Market Taxation Guide - South Korea

26.09.2017

This Market Taxation Guide (South Korea) provides the following details:

  • Reference information about all taxes applied at source, through Clearstream Banking and its local depositories, to securities deposited in Clearstream Banking; and
  • Instructions for obtaining relief at source or a refund of withholding tax, where these are available, through Clearstream Banking.

New and improved tax information and procedures that become available will be included on an ongoing basis.

Important note:

This Market Taxation Guide (including any attachments and other links) is for informational purposes only and is not intended and should not be considered to be legal advice on any subject matter. Readers of this Market Taxation Guide, whether customers or otherwise, should not act or refrain from acting on the basis of any information included in this Market Taxation Guide without seeking appropriate legal or other professional advice.

Withholding tax

Debt securities

Holding
restriction / requirement

Trading prerequisite

Withholding
tax rate

Relief
at source

Quick
refund

Standard
refund

Yes

  Yes

15.4%a

Residents of a Double Taxation Treaty (DTT) country

Yes

No

No

Overseas Investment Vehicle “OIV” (non-public) and Overseas Public Collective Investment Vehicle “OPCIV” (public OIV) with beneficial owners residents in DTT countries and/or tax exempt

Yes

No

No

Foreign investors who purchased KTB/MSB on or before 12 November 2010

Yes

No

No

Equities

Holding
restriction / requirement

Trading prerequisite

Withholding
tax rate

Relief
at source

Quick
refund

Standard
refund

Yes

Yes

22%

Residents of a Double Taxation Treaty (DTT) country

Yes

No

No

Overseas Investment Vehicle “OIV” (non-public) and Overseas Public Collective Investment Vehicle “OPCIV” (public OIV) with beneficial owners residents in DTT countries and/or tax exempt

Yes

No

No

a. The standard rate of withholding tax is 15.4% for debt securities.
The withholding tax “amount” (total tax) is calculated based on the actual holding period in reference to Article 98-3 (Special Cases concerning Withholding from Bonds, etc. subject to Withholding Tax of Foreign Corporations) of the “Corporate Tax Act”.

Capital gains tax

Generally, non-residents of South Korea are liable to capital gains tax on interest/dividend income from South Korean securities at the lower of the following rates:

  • 10% of the gross proceeds realised from the sale (11%, including the 10%-surtax); or
  • 20% of the net capital gain (22%, including the 10%-surtax).

Residents of countries that have concluded a Double Taxation Treaty (DTT) with South Korea, or countries with reciprocity rules, will, based on their Investment Registration Card (IRC), either be exempted or be taxed, depending on the DTT.

Note: The selling broker is responsible for the calculation and withholding of the capital gains tax and for the payment of it to the South Korean Tax Authorities.

Clearstream Banking does not assist in this regard. Please consult your tax advisor for further information.

Note: For Equities, non-residents are exempt from capital gains tax if they hold less than a 25% stake in a listed company. However, if listed securities are traded outside the Stock Exchange (that is, in the over-the-counter (OTC) market), then, regardless of the stake in the company, capital gains tax will be applied.

In addition, the application of capital gains tax depends on where the foreign investor resides.

Clearstream Banking does not assist in this regard. Please consult your tax advisor for further information.

Stamp Duty

There is no stamp duty withheld through Clearstream Banking on securities held in Clearstream Banking. Stamp duty may however be payable on specific transactions. Clearstream Banking does not assist in this regard. Please consult your tax advisor for further information.