Capital Gains Tax and Securities Transaction Tax on Domestic Stocks
Did you know that even if you make 100 million won on domestic stocks, the capital gains tax can be zero? Instead, there is one tax you must pay even when you take a loss.
Small Shareholders' Transfer Gains Are Tax-Exempt
One big feature of the domestic market is that gains from buying and selling listed stocks (KOSPI, KOSDAQ, KONEX) are tax-exempt for ordinary individuals (small shareholders). Whether you make 1 million won or 100 million won, a small shareholder pays no capital gains tax.
In this respect it differs greatly from overseas stocks, which carry a 22% capital gains tax. That said, it is not "unconditionally tax-exempt." If you exceed the "major shareholder" criteria explained below, capital gains tax applies even to domestic listed stock gains. Also, unlisted stocks are in principle taxable regardless of whether you are a major or small shareholder.
The rates and criteria in this article are as of July 2026. Major-shareholder standards and rates are revised frequently, so check the latest rules before trading.
If You Become a Major Shareholder, You Are Taxed
If you hold a very large amount of a single stock, you are classified as a "major shareholder" and taxed on transfer gains. For listed stocks, the per-stock criteria are as follows.
KOSPI: 1% or more ownership stake, or 5 billion won or more in holdings KOSDAQ: 2% or more ownership stake, or 5 billion won or more in holdings KONEX: 4% or more ownership stake, or 5 billion won or more in holdings
Once you become a major shareholder, the rate is 22% on a tax base of 300 million won or less and 27.5% on the portion above 300 million won (both include local income tax). Most individual investors are far from this threshold, but the 5 billion won holdings criterion can get closer than you'd think when you concentrate investment in a single stock, so it is worth knowing.
The Securities Transaction Tax You Pay Even at a Loss
Separate from the tax on transfer gains, the securities transaction tax is a tax that is unconditionally imposed when you "sell" a stock. The key point is that it is levied on the sale amount whether you had a gain or a loss. So even if you cut your losses, this tax goes out.
As of 2026, the rate is 0.20% on KOSPI and 0.20% on KOSDAQ. (For KOSPI it is the pure securities transaction tax 0.05% + the special rural development tax 0.15%, combined to 0.20%; for KOSDAQ it is a 0.20% transaction tax with no rural development tax.) Through 2025 both KOSPI and KOSDAQ were 0.15%, but it was raised in 2026.
For example, if you sell 10 million won worth of KOSPI stock, 20,000 won (0.20%) goes out as transaction tax. Once or twice it's small, but the more you day-trade with frequent buying and selling, the more this cost accumulates and eats into your returns. This is one reason long-term investing with long holding is advantageous in terms of taxes and costs.
The securities transaction tax rate is as of July 2026. Rates may be adjusted again depending on policy.
Frequently Asked Questions
Q. Domestic stocks have almost no tax, so why do overseas stocks pay 22%?
It's a difference in system design. Domestic listed stocks exempt small shareholders' transfer gains but collect the securities transaction tax at the point of sale, while overseas stocks tax transfer gains at 22% instead of a transaction tax. Which is more favorable depends on trading frequency and profit scale, so it cannot be stated categorically.
Q. What happened to the financial investment income tax that used to come up?
The financial investment income tax ("geumtu-se"), which sought to tax even small shareholders' gains on domestic listed stocks, was confirmed abolished in January 2025 after several deferrals and was never implemented. So small shareholders' gains on domestic listed stocks are still tax-exempt today. See the related article for details.
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