Overview
Understanding Korean tax rules is essential for foreign investors in the KRX. The good news: most foreign investors pay little to no capital gains tax on Korean stocks.
Disclaimer: This is general information only. Consult a tax professional for advice specific to your situation.
Korean Capital Gains Tax for Foreign Investors
General Rule: Mostly Exempt
Foreign investors are generally exempt from Korean capital gains tax on listed Korean stocks (KOSPI/KOSDAQ) under most tax treaties.
Key Exemptions
Most countries have tax treaties with Korea that exempt capital gains from Korean withholding tax, including:
- United States
- United Kingdom
- Most EU countries
- Japan
- Australia
- Canada
When You May Owe Tax
You may owe Korean tax if:
- Your country has no tax treaty with Korea
- You hold more than 25% of a single company’s shares
- You are considered a Korean tax resident
Dividend Tax
Dividends are treated differently from capital gains:
| Investor Type | Dividend Withholding Tax |
|---|---|
| Treaty country residents | 10-15% (treaty rate) |
| Non-treaty country residents | 20% |
| Korean residents | 15.4% |
Most brokers (including Interactive Brokers) will automatically withhold the correct amount.
What to Do
- Check your country’s tax treaty with Korea at the Korean National Tax Service website
- Report foreign income in your home country according to local rules
- Keep records of all trades, dividends received, and taxes withheld
- Consult a tax professional familiar with both Korean and your home country’s tax law
US Investors Specifically
US investors generally owe no Korean capital gains tax due to the US-Korea tax treaty. However, you must still report all foreign income on your US tax return (Form 8938, FBAR if applicable).