Korea Capital Gains Tax for Non-Residents: The 25% Rule Explained

Most foreign investors who sell listed Korean shares owe no Korean tax on the profit. Korean law leaves the gain untaxed when the shares are sold through the market and the seller, together with related parties, held less than 25% of the company over a set period.

Every sale still pays a different tax. The securities transaction tax takes a slice of the sale price whether the trade made money or lost it. Since the start of 2026 it costs 0.20% of the price on both the KOSPI and the KOSDAQ, up from 0.15% in 2025.

Larger holders and off-market sellers face a different rule. For them, the broker withholds tax at the lesser of 11% of the sale price or 22% of the gain, unless a tax treaty says otherwise.

Here's what you need to know.

Do Non-Residents Pay Capital Gains Tax on Korean Stocks?

For most small shareholders, no. Article 179 of the Enforcement Decree of the Income Tax Act, the presidential decree that fills in the act's details, removes these gains from Korean-source income when three conditions are met.

• Listed shares sold through the market: The shares are sold on the Korea Exchange, or through a broker-run venue under Article 78 of the Capital Markets Act, such as Nextrade, Korea's alternative trading venue.
• Below 25%: The seller and its related parties owned less than 25% of the company's issued shares.
• For six years: The holding stayed below 25% throughout the year of the sale and the five years before it.

The test covers related parties, not just the seller. Shares held by family members or affiliated companies that count as related under the decree are added together, so a group of holders can cross 25% even when each one is small.

Foreign companies follow the same rule. Article 132 of the Enforcement Decree of the Corporate Tax Act sets an identical 25%, six-year test for a foreign corporation with no business in Korea. The articles cited here are the versions in force on Nov. 8, 2026.

Simply put, a typical foreign portfolio investor who buys and sells KOSPI or KOSDAQ shares on the exchange is outside Korean capital gains tax. The exemption does not cover a private sale outside the market or shares in an unlisted company, even for a small stake.

How Much Is Withheld When the Gain Is Taxable?

When the exemption does not apply, the national withholding tax is 10% of the sale price or 20% of the gain, whichever is lower. Article 156 of the Income Tax Act sets the rate at "10/100 of the amount paid," and allows 20% of the gain instead, "whichever is lesser," when the purchase price and selling costs are verified, according to the English translation by the Korea Legislation Research Institute (KLRI).

A local income tax comes on top. Article 103-18 of the Local Tax Act requires the payer to collect a further 10% of the income tax it withholds from a non-resident. That turns 10% of the price into 11% and 20% of the gain into 22%.

The broker does the withholding. Under Article 156 of the Income Tax Act, a Korean brokerage firm that handles the sale must withhold the tax from the proceeds. If the purchase cost cannot be verified, only the 11%-of-price option is available.

Foreign companies face the same arithmetic. Article 98 of the Corporate Tax Act sets the same 10% and 20% rates for a foreign corporation, and Article 103-52 of the Local Tax Act adds 10% of that tax as corporate local income tax.

A simple example shows how the two limits compare. Say a large holder sells shares for ₩100 million ($73,700) that cost ₩80 million. Then 11% of the price is ₩11 million ($8,110), while 22% of the ₩20 million gain is ₩4.4 million ($3,240), so ₩4.4 million is withheld.

The other limit wins when the gain is large. Once the gain is more than half of the sale price, 11% of the price becomes the smaller figure. Dollar amounts here use ₩1,356.6 per dollar, the Seoul 3:30 p.m. rate on Nov. 6, 2026, reported by the Korea Herald.

How Do Tax Treaties Change Korean Capital Gains Tax?

A tax treaty can remove Korea's right to tax the gain altogether. Each treaty sets its own terms for capital gains, separate from its dividend rules.

For U.S. residents, Article 16 of the Korea-U.S. tax treaty, signed in Seoul on June 4, 1976, is broad. A resident of one country "shall be exempt from tax by the other Contracting State on gains from the sale, exchange, or other disposition of capital assets," the treaty text published by the IRS says, with three exceptions.

