background image

South Korea to Implement Changes in the Taxation of Securities Transactions — Orbitax Tax News & Alerts

On 25 June 2020, South Korea's Ministry of Economy and Finance announced plans for changes in the taxation of securities transactions. One of the key changes is an increase in the taxation of capital gains from securities transactions by removing the distinction between large shareholders and other shareholders and the introduction of a new progressive tax on gains.

Currently, investors are generally only subject to tax on capital gains from securities transactions if they are classified as a large shareholder. Under the planned system, all investors may be subject to tax at progressive rates of 20% on gains up to KRW 300 million and 25% on gains exceeding KRW 300 million, with a deduction (allowance) of KRW 20 million for gains on domestic listed shares and KRW 2.5 million for other securities. Investors would also be allowed to carry forward capital losses for three years. The new system is to apply from 2023.

In addition to the changes for the taxation of capital gains, the Ministry also plans to reduce the stock transaction tax rate from 0.25% to 0.15% for KOSPI and KOSDAQ-listed shares. This is to be implemented with a 0.02% reduction in 2022 and a 0.08% reduction in 2023.

The changes are subject to parliamentary approval.