The South Korean government will cut the tax for trading stocks listed in the main KOSPI and secondary KOSDAQ markets and unlisted stocks by 0.05 percentage point within this year.
The government had been cautious on lowering the tax rate for stock transactions, but finally decided to lower it within this year.
The government's decision is intended to expand investment in venture companies and facilitate recovery of venture investments, according to a plan jointly announced by the Ministry of Economy and Finance and the Financial Services Commission on March 21.
The cut will lower the current stock trade tax on shares listed on the KOSPI and KOSDAQ markets and non-listed shares by 0.05 percentage point. The transaction tax on shares listed on the country’s smallest bourse Korea New Exchange (KONEX) will be pushed down by 0.2 percentage point in order to activate its function as the market to recover investment funds, including venture capital.
More specifically, the authorities will maintain the special tax for rural development levied on KOSPI transactions at 0.15 percent and cut the stock trade tax by 0.05 percentage point from 0.15 percent to 0.1 percent, which will bring the combined tax on KOSPI transactions from 0.3 percent to 0.25 percent. The stock trade tax on the KOSDAQ and KONEX markets, which do not have the special tax for rural development, will be reduced from 0.3 percent to 0.25 percent and from 0.3 percent to 0.1 percent, respectively. The tax rate for non-listed stocks will be cut from 0.5 percent to 0.45 percent.
The government will also push ahead with the financial tax system advancement plan in its bid to support innovative growth by vitalizing the capital market and improve international convergence of the tax code on the capital market. In the short term, it will allow investors to annually calculate income on capital gains of local or foreign shares upon investment losses. The change will allow investors to add up all losses and profits from various financial investment products and calculate them before being taxed on income. This will be applied to stocks to be transferred after Jan. 1, 2020, by investors who are subject to pay the transfer tax.