South Korea has confirmed that it will begin taxing digital asset profits from January 1, 2027. The announcement ends years of delays and gives investors and exchanges a clear date to prepare.

Deputy Prime Minister and Finance Minister Koo Yun-cheol said the government plans to move forward with the tax as scheduled. He made the comments during a meeting of the National Assembly on July 29.

"We are pushing forward with the plan to tax [cryptocurrency] starting next year as scheduled," Koo said.

Under the new rules, investors will not pay tax on their first 2.5 million won (about $1,750) in yearly digital asset profits. Any profits above that amount will be taxed at 20%. After adding local income tax, the total tax rate will be 22%.

The tax will apply to income earned from selling or lending digital assets, including bitcoin. South Korea will treat these earnings as "other income" instead of capital gains.

The digital asset tax was first supposed to begin in January 2022. However, the government delayed it several times because of political debate and concerns that the tax system and digital asset exchanges were not ready. The current start date is January 1, 2027.

Koo said South Korea's tax system is different from countries such as the United States and the United Kingdom, where digital asset profits are usually taxed as capital gains.

"To move to a capital gains tax framework, there is an aspect that we need to look comprehensively and systematically at how to handle not only virtual assets but the entire capital market," Koo said.

Some lawmakers are still worried about the new tax rules. People Power Party lawmaker Kim Sang-hoon said investors cannot carry forward losses to reduce taxes on future profits. He argued that this does not fairly reflect an investor's overall gains and losses.

Kim also warned that some investors could move their trading to overseas exchanges, decentralized exchanges (DEXs), or peer-to-peer (P2P) platforms to avoid the tax. He suggested waiting until the OECD's Crypto-Asset Reporting Framework (CARF) is fully in place before starting the tax.

Nevertheless, the government said it still plans to launch the tax on time. Koo said officials can improve the system later if problems appear after it starts.

"As of now, taxation is only deferred until the end of this year, so we will first implement it next year and make supplements as needed," Koo said.

The debate is not over. Earlier this year, opposition lawmakers introduced a bill that would completely remove the digital asset tax. The proposal is now being reviewed in parliament. Unless lawmakers approve another delay or cancel the law, the tax will begin on January 1, 2027.

Before the launch, South Korea's National Tax Service is preparing detailed guidelines. It is working with the country's biggest digital asset exchanges, including Upbit, Bithumb, Coinone, Korbit, and Gopax.

These exchanges will need to help track users' transactions so investors can calculate their taxable profits. People who trade on several exchanges or use personal wallets may also need to keep detailed records of their purchases and sales.