Capital Gains Tax Basics (Domestic & Foreign Stocks)

Capital gains tax is a tax levied on the "gain (capital gain) that arises when you buy and sell" assets like stocks and real estate. The key here is that you pay it only "when you sell and realize the gain." No matter how much the valuation rises, if you haven't sold, there's no capital gains tax.

Stock taