Capital gains tax in South Korea

How are listed-share gains taxed?

South Korean listed-share capital-gains taxation operates a distinctive retail-investor exemption preserved through successive reform cycles. Retail investors holding Korean-listed shares below substantial-shareholder thresholds face zero capital-gains tax on disposals — among the most favourable retail-investor frameworks among major OECD jurisdictions. Substantial-shareholder (dae-ju-ju 대주주) classification under Article 94 of the So-deuk-se-beob triggers full taxation: holders of 1% or more of company shares (direct or indirect through related parties), or holders with market value exceeding KRW 5 billion at year-end, qualify as substantial shareholders. Substantial-shareholder capital gains face 22% (held 1+ year) or 25% (held under 1 year) personal income tax including local surcharge. PwC's 2026 South Korea capital-gain commentary identifies the retail exemption as a critical Korean political-economy feature — over 14 million retail investors hold Korean listed shares, making retail-friendly capital-gain treatment a recurring election-cycle topic. The Korean small-business crossover at /global/jurisdictions/country/kr/topic/small-business-tax covers the corporate-side framework affecting listed-corporation operations.

What is the Financial Investment Income Tax (FIIT)?

The Financial Investment Income Tax (Geum-yung-tu-ja-so-deuk-se 금융투자소득세 — FIIT) reform would have unified all financial-investment categories (listed shares, derivatives, bonds, investment funds, ETFs) at a flat 22% capital-gain rate above a KRW 50 million annual exemption. The framework was originally announced in 2020 with implementation scheduled for 2023, deferred to 2025, and ultimately withdrawn from the legislative agenda by the Yoon administration in 2024. The withdrawal followed substantial industry-association pushback citing concerns about retail-investor flight from Korean exchanges to overseas markets (US, Japan) where similar tax treatment was already in place. KPMG's 2026 South Korea FIIT commentary notes the withdrawal substantively preserves the favourable listed-share retail-investor framework but creates ongoing political uncertainty — the opposition Democratic Party retains the framework on its platform and could reactivate the proposal under future administrations. Practitioners frequently advise long-term Korean retail-investor positions assume continued retail-exemption availability while monitoring legislative cycles for reform signals.

How are real-estate gains taxed?

South Korean real-estate capital-gain taxation operates progressive rates under Article 104 of the So-deuk-se-beob with substantial multiple-home owner surcharges. Base progressive rates: 6% on the first KRW 14 million; 15% to KRW 50 million; 24% to KRW 88 million; 35% to KRW 150 million; 38% to KRW 300 million; 40% to KRW 500 million; 42% to KRW 1 billion; 45% above KRW 1 billion. The multiple-home owner surcharges under the Moon administration's 2020 housing-market intervention substantially increased Korean real-estate-tax burden: 10 percentage point surcharge for 2-home owners, 20 percentage points for 3-home owners, 30 percentage points for 4+ home owners. The Yoon administration partially relaxed the surcharges in 2022-2023 (10pp / 20pp / 30pp narrowed to 10pp / 20pp / 30pp on shorter holding periods) but retained the basic framework. Holding-period reductions provide partial relief: 30% reduction for holdings exceeding 2 years, special long-term-holding deduction up to 80% for holdings exceeding 10 years. EY's 2026 South Korea real-estate commentary identifies the multiple-home surcharge framework as a continuing source of practitioner concern — high-net-worth Korean real-estate investors frequently consider corporate-structure alternatives to mitigate multiple-home exposure.

How are non-listed share gains taxed?

Non-listed-company (bi-jang-oe-bo-yu-ju-sik 비장외보유주식) share-disposal gains face flat-rate taxation under Article 104 of the So-deuk-se-beob. Small-medium company shares: 22% combined (20% national + 2% local surcharge). Large company shares: 25% combined (22% national + 3% local surcharge). SME-qualifying holdings under the Special Tax Treatment Limitation Act (Jo-se-teug-rye-je-han-beob 조세특례제한법 — STTLA) access reduced 11% combined rate (10% national + 1% local) — particularly relevant for venture-capital investments and SME holdings meeting specific eligibility criteria. Loss-set-off operates within the capital-gain category with 5-year carry-forward under Article 95 of the Income Tax Act. The Korean self-employed crossover at /global/jurisdictions/country/kr/topic/self-employed-tax covers the sole-proprietor framework for self-managed investment activity.

