South Korea to levy capital gains tax on equity investments from 2023

SEJONG, June 25 (Yonhap) – South Korea on Thursday announced that it plans to revise a law to levy a capital gains tax on capital gains from equity investments in from 2023, while lowering a tax on stock market transactions.

Under the plan, all investors who own listed shares will be subject to a 20% tax rate. If they own shares worth more than 300 million won (US $ 250,041), the tax rate will be increased to 25%.

However, the proposed tax revision allows a retail investor to be exempt from capital gains tax when profits from stock transactions are less than 20 million won.

Currently, South Korea levies a capital gains tax on major shareholders who own shares worth more than one billion won in a single company. In addition, their participation must exceed 1% of the total shares listed on the main KOSPI or 2% of the total shares listed on the secondary market of KOSDAQ if they are subject to capital gains tax.

The decision “aims to improve tax fairness by reducing tax exemptions on financial products,” the Ministry of Economy and Finance said in a statement.

South Korea had some 6 million individual investors in 2019. The ministry said about 5% of retail investors, or some 300,000 people, would be taxed.

In line with the decision to impose a capital gains tax on all shareholders, the ministry said it will gradually reduce the tax on stock transactions.

Last year, South Korea reduced the tax on stock transactions for the first time in 23 years.

The transaction tax for shares listed on the KOSPI and KOSDAQ markets has been lowered by 0.05 percentage point to 0.25% each.

From 2022, the tax on equity transactions will be further lowered by 0.02 percentage point to 0.23%.

In 2023, the tax will be further reduced by 0.08 percentage point to 0.15%, the ministry said.

Last year, South Korea began imposing a 10% tax on profits earned from trading all derivatives linked to stock indexes.

The tax covers KOSDAQ 150 futures, KOSDAQ 150 options and KRX 300 futures, sector index futures and dividend index futures, as well as V-KOSPI 200 futures and warrants linked to KOSDAQ 150 shares.

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