"If an Ant Investor Earns 40 Million Won from Stocks, They Must Pay 4.21 Million Won in Taxes"

[Asia Economy Reporter Kwangho Lee] On the 25th, the government decided at the 8th Emergency Economic Central Countermeasures Headquarters (Economic Central Headquarters) meeting to expand the taxation scope to include small shareholders for capital gains arising from the sale of domestic listed stocks starting in 2023. However, capital gains up to 20 million KRW per year will be exempted (deducted). The current securities transaction tax, which imposes 0.25% on the sale amount regardless of profit or loss when selling stocks, will be reduced by 0.1 percentage points. The government’s announced 'Direction for Advancing Financial Taxation' on this day is explained in a Q&A format.

▲Tax burden for small shareholders with capital gains on stocks under 20 million KRW

-If you purchased 1,000 shares of A stock (listed on the KOSDAQ market, 50,000 KRW per share) for 50 million KRW, and the price rose 40% to 70,000 KRW, then sold 2,000 shares for 70 million KRW resulting in a capital gain of 20 million KRW, under the current system the tax is 175,000 KRW, and under the new system it is 105,000 KRW. Under the new system, a basic deduction applies up to 20 million KRW of capital gains, so no capital gains tax is due. Only the securities transaction tax (0.15%) on the sale amount of 70 million KRW, which is 105,000 KRW, must be paid.

▲Tax burden for small shareholders with capital gains on stocks exceeding 20 million KRW

-If you purchased B stock (listed on the KOSDAQ market, 50,000 KRW per share) for 100 million KRW, and the price rose to 70,000 KRW per share, then sold for 140 million KRW resulting in a capital gain of 40 million KRW, the tax under the current system is 350,000 KRW, and under the new system it is 4.21 million KRW. Under the current system, capital gains tax is not applied to the gain, but under the new system, 20 million KRW of the 40 million KRW gain is exempted as a basic deduction, and 20 million KRW is subject to 20% capital gains tax (25% if the gain exceeds 300 million KRW), resulting in 4 million KRW tax. Additionally, securities transaction tax (0.15%) of 210,000 KRW is imposed.

▲How is the non-carryover offset of gains and losses between stocks applied?

-If you made a 30 million KRW gain on C stock and a 50 million KRW loss on D stock, the total combined loss is 20 million KRW, so no capital gains tax is due. If you make a 40 million KRW gain on E stock the following year, you can carry over the 20 million KRW loss from the previous year to deduct it. Deducting the 20 million KRW loss from the 40 million KRW gain leaves a 20 million KRW gain, and with the basic deduction (20 million KRW), the capital gains tax is zero.

▲If you earned 2 million KRW from bonds but incurred a 7 million KRW loss from listed stocks, what is the tax?

-Under the current system, you must pay 280,000 KRW in tax, but under the new system, no tax is due. The current system imposes dividend income tax (14%) of 280,000 KRW on the 2 million KRW bond capital gain and does not consider stock losses at all. However, the new system treats both bond capital gains and stock capital losses as taxable, so it views the total as a 5 million KRW loss and does not impose tax.

▲If you redeemed overseas stocks with a 10 million KRW gain and domestic stocks with an 8 million KRW loss, what is the tax?

-Under the current system, the gain from redeeming the F fund (domestic stocks) is classified as dividends, so the 8 million KRW loss is canceled, and the 10 million KRW gain from the G fund (overseas stocks) is subject to dividend income tax of 1.4 million KRW. However, under the new system, fund redemption gains are classified as financial investment income, so gains and losses from funds are offset, and only the net gain of 2 million KRW is subject to financial investment income tax of 400,000 KRW.

This content was produced with the assistance of AI translation services.