How Does Capital Gains Tax in South Korea Work?

In South Korea, a capital gains tax is levied on the profit from selling specific assets, calculated separately from regular income. The tax applies to both residents and non-residents who realize gains from assets like real estate and stocks. However, the rules differ significantly based on the taxpayer’s residency status.

Determining Taxpayer Status and Scope

A taxpayer’s obligations for capital gains in South Korea are shaped by their residency status. An individual is a “resident” for tax purposes if they have a domicile in Korea or have a place of residence in the country for 183 days or more.

The primary distinction is the geographic source of the taxable gains. Residents are taxed on their worldwide capital gains, covering assets both within and outside South Korea. For foreign nationals who are residents, gains from foreign assets are only taxable if the individual has been a resident for five or more of the last ten years. This rule provides a grace period for newer foreign residents.

A “non-resident” is an individual who does not meet the 183-day residency threshold. Non-residents are taxed only on gains from Korean-source assets. These include real estate located in South Korea, such as land and buildings, and shares in Korean corporations.

Identifying Taxable Assets and Exemptions

Capital gains tax applies to specific assets, primarily real estate and corporate stocks. The law defines taxable assets and provides exemptions for primary residences and small-scale stock investors.

Real Estate

Taxable real estate assets include land, buildings, and certain rights associated with property, such as the right to acquire a property. An exemption exists for the “1-household-1-home” rule, where a household that sells its single primary residence may be exempt from capital gains tax.

To qualify for this exemption, the seller must have owned the home for at least two years. The exemption applies to homes with a sale price up to KRW 1.2 billion; any capital gain amount attributable to the portion of the sale price exceeding this threshold is subject to tax. Additional requirements, such as a residency period within the home, may also apply.

Stocks and Equity Interests

The taxation of gains from stocks and other equity interests depends heavily on the shareholder’s status and the type of stock. A distinction is made between “major shareholders” and minor shareholders. A major shareholder is defined by either the percentage of ownership (1% for KOSPI-listed companies, 2% for KOSDAQ, and 4% for KONEX) or the market value of their holdings in a single company, which is KRW 5 billion or more.

Gains realized by major shareholders from the sale of stocks are taxable. In contrast, capital gains from the transfer of listed stocks by minor shareholders are exempt. A planned financial investment income tax, which would have taxed stock gains above KRW 50 million, was scheduled to begin in 2025 but was ultimately abolished before implementation. Gains from unlisted stocks are taxable regardless of the shareholder’s status.

Calculating the Capital Gains Tax Base

The capital gains tax base is calculated using the formula: Capital Gain = Transfer Price – (Acquisition Cost + Necessary Expenses). The Transfer Price is the gross amount received from the sale of the asset. The Acquisition Cost is the original purchase price, which can be substantiated with contracts and payment records. Costs like acquisition taxes and legal fees can also be included.

If the actual acquisition cost cannot be verified, tax authorities may use a “deemed acquisition cost.” Necessary Expenses are direct costs to facilitate the sale or enhance the asset’s value, including brokerage fees and capital expenditures. Routine maintenance costs are not deductible. A basic deduction of KRW 2.5 million per year is also permitted against the calculated gain.

Applicable Tax Rates

After calculating the tax base, the appropriate tax rate is applied. Rates vary based on the asset type, the holding period, and the taxpayer’s residency status.

Asset Type and Holding Period

For real estate, tax rates are influenced by the holding period. Gains from properties held for less than one year are subject to rates as high as 70%, while properties held between one and two years face a rate of around 60%. These high short-term rates are designed to discourage speculative real estate flipping.

For properties held two years or more, the standard progressive income tax rates of 6% to 45% apply. A “long-term holding special deduction” can further reduce the taxable gain. This deduction begins for properties held for at least three years, with the rate increasing for each year of ownership.

Tax rates for stocks also depend on shareholder status and holding period. Major shareholders face rates between 22% and 33%, with the highest rate applied to shares held for less than one year. Different rates can also apply to shares in small and medium-sized enterprises.

Taxpayer Status and Special Surtaxes

While residents are subject to rates based on holding periods, non-residents face a different calculation. They are taxed at the lesser of two amounts: 11% of the total sale price or 22% of the net capital gain, both inclusive of a local surtax.

In addition to standard rates, heavy surtaxes can apply. Individuals who own multiple homes may be subject to an additional 20 to 30 percentage points on top of basic rates when selling a residential property. The application of these surtaxes was temporarily suspended but resumed in May 2025. Sales of property in designated “speculative zones” can also trigger additional taxes.

Reporting and Paying the Tax

After calculating the tax liability, the gain must be reported and the tax paid to the authorities. This process involves specific forms, deadlines, and payment methods.

Information and Forms Needed

Taxpayers must complete specific forms from the National Tax Service (NTS), available on its Hometax online portal. For real estate, the “Preliminary Return on Capital Gains on Transfer of Real Estate” requires details like the transfer price, acquisition cost, and the final tax amount. The Hometax website is the primary platform for finding forms, calculating liability, and submitting returns electronically.

Filing and Payment Process

For real estate sales, a preliminary tax return must be filed within two months from the end of the sale month. A final, comprehensive tax return consolidating all income is then due in May of the following year. Returns can be submitted electronically via Hometax or in person at a district tax office. Payments can be made through electronic bank transfers on Hometax or at a designated financial institution.