For the first time last year, the number of Korean retail investors who paid taxes on capital gains from overseas stock investments surpassed 500,000. This figure more than doubled in just one year, driven by the strong performance of the U.S. stock market and increased demand for dollar-denominated assets.

According to data submitted by the National Tax Service to Assemblyman Park Sunghoon of the People Power Party on January 22, the number of people who filed capital gains tax returns for overseas stock investments for the 2024 tax year reached 523,709. This represents a 152.7% surge from the previous year’s 207,231 filers, marking the first time the number has exceeded 500,000.

Overseas stock investors are required to report their net profit-after offsetting gains and losses for each stock-to the National Tax Service every May. They pay a capital gains tax (including local tax) of 22% on the amount exceeding 2.5 million won in net profit.

The sharp increase in the number of Korean retail investors paying capital gains tax is attributed to factors such as the booming U.S. stock market. In 2024, the S&P 500 Index rose by 23.3% and the Nasdaq Index by 28.6%. During the same period, the KOSPI fell by 9.6% and the KOSDAQ dropped by 21.7%.

Amid continued liquidity injections following the pandemic, excess funds flowed into the stock market, fueling a frenzy among individual investors to invest in U.S. stocks.

Capital gains tax filings surpassed 500,000 last year
Increased more than 2.5 times in one year

Profit increase due to booming U.S. stock market
Total capital gains of 14.4212 trillion won
Increased by 303% compared to the previous year

Capital gains per person 28 million won
Increased by more than 10 million won compared to the previous year Yonhap News

As a result, the number of people filing capital gains tax returns for overseas stocks increased from 139,909 in 2020 to 242,862 in 2021, then dropped to 100,374 in 2022 due to a market downturn, before rebounding to 207,231 in 2023. Compared to 2020, this is a 3.7-fold increase over four years.

Profits from overseas stock investments also surged. The total capital gains reported by these investors for 2024 amounted to 14.4212 trillion won, a 303.1% increase from the previous year’s 3.5772 trillion won. The average capital gain per person was about 28 million won.

The per capita capital gain rose from 21 million won in 2020 to 28 million won in 2021, then fell to 11 million won in 2022. It increased again to 17 million won in 2023, and last year saw an additional increase of over 10 million won.

원본보기 아이콘

Despite the strong won-dollar exchange rate, Korean retail investors have continued to expand their investments in overseas stock markets. According to the Korea Securities Depository, the value of U.S. stocks held by Korean investors rose from $44.2 billion in 2022 to $68 billion in 2023, and then surged to $112.1 billion in 2024. By the end of last year, this figure had further increased to $163.6 billion.

To help stabilize the foreign exchange market, which has become more volatile due to strong dollar demand, the government plans to introduce a ‘Return-to-Domestic Market Account (RIA)’ at the upcoming temporary session of the National Assembly next month. Korean retail investors who open an RIA at their brokerage can transfer overseas stocks from their foreign stock accounts to the RIA, and then sell the stocks, exchange the proceeds, and purchase domestic stocks. By doing so, they can receive capital gains tax deductions on overseas stock profits.

The maximum allowable sale amount per person is 50 million won. If investors return their funds in the first quarter, 100% of the capital gains will be tax-exempt. For returns in the second and third quarters, 80% and 50% of the gains, respectively, will be exempt, meaning the sooner investors bring their funds back, the greater the tax benefit.