carryforward system will remain in place; it simply means that losses can be carried forward for up to three years. For example, if a loss occurs in 2029, it can be carried forward for three years and deducted from future gains. For instance, a loss incurred in 2029 can be carried forward for three years and deducted from income as late as 2032. Since this is a self-assessment system, losses and gains incurred in the previous year are reported and paid in May of the following year. At that time, the carried-forward losses are deducted from the gains.
-Once taxation begins in 2029, will losses incurred this year (2026) also be applied retroactively?
△ (Director of the Tax Policy Bureau) You can utilize the deemed acquisition cost system. Under this system, once taxation begins in 2029, the price as of December 31, 2028, is deemed to be the acquisition cost. Losses incurred after 2029 will be subject to carryover deductions, and if assets are acquired in 2026 or 2027 at a price higher than the market value as of December 31, 2028, the loss can be calculated based on that acquisition cost.
- Are losses that have already been realized through a sale in 2026 ineligible for carryover deductions?
△ (Director of the Tax Policy Bureau) Realized losses cannot be carried forward for deduction.
-Is it appropriate to classify virtual assets, which also have characteristics of investment assets, as miscellaneous income? Is there a possibility of reclassifying this income during the grace period?
△ (Director General of Tax Policy) Classifying them as miscellaneous income offers many advantages because the category is broadly defined. Virtual asset transactions are so diverse that they often combine elements of capital gains and rental income. If classified as capital gains, all these elements would need to be separated, making filing and payment significantly more difficult.
The downside is that the tax system for miscellaneous income generally does not allow for carryover deductions. However, virtual assets are increasingly taking on the characteristics of financial and capital gains. Japan, like Korea, previously taxed them as miscellaneous income without allowing carryover deductions but has recently begun moving toward permitting them. In Korea as well, as the financial and capital nature of virtual assets has become more pronounced and price volatility has increased, there has been widespread support for the need for carryover deductions, which is why we have now permitted them.
-There is a lot of criticism regarding the taxation of gains resulting from exchange rate fluctuations on dollar-pegged stablecoins and similar assets. How do you plan to establish criteria for this in the future?
△ (Director-General of the Tax Policy Bureau) This will become a key issue once the Framework Act on Digital Assets is enacted. Regulations on stablecoins will also affect the tax system. If won-pegged stablecoins are introduced, we will need to consider a tax framework for them. Dollar-pegged stablecoins can be used as a means of payment in trading transactions, and taxes can be levied based on the difference in exchange rates between the acquisition and disposal dates. While some argue that taxation is difficult because their prices are fixed, others contend that there is room for taxation. We plan to discuss this in a working group.
- Perpetual futures on overseas exchanges remain in a tax blind spot. How will they be regulated, and how will the tax base be determined?
△ (Director of the Tax Policy Bureau) It is a matter of how futures are defined. The tax treatment will depend on how the Financial Services Commission (FSC) classifies perpetual futures. We need to consult with the FSC on this matter.
-Currently, there is no carryover deduction for capital gains tax on foreign stocks; allowing it only for virtual assets is likely to raise concerns about fairness. How do you view this criticism?
△ (Deputy Prime Minister) In the case of (domestic) stocks, all gains from listed stocks are tax-exempt if the taxpayer does not meet the major shareholder criteria. Since there has been no discussion yet regarding taxation of minority shareholders, we are not currently considering a loss carryforward deduction.
(Director-General of the Tax Policy Bureau) Since small shareholders are not taxed on domestic stocks, we are not considering a carryover deduction for them. However, while all foreign stocks are subject to taxation, there is an equity issue between foreign and domestic stocks, so allowing a carryover deduction for foreign stocks presents a problem. This means that another equity issue could arise if carryover deductions are granted for foreign stocks but not for domestic stocks.
-Some argue that it would be preferable to treat virtual assets within an integrated tax system, similar to the Financial Investment Income Tax (FIT), which was scrapped in the past.
△ (Director-General of the Tax Policy Bureau) This is not being discussed at all.
