Korea's capital gains tax on overseas stocks is calculated on net gains from trades settled during the calendar year: subtract 2.5 million won, then apply 22%. A net gain of 10 million won leaves a taxable base of 7.5 million won and a bill of 1.65 million won. The 22% is a 20% capital gains tax plus a local income surtax equal to 10% of that tax, and Korea Investment & Securities notes that gains on foreign-listed shares and foreign-listed ETFs alike fall under this rate.
Unlike domestic shares, there is no large-shareholder threshold — every investor is in scope. Filing is self-assessed, between May 1 and 31 of the year after the sale. Miss it and a 20% non-filing penalty applies (10% for under-reporting), plus a late-payment charge running around 8% a year. Hankyung Money reported that filers have grown to roughly 520,000 from 207,231 a year earlier, with an average declared gain near 28 million won.
What is the effective rate after the deduction?
The 2.5 million won basic deduction is per person, once a year. The headline rate never changes, but because the deduction comes off the top, the share you actually pay rises with the size of the gain. The table below computes the tax and effective rate (tax divided by net gain) directly.
| Annual net gain (KRW) | Taxable base (KRW) | Tax at 22% (KRW) | Effective rate (%) |
|---|---|---|---|
| 2.5M | 0 | 0 | 0.0 |
| 5M | 2.5M | 550,000 | 11.0 |
| 10M | 7.5M | 1.65M | 16.5 |
| 28M | 25.5M | 5.61M | 20.0 |
| 50M | 47.5M | 10.45M | 20.9 |
| 100M | 97.5M | 21.45M | 21.5 |
The 28 million won row — the reported average — lands at exactly 20.0%. Even a 100 million won gain stops at 21.5%. Below 5 million won, the effective rate falls under 11%.
Costs also shrink the base. Yuanta Securities gives a worked case: bought for 10 million won, sold for 15 million, 50,000 won in fees, tax of 539,000 won. That is 5 million minus 50,000 in fees minus the 2.5 million deduction, times 22%. The 50,000 won fee cut the tax by 11,000 won.
Why a December sale can land in next year's return
The tax year is set by the settlement date, not the execution date. Yuanta's guidance covers trades settled between January 1 and December 31, filed the following May. A sale on the last trading day of the year may settle into the next year — and that single day decides whether this year's 2.5 million won deduction is available.
The tax year turns on the day the trade settles, not the day the order fills.
Currency conversion follows the same logic. Per Korea Investment & Securities, sale proceeds convert at the deposit-date rate and purchases at the withdrawal-date rate. The rate at which you actually exchanged money, or the period you held dollars in the account, never enters the calculation.
Concretely: buy $1,000 when the rate is 1,300 won (1.3M won) and sell for $1,100 when it is 1,400 won (1.54M won). The dollar return is 10%, but the won-denominated gain is 240,000 won, or 18.5%. Run the currency the other way and a dollar profit can become a won-denominated loss.
What realizing a loss in the same year changes
Gains and losses inside one tax year are netted. Yuanta adds that gains and losses from domestic shares that are themselves subject to capital gains tax — large-shareholder, off-exchange and unlisted holdings — are pooled in the same return. The 2.5 million won deduction is applied once across the pool, not once per category.
| Case | Realized gain (KRW) | Realized loss (KRW) | Net (KRW) | Taxable base (KRW) | Tax (KRW) |
|---|---|---|---|---|---|
| Gain only | 10M | 0 | 10M | 7.5M | 1.65M |
| With a 4M loss realized | 10M | 4M | 6M | 3.5M | 770,000 |
| Split across two years (2.5M + 2.5M) | 5M | 0 | 2.5M per year | 0 | 0 |
The same 10 million won gain costs 770,000 won instead of 1.65 million if a 4 million won loss is realized in the same year — a difference of 880,000 won. The third row splits a 5 million won gain across two calendar years, using the deduction twice and bringing the bill from 550,000 won to zero. Settlement delays that push a January sale back into December reverse the arithmetic just as easily.
Dividends are a separate category: overseas dividends are taxed as dividend income and count toward the aggregate financial income threshold, not this return.
First-in-first-out versus moving average
When a position was built in tranches and only part is sold, the acquisition cost depends on which lot is deemed sold. The default is first-in-first-out; Hankyung Money notes that a brokerage's moving-average figure is also accepted, so the two methods can produce different bills after staggered buying in a rising market.
Take 100 shares bought at $10 and another 100 at $20. Selling 100 shares at $25 gives a $1,500 gain under FIFO (cost $1,000) but a $1,000 gain under moving average (average cost $15). At a rate of 1,400 won, that $500 gap is 700,000 won of gain and roughly 150,000 won of tax.
Which method helps depends on the order of the purchase prices — averaging down in a falling market can flip the result. The estimated tax shown in a trading app is computed with whichever single method that broker uses.
What to watch
- Whether cumulative net gains have reached the 2.5 million won line — below it, the tax is zero
- The settlement date of year-end sales; brokers publish the last settling day of the year
- The won-converted gain, using deposit- and withdrawal-date rates rather than your dollar return
- Domestic shares in scope of capital gains tax, which share the single 2.5 million won deduction
- The acquisition-cost method on positions built in tranches
- The May 1–31 filing window, and penalties of 20% (non-filing), 10% (under-reporting) and roughly 8% a year for late payment
