Dividend and Investment Tax in South Korea Confirm the cited source.

South Korea taxes dividend and interest income at source through a withholding mechanism administered by the National Tax Service (NTS). For most individual investors, the 15.4% withholding rate is the final liability. Where investment income grows large, the comprehensive-taxation rule pulls all financial income into the progressive rate schedule. Understanding where you sit relative to the KRW 20 million threshold is the central question for Korean investors.

01What rate is withheld on dividends and interest?

Under the Income Tax Act (So-deuk-se-beob), Korean-source dividends and interest paid to resident individuals are subject to a 14% national withholding tax. A local income surtax is then applied at 10% of the national withholding amount -- 1.4% of the gross income -- bringing the combined effective rate to 15.4%. Paying corporations, banks, and broker-dealers deduct this automatically at source before crediting the net amount. For amounts below the KRW 20 million annual threshold (see below), this withholding operates as a final tax: no further income-tax filing obligation arises on that income. PwC's Worldwide Tax Summaries for the Republic of Korea confirm the 15.4% combined rate as the standard separate-taxation rate for resident individuals [1].

02How does the KRW 20 million financial-income aggregation rule work?

Where a resident individual's combined annual interest and dividend income exceeds KRW 20 million, that income is no longer taxed separately at 15.4%. Instead, the entire financial-income aggregate -- not merely the excess above the threshold -- is added to the individual's other income (employment, business, rental, etc.) and taxed at the progressive rates set out in the Income Tax Act: 6% on the first KRW 14 million of taxable income, rising through five intermediate bands to 45% on income above KRW 1 billion, with the 10% local income surtax applied on top of each national rate at each band. The combined effective top rate therefore reaches 49.5%. PwC confirms the KRW 20 million threshold as the structural trigger for comprehensive (jong-hap-gwa-se) taxation [1]. Because the threshold test aggregates both Korean-source and foreign-source dividends and interest, Korean residents with overseas brokerage accounts must monitor worldwide financial income against the ceiling.

The table below shows how the tax treatment changes either side of the threshold:

2026 reform for high-dividend companies. The National Assembly passed an income-tax amendment in December 2025, effective for 2026 dividend distributions, creating a separate graduated rate for dividends paid by companies meeting defined payout-ratio thresholds (a ratio of 40% or higher, or a ratio of 25% with a year-on-year increase of at least 10%). For qualifying dividends, a 14% rate applies up to KRW 20 million, 20% on KRW 20 million to KRW 300 million, 25% on KRW 300 million to KRW 5 billion, and 30% on amounts above KRW 5 billion. This replaces the prior comprehensive-taxation exposure (up to 49.5%) for shareholders of those companies. The Korea Herald and Korea Times both reported the cross-party agreement in November 2025 [3].

03What happened to the Financial Investment Income Tax (FIIT)?

The Financial Investment Income Tax was a proposed levy that would have imposed a 20% tax on capital gains exceeding KRW 50 million from listed equities, bonds, funds, and derivatives, with a 25% rate on gains above KRW 300 million. It had been deferred twice -- originally scheduled for 2023, then 2025. The Yoon Suk Yeol administration and, ultimately, both the ruling and opposition parties agreed to repeal it before its 2025 launch date. The National Assembly approved the repeal on 10 December 2024, with Cabinet approval following on 24 December 2024. The Korea Herald confirmed the formal scrapping [2].

As a result, capital gains on listed Korean equities remain largely outside the personal income-tax net for ordinary investors. The existing rules that apply only to "major shareholders" (those holding 1% or more of a listed company, or shares with an acquisition cost exceeding KRW 1 billion) and to unlisted-share disposals remain in force. The South Korea country overview provides wider context on the Korean tax framework.

04How are foreign dividends taxed and what treaty relief applies?

Korean tax residents are liable on their worldwide income. Foreign-source dividends and interest are therefore included in the KRW 20 million threshold calculation alongside Korean-source financial income. Where the aggregate exceeds the threshold, comprehensive taxation applies. To prevent double taxation, Article 57 of the Income Tax Act grants a foreign tax credit equal to the lesser of (a) the foreign tax actually paid and (b) the Korean tax that would apply to the same foreign income. Any excess credit beyond the Korean rate cannot be carried forward; it is lost. Residents may alternatively elect to deduct the foreign tax paid from taxable income rather than claiming a credit. PwC's treaty-relief summary for Korea notes that excess credits may be carried forward ten years when the limit applies [4].

Korea has concluded income tax treaties with 97 countries as at January 2026. Most treaties follow the OECD model and reduce source-state withholding on dividends to 15% for portfolio holdings and 5-10% for substantial shareholdings (typically defined at a 10-25% voting-interest threshold). To apply a reduced treaty rate at source, the recipient must submit an application form to the Korean paying entity before payment, accompanied by a residency certificate from the home tax authority. Retroactive refunds for over-withheld amounts are available within five years.

Consult a qualified tax professional where your cross-border income position involves multiple treaty jurisdictions, deferred income structures, or aggregate financial income approaching the KRW 20 million threshold.

05What is the securities transaction tax and what are the current rates?

South Korea imposes a securities transaction tax (STT) on the transfer of shares and interests. The tax applies to the seller at the time of transfer and is collected by the broker or transferring institution. The KOSPI (Korea Composite Stock Price Index main board) and KOSDAQ markets have seen a series of rate changes in recent years. Effective 1 January 2026, the KOSPI rate rises from 0% (the STT had been eliminated on the main board in stages) to 0.05%, while the KOSDAQ and K-OTC rate rises from 0.15% to 0.20%. A separate agricultural and fishery village special tax of 0.15% applies on KOSPI transfers alongside the new 0.05% STT, giving a combined 0.20% total on KOSPI. KONEX (Korea New Exchange) shares carry a 0.10% rate. Unlisted Korean shares are taxed at 0.35%. The PwC corporate other-taxes page for Korea confirms these 2026 rates [5].

The STT is independent of income tax on gains -- it is levied on the transfer value regardless of profit or loss. It does not interact with the FIIT (now repealed) and does not create an income-tax offset.