If your annual realized gains from overseas stocks exceed 2.5 million won, only the excess is taxed, at 22% — a 20% capital gains tax plus a 2% local income surtax. Filing and payment happen once, between May 1 and 31 of the year following the sale. Korea's National Tax Service does not require quarterly interim filings for foreign stocks.
The catch is that all three key terms in that sentence work differently from how most investors assume. The 2.5 million won deduction is not per ticker, the gain is measured in won rather than dollars, and the "year" is set by the settlement date, not the day you hit sell. Stack those three together and a brokerage account that lost money in dollar terms can still generate a tax bill.
The deduction applies once a year, not per stock
The 2.5 million won basic deduction is not per account, per ticker, or per brokerage. You add up every gain and loss realized between January 1 and December 31, then subtract it exactly once. As Hankyung Money lays out, annual gains of 12.5 million won leave 10 million won taxable, producing 2.2 million won in tax.
One more rule stacks on top. According to Mirae Asset Securities, taxable domestic stock gains and foreign stock gains offset each other, and the 2.5 million won deduction is applied once across both. Trades that were never taxable to begin with — such as exchange-traded domestic shares held by ordinary small shareholders — cannot be pulled into the offset.
Because the deduction is granted only once, the effective rate climbs in steps. The table below applies the 22% headline rate across gain brackets.
| Annual net gain (KRW) | Taxable base (KRW) | Tax at 22% (KRW) | Effective rate |
|---|---|---|---|
| 2.5m | 0 | 0 | 0% |
| 5m | 2.5m | 550,000 | 11.00% |
| 10m | 7.5m | 1.65m | 16.50% |
| 20m | 17.5m | 3.85m | 19.25% |
| 50m | 47.5m | 10.45m | 20.90% |
| 100m | 97.5m | 21.45m | 21.45% |
At a 5 million won gain the effective rate is 11%; at 100 million won it is 21.45%. The deduction is a fixed amount, so the larger the gain, the closer the effective rate creeps to the 22% headline. The flip side is that for smaller gains, whether or not you use the deduction swings the after-tax return sharply.
Why a 5% dollar loss can still be taxed
The taxable gain is not the dollar profit but the difference between two won-converted amounts. As Toss Bank explains, the formula is (sale amount in foreign currency x the base exchange rate on the sale settlement date) minus (purchase amount x the base rate on the purchase settlement date). For US stocks, that is normally the rate two business days after the trade. Currency gains are not taxed separately — they are already baked into the taxable figure.
Suppose you invested 50,000 dollars when the settlement-date rate was 1,200 won, and closed the position at 47,500 dollars after a 5% drop. That is a 2,500 dollar loss. Vary only the sale settlement rate and the won-denominated outcome splits like this.
| Sale settlement rate (KRW/USD) | Cost basis (KRW) | Proceeds (KRW) | Gain in won (KRW) | Taxable base (KRW) | Tax (KRW) |
|---|---|---|---|---|---|
| 1,200 | 60m | 57m | -3m | 0 | 0 |
| 1,300 | 60m | 61.75m | +1.75m | 0 | 0 |
| 1,400 | 60m | 66.5m | +6.5m | 4m | 880,000 |
| 1,500 | 60m | 71.25m | +11.25m | 8.75m | 1,925,000 |
Identical trades, identical dollar loss — yet a 300 won move in the exchange rate produces 1.93 million won of tax. The reverse holds too: a dollar profit can vanish from the tax base if the won strengthens enough between purchase and sale.
Leaving the proceeds in dollars inside the account changes nothing. The taxable event is the sale and its settlement, not the conversion back to won. Yuanta Securities likewise instructs investors to convert cost basis and proceeds at their respective settlement-date base rates.
Overseas capital gains tax is not levied on a stock's return. It is levied on the gap between two won-converted amounts.
Offsetting closes at the year boundary
Gains and losses realized in the same year offset each other, but nothing carries across the year-end. There is no loss carryforward for overseas capital gains, so this year's loss will not reduce next year's tax. That is why deciding between a late-December and an early-January loss sale changes the bill.
| Timing of realization | Year 1 net (KRW) | Year 2 net (KRW) | Year 1 tax (KRW) | Year 2 tax (KRW) | Total (KRW) |
|---|---|---|---|---|---|
| 10m gain and 4m loss both in year 1 | +6m | 0 | 770,000 | 0 | 770,000 |
| 4m loss pushed into year 2 | +10m | -4m | 1.65m | 0 | 1.65m |
| 5m gain taken all in year 1 | +5m | 0 | 550,000 | 0 | 550,000 |
| 5m gain split 2.5m across two years | +2.5m | +2.5m | 0 | 0 | 0 |
The same trades, rearranged, produce 770,000 won versus 1.65 million won, or 550,000 won versus nothing. Deferring a loss strands it with no gain to absorb; bunching gains wastes a deduction that could have been claimed twice.
One more trap sits here: the tax year is fixed by settlement, not execution. A sale in the final days of December may settle in January and land in the following year's return. Anyone squaring up their books at year-end should check the brokerage's published final settlement date first.
What to watch
- Year-to-date realized net gain — whether the combined domestic and foreign figure in your brokerage app sits under 2.5 million won
- Your brokerage's last settlement date of the year — the line that decides which tax year a late-December sale belongs to
- Unrealized losses still on the books — whether there is anything left to offset this year's gains before it expires
- Purchase settlement rates on record — positions built in tranches carry a different conversion rate per lot
- The May filing window, and the earlier cutoff for brokerage-assisted filing
Sources
- National Tax Service — Stock capital gains tax scope
- Hankyung Money — Gains above 2.5 million won taxed at 22%
- Mirae Asset Securities — Filing when foreign gains fall under 2.5 million won
- Toss Bank — Overseas capital gains tax, from deadlines to payment
- Yuanta Securities — Overseas stock capital gains tax guide