Foreign Investors Earn KRW6.4tr from Trading of Korean Stocks in 2020

The National Tax Service announced on Nov. 29 that foreign individuals’ and corporations’ income in South Korea totaled 54.8 trillion won last year, including 26.9 trillion won in dividend income, 6.4 trillion won in capital gains from marketable securities, and 4.1 trillion won in interest income.

The capital gains were 6.6 trillion won in 2019 and decreased 3 percent last year with the domestic stock market stagnant due to COVID-19. However, the actual return on investment increased a lot last year as withholding taxes decreased substantially.

According to the National Tax Service, the taxes on their capital gains from marketable securities totaled 368 billion won in 2019 and 273.6 billion won in 2020. This decrease means they reduced the frequency of stock trading. The capital gains decreased only 3 percent while the taxes dropped 25.7 percent from more than 360 billion won to less than 280 billion won. In other words, they invested well in South Korea last year.

Their tax burden is likely to decrease with time. This is because the securities transaction tax will become a part of the financial investment income tax. The latter will be fully introduced in 2023, and then the securities transaction tax will be lowered from the current level of 0.25 percent to 0.15 percent of the trading value.