Yes, it does, but internally it only does integer scales and result is downscaled by the compositor, so it’s not perfect. Upcoming Plasma 6.0 will have support for fractional-scale-v1 protocol and for supported clients it should render perfectly (Qt 6 and GTK4 already support it, Chromium support was announced few months back, Firefox just merged the feature, probably more clients support is pending or will come soon-ish). No rush with jumping on some early patches, but we’re getting there! I expect it to be mostly good in next few months.
Sadly Xwayland apps will always be somehow problematic as there is simply no way to apply scale per window and have it fit perfectly to every setup.