How does the substantial-shareholder work?

The Korean substantial-shareholder (dae-ju-ju 대주주) framework under Article 94 of the So-deuk-se-beob applies dual-test criteria for taxable status. Holding-percentage test: direct or indirect (through related parties) holding of 1% or more of company shares. Market-value test: aggregate holdings with market value exceeding KRW 5 billion at year-end measured on 31 December. The related-party scope under Article 98 includes spouse, lineal ascendants and descendants, siblings, and entities under common control — substantial-shareholder status frequently extends to family-aggregated holdings even where individual holdings remain below the threshold. The substantial-shareholder threshold has been repeatedly modified through legislative cycles: prior administrations proposed reducing the KRW 5 billion to KRW 1 billion (expanding the substantial-shareholder scope), but these proposals were withdrawn under retail-investor pressure. KPMG's 2026 Korea substantial-shareholder commentary identifies year-end (December) substantial-shareholder positioning as a recurring practitioner question — many Korean high-net-worth investors adjust holdings before year-end to manage threshold exposure.

Are non-residents taxed on Korean capital gains?

Non-residents face Korean capital-gains taxation on Korean-source disposals under Article 119 of the So-deuk-se-beob, with the framework varying by asset class. Korean-listed shares: non-resident retail-equivalent exemption similar to resident treatment; substantial-shareholder thresholds apply identically (1% or KRW 5 billion). Korean real estate: non-residents face the same progressive 6-45% rates plus multiple-home surcharges, with withholding-at-closing by the Korean buyer as advance payment against final liability. Korean non-listed company shares: full taxation at 22-25% combined. Treaty interaction frequently mitigates non-resident exposure under OECD Model Article 13 (Capital Gains). The Korean tax-treaty crossover at /global/jurisdictions/country/kr/topic/tax-treaty-relief covers Korea's 95+ DTA framework. The Korean expat-tax crossover at /global/jurisdictions/country/kr/topic/expat-tax-residency covers cross-border residency frameworks.

How do international filers handle cross-border capital-gain reporting?

Korean residents holding foreign-listed shares or non-Korean real estate report worldwide gains through the annual personal income tax return (jong-hap-so-deuk-se sin-go 종합소득세 신고), due 31 May following the tax year. Foreign-tax credit under Article 57 of the Income Tax Act offsets foreign tax paid against Korean liability up to the Korean rate on the same income. Where foreign rates exceed the Korean rate, the excess is lost — no carry-forward exists. CRS automatic exchange flows foreign-broker data to NTS automatically (Korea participates fully). Cross-border foreign-currency exchange for cost-effective KRW conversion runs through WorldFirst supporting accurate Korean personal income tax reporting on USD or EUR-denominated transactions. US-source 1099-B documentation for Korean-resident accounts feeds the annual filing via Tax1099 reconciliation. Korean residents with substantial foreign investment holdings face Foreign Asset Disclosure obligations on Form Hae-oi-geum-yung-gye-jwa Sin-go (해외금융계좌신고) for accounts exceeding KRW 500 million.

What enforcement framework operates?

NTS enforcement of capital-gains-tax compliance operates under the National Tax Basic Act (Kuk-se-gi-bon-beob 국세기본법). Penalties for non-disclosure: late-filing penalty of 20% of underpaid tax for negligent non-disclosure, scaling to 40% for fraudulent concealment; interest at the basic discount rate plus 1.2% per annum compounded from the original due date. Records retention period is 5 years from the close of the fiscal year (10 years for substantial-shareholder transactions and 7 years for foreign-asset reporting). Required documentation: broker-issued tax certificates confirming substantial-shareholder calculations; real-estate disposal certificates from buyers (specifically the withholding-at-closing receipt); foreign-broker year-end statements with foreign-tax-paid breakdowns. Practitioners commonly recommend Korean Certified Tax Accountants (Se-mu-sa 세무사) registered with the Korean Association of Certified Public Tax Accountants for complex cross-border investment structuring including substantial-shareholder year-end positioning, multiple-home surcharge analysis, SME-qualifying holding identification, and foreign-tax-credit optimisation for high-yield foreign-investment portfolios.