South Korea to delay virtual asset tax by two more years, introduce loss carryover

The government is moving to delay the taxation of virtual asset income — originally set to take effect next year — by an additional two years to 2029.

The decision takes into account that South Korea's tax information exchange with the United States on virtual assets is scheduled to begin in 2029, and aims to shore up the tax base for overseas transactions. At the same time, the government plans to introduce a system allowing investment losses on virtual assets to be carried over for up to three years.

Deputy Prime Minister and Finance Minister Lee Hyeong-il held a briefing at Government Complex Seoul on Thursday and said the government would pursue the measures in consultation with the National Assembly.

The government said it had reviewed input from experts and industry stakeholders, as well as proposals raised in the National Assembly, and concluded that additional preparation time was needed.

Officials cited concerns that imposing taxes immediately — before the US information-sharing arrangement takes effect in 2029 — could put the domestic market at a relative disadvantage compared with overseas markets. The government also pointed to the expected overhaul of the institutional framework for the digital asset industry following the enactment of a digital asset law as another reason for the delay.

The government said the timing adjustment was intended to uphold the basic tax principle of "taxing where income exists" while improving the effectiveness of taxation on both domestic and overseas transactions and ensuring greater fairness among taxpayers.

During the deferral period, the government plans to assess conditions for obtaining tax information on overseas transactions and expand the related infrastructure. With the information exchange with the United States through the Crypto-Asset Reporting Framework set to begin in 2029, officials said they would monitor the development of international information-sharing systems and link and analyze domestic and overseas tax data to strengthen the effectiveness of taxing cross-border transactions.

The government also plans to introduce a loss carryover system in recognition of the high price volatility of virtual assets. It said it would consult with the National Assembly on allowing losses to be carried forward for up to three years — a provision already recognized in major economies including the United States and the United Kingdom. The move reflects expert recommendations that it is reasonable to allow gains and losses over a given period to be netted before taxation.

In addition, the government plans to work with the Financial Services Commission and other related ministries to enact a digital asset law, and will revise the taxation system in line with the resulting changes to the legal definition of digital assets and the regulatory framework for digital asset businesses. The government said it would support the sound growth of the digital asset industry while also establishing an institutional foundation to protect users.

To that end, the government will form and operate a public-private digital asset taxation working group, bringing together experts, industry representatives and related ministries. The group will discuss rationalizing the taxation system, establishing detailed tax standards for various types of transactions, and improving the convenience of filing for taxpayers.

The government plans to hold the working group's inaugural meeting as soon as possible and complete intensive discussions by the first half of next year to produce a reform proposal. Measures requiring legislation will be drafted and submitted to the regular session of the National Assembly in 2027. Detailed tax standards are then to be drawn up and announced in the first half of 2028, with guidance to be provided to the market and taxpayers.

The government said it would work closely with the National Assembly to advance the necessary legislation and put in place the tax standards and enforcement systems needed to ensure fair taxation.