[Weekly Review] From 2023, 'Gaemi Investors' Must Pay Capital Gains Tax on Stocks... But Transaction Tax Decreases

[Asia Economy Reporter Joo Sang-don] From 2023, if you earn more than 20 million KRW annually from stock investments, you will have to pay taxes. However, the current securities transaction tax rate of 0.25% will be reduced to 0.15%.

On the 25th, the Ministry of Economy and Finance announced the direction for promoting 'financial tax system advancement' at the '8th Emergency Economic Central Countermeasures Headquarters Meeting'.

Capital gains from stocks will be included in financial investment income and taxed accordingly, but from 2023, taxation will apply regardless of whether the shareholder is a major or minor shareholder. However, considering the impact on the stock market, capital gains from listed stocks will be exempted up to 20 million KRW annually. A 20% tax rate will apply to financial investment income up to 300 million KRW. For financial investment income exceeding 300 million KRW, the taxable amount will be calculated by adding 60 million KRW plus 25% of the amount exceeding 300 million KRW.

Accordingly, from 2023, if the stock capital gains are 20 million KRW or less, the tax burden will decrease. For example, Mr. K, who purchased M stocks listed on the KOSPI at 50,000 KRW per share totaling 50 million KRW, and earned 20 million KRW by selling M stocks, will have to pay 175,000 KRW in taxes this year. Since he is not a major shareholder, capital gains tax is not imposed, but he must pay securities transaction tax calculated by multiplying the transaction amount (70 million KRW) by 0.25%. In 2023, this tax burden will decrease by 70,000 KRW. Because the stock capital gains are 20 million KRW or less, capital gains tax will not be imposed as before, and the securities transaction tax rate will be lowered to 0.15%, so he will pay 105,000 KRW in taxes.

On the other hand, if the profit from investment, i.e., stock capital gains, exceeds 20 million KRW, the tax burden will increase. For example, Mr. G, who holds 2,000 shares of J stock priced at 50,000 KRW per share (total 100 million KRW), if the stock price rises to 70,000 KRW per share and he sells all shares, currently he only pays 350,000 KRW in securities transaction tax. However, in 2023, he will have to pay 4 million KRW in capital gains tax (20%) on the 20 million KRW taxable amount after deducting the basic exemption (20 million KRW) from the capital gains (40 million KRW). Additionally, he must pay 210,000 KRW in securities transaction tax on the transaction amount (140 million KRW). The tax burden increases from 350,000 KRW to 4.21 million KRW, an increase of 3.86 million KRW.

◆Housing Price Sentiment Rebounds After 21 Months Following the June 17 Real Estate Measures= According to the 'June 2020 Consumer Sentiment Survey' released by the Bank of Korea, the housing price outlook consumer sentiment index (CSI) for this month rose 16 points from the previous month to 112. This is the largest increase in 21 months since September 2018 (+19 points). However, the absolute figure is still lower compared to the past peak (128 in September 2018).

The CSI is a statistical index based on surveys of consumers' perceptions and expectations about the economic situation. A value above 100 means that the number of households expecting housing prices to rise in one year exceeds those expecting a decline. Women (113) had a slightly higher expectation than men (112), and by age group, those under 40 predicted housing price increases. The housing price outlook CSI for those under 40 was 117, higher than the 110-111 range for those aged 40 to 70. By occupation, self-employed individuals scored 111, and salaried workers 113. People earning between 3 million and 4 million KRW or between 4 million and 5 million KRW per month had a CSI of 114, indicating more expectations of price increases compared to other groups. Regionally, the housing price outlook CSI for the six major metropolitan cities was 116, 5 points higher than Seoul and other cities (111).

◆IMF Revises South Korea's Economic Growth Forecast to -2.1% = The International Monetary Fund (IMF) has again lowered South Korea's economic growth forecast for this year to -2.1%. This is 0.9 percentage points lower than the previous forecast in April (-1.2%) and 4.3 percentage points lower than the forecast made in January before the COVID-19 outbreak (2.2%). The growth rate for next year has been revised to 3.0%.

The IMF expressed concerns that, except for some countries like China, Germany, and Japan, the first quarter GDP was weaker than expected, and recent indicators suggest a more severe contraction in the second quarter. Based on assumptions of greater economic activity damage in the first half of the year than forecasted in April, a slowdown in recovery in the second half, and sustained current financial conditions, the IMF lowered the global growth forecast to -4.9%, down 1.9 percentage points from the April forecast (-3.0%). This is an 8.2 percentage point downward revision from the January forecast (3.3%).

◆Exports Decline Despite Increased Working Days= According to the Korea Customs Service's export-import status (provisional clearance basis), exports from June 1 to 20 decreased by 7.5% (2.04 billion USD) year-on-year to 25 billion USD.

During this period, the number of working days was 16, 1.5 days more than last year. Nevertheless, the average daily export value decreased by 16.2% (310 million USD) year-on-year to 1.56 billion USD. Compared to the 9.8% decrease in average daily exports from June 1 to 10 year-on-year, the actual export performance appears to be worsening.

This is due to prolonged economic downturn caused by the COVID-19 pandemic, with continued declines in automobile and home appliance exports, and slow recovery in major markets such as the United States and the European Union (EU).

By export item, semiconductors (2.6%), ships (35.5%), and wireless communication devices (10.9%) increased, while passenger cars (-36.7%), petroleum products (-40.9%), and home appliances (-14.9%) decreased. By country, exports to China (14.5%) and Singapore (16.7%) increased, whereas exports to the United States (-10.0%), EU (-13.9%), Vietnam (-8.0%), Japan (-16.0%), and the Middle East (-19.0%) decreased.

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