• Real property: Gains from Korean real property covered by Article 15 of the treaty can still be taxed in Korea.
• A business base in Korea: Gains tied to a permanent establishment in Korea, such as a branch or office, can be taxed.
• Long stays: An individual present in Korea for 183 days or more in the tax year, or with a fixed base there for that long, can be taxed.

The treaty also limits who can claim it. Article 17 denies the capital gains exemption to some investment or holding companies that pay little tax at home and are at least 25% owned by outsiders.

The exemption is not automatic. Under Article 156-2 of the Income Tax Act, the beneficial owner, the person who actually owns the income, gives the payer an application for exemption and a document proving beneficial ownership. If the papers are missing, the payer withholds Korea's full rate.

There is a way back. The owner or the payer can file a claim for rectification, a formal request to correct tax already paid, within five years from the 11th day of the month after the month of withholding. The tax office must respond within six months.

Residents of other countries should read their own treaty. The U.S. terms are one example, not a rule for every country.

What Is the Securities Transaction Tax in 2026?

The securities transaction tax is a levy on the sale price of shares, charged on every sale by residents and non-residents alike, with no link to profit. It is "levied regardless of whether the seller makes a profit," the Korea Times wrote on July 21, 2025.

The rates come from Article 5 of the Enforcement Decree of the Securities Transaction Tax Act, in the version in force on Nov. 8, 2026. KOSPI trades also pay a 0.15% rural development special tax under Article 5 of the Special Tax for Rural Development Act, which its decree limits to the KOSPI market.

The 0.35% figure is the base rate in Article 8 of the Securities Transaction Tax Act. The lower market rates are cuts that the act allows the government to set by decree. For how the KOSPI and KOSDAQ differ, see our guide to KOSPI vs. KOSDAQ vs. KOSPI 200.

The rates rose in 2026. "Starting this year, South Korea began imposing a new 0.05 percent transaction tax on the main bourse, while the tax rate on the secondary market rose from 0.15 percent to 0.2 percent," Yonhap reported in an article carried by the Korea Herald on May 29, 2026.

That reversed years of cuts. In July 2025, the Korea Times reported that most KOSPI trades paid only the rural development tax and that the KOSDAQ rate had fallen from 0.25% to 0.15%. In March 2026, the finance ministry linked a jump in February tax revenue partly to the 0.05 percentage-point rate increase, the Korea Times reported.

Collection is automatic for exchange trades. Under Article 3 of the Securities Transaction Tax Act, the Korea Securities Depository is the taxpayer for shares settled between its accounts, so the tax is taken in settlement. On the ₩100 million KOSPI sale in the example above, the tax is ₩200,000 ($147).

The tax is not an income tax. The U.S. treaty lists Korea's income tax and corporation tax as the Korean taxes it covers, so its capital gains exemption does not remove the transaction tax.

How Is This Different From Dividend Tax?

Dividends are taxed from the first won, while most capital gains are not taxed at all. Korea withholds 22% of each dividend paid to a non-resident, made up of 20% national tax and 2% local tax, unless a treaty rate applies.

The two taxes work in opposite ways. A treaty can lower the dividend rate, to 15% of the gross dividend for U.S. residents, and the full rate is withheld first for shares in a foreign broker's omnibus account. For the details, see our guide to Korea's dividend withholding tax for non-residents.

For capital gains, the starting point is no tax for small holders on the market, plus the transaction tax on each sale. The paperwork matters mainly to large holders, off-market sellers and anyone claiming a treaty exemption. Our guide on how to buy Korean stocks from abroad explains the account types.

This article explains the rules and is not tax advice. Check your own situation with a tax adviser, because your country of residence, your holding size and how your shares are held all change the result.

Together, the rules mean that a typical foreign investor trading on the market pays 0.20% of the sale price in transaction tax and no Korean tax on the gain, while holders of 25% or more face withholding of up to 11% of the price unless a treaty removes it.