When dividends arrive in your account, taxes have already been deducted. Cash dividends on domestically listed stocks are deposited after 15.4% withholding — 14% dividend income tax plus 1.4% local income tax — and if your total financial income for the year does not exceed 20 million won, taxation ends there. Starting in 2026, however, a new track has been added to this calculation. As separate taxation — which taxes dividends from high-dividend companies at a distinct rate without aggregating them with other income — takes effect, dividend income tax now follows three paths.
This article breaks down those three paths — ① cases resolved by withholding, ② cases that shift into comprehensive financial income taxation, and ③ the high-dividend company separate taxation newly established in 2026 — with rate tables and calculation examples by bracket.
The Default — Cases Resolved by 15.4% Withholding
According to the domestic stock tax structure summarized by KB Think, the withholding tax rate on dividend income is 14%, with a local income tax (10% of income tax) added, making the effective withholding 15.4%. Since withholding is completed at the payment stage, investors have no separate filing obligation.
The calculation is straightforward. If you receive 10 million won in dividends in a year, 1.54 million won is withheld and 8.46 million won is deposited. If your total financial income from interest and dividends does not exceed 20 million won for the year, the tax obligation ends with this withholding. Most individual investors fall into this category.
Within this bracket, the tax rate is constant regardless of the dividend amount. Whether dividends are 1 million won or 19 million won, the same 15.4% applies — so while you remain under the threshold, you can quickly estimate your after-tax receipt as dividend amount × 0.846.
The 20 Million Won Threshold — Comprehensive Financial Income Taxation
When total financial income from interest and dividends exceeds 20 million won per year, the excess is aggregated with other income such as wages and business income and subject to the progressive comprehensive income tax rates. Including local income tax, the rates range from 6.6% up to a maximum of 49.5%. The higher your other income, the heavier the tax on the same dividends becomes.
The key point is that the threshold is not based on "dividends only." Bank deposit interest, bond interest, and dividends are all aggregated. Even if dividends are 15 million won, adding 6 million won in interest creates a combined total of 21 million won — crossing the threshold. That said, even when you shift to comprehensive taxation, the tax already withheld is settled as prepaid tax, so you are not paying taxes twice on the same income. The fact that a comprehensive income tax filing obligation arises in May of the following year is another thing that changes.
The starting point of dividend income tax calculation is not the rate table — it is confirming which side of the 20 million won line your total interest and dividend income falls on.
New in 2026 — Separate Taxation on High-Dividend Company Dividends
Passed by the National Assembly in December of last year and applicable to dividends paid on or after January 1, 2026, the new separate taxation taxes cash dividends from qualifying high-dividend companies at a distinct rate without aggregating them with other income. According to KB Think, eligible dividends are cash dividends from listed companies with a payout ratio of 40% or higher, or a payout ratio of 25% or higher combined with a year-on-year dividend increase of 10% or more. ETF distributions and overseas stock dividends are excluded. It applies on a three-year temporary basis through 2028.
| Taxable Base Bracket | Tax Rate (%) | Including Local Income Tax (%) |
|---|---|---|
| Up to 20 million won | 14 | 15.4 |
| Over 20 million won – up to 300 million won | 20 | 22.0 |
| Over 300 million won – up to 5 billion won | 25 | 27.5 |
| Over 5 billion won | 30 | 33.0 |
Large dividends that would have faced up to 49.5% under comprehensive taxation now cap at 33% — the benefit grows with the dividend amount. As reported by Korea JoongAng Daily, this measure is projected to reduce tax revenue by approximately 1.9 trillion won over five years. Conversely, investors whose financial income is below 20 million won see no immediate change since 15.4% withholding already ends their obligation; overseas dividends such as US stock dividends remain subject to comprehensive income tax aggregation as before.
Three-Track Calculation Illustrated by Example
The same dividend can produce different results depending on your income composition. The following are simplified examples to illustrate the structure (various deductions and prepaid tax settlements are omitted).
- Dividends of 8 million won, no other financial income — Below 20 million won, so withholding of 15.4% (1.232 million won) ends the obligation.
- Dividends of 15 million won + interest of 10 million won — Combined total of 25 million won crosses the threshold. The first 20 million won is taxed at the withholding rate; the excess 5 million won is aggregated with other income and taxed at progressive rates.
- High-dividend company dividends of 30 million won (paid in 2026) — Under separate taxation, calculated at the bracket rate independently without aggregating with other income. Whether this is more or less favorable than comprehensive taxation depends on the individual's other income level.
As the third example shows, separate taxation is not always more advantageous. For someone with low other income who would face low progressive rates, the aggregated approach may actually result in a lighter burden. The actual application method and filing procedure will be confirmed by securities firm withholding notices and National Tax Service guidance at the time of 2026 dividend payments — it is too early to make definitive conclusions before then.
What to Watch
- Whether total interest and dividends for the year will cross 20 million won — check via the financial income inquiry menu in your financial institution's app before year-end
- Whether your holdings' payout ratios meet the 40% (or 25% + 10% year-on-year increase) threshold — business reports and dividend disclosures
- How withholding tax rates will be communicated for dividends paid on or after 2026 — securities firm notices and withholding receipts
- Extension or revision discussions after the three-year temporary period (ending 2028) — the annual tax reform bill announced at the end of July each year
References
- KB Think — Complete Guide to Domestic Stock Taxes: Capital Gains Tax, Dividend Income Tax, Securities Transaction Tax
- KB Think — High-Dividend Company Separate Taxation: Eligible Companies, Effective Date, and Rate Summary
- Korea JoongAng Daily — Dividend Separate Taxation Cuts 5-Year Tax Revenue by 1.9 Trillion Won... Corporate Tax Hike Raises 18 Trillion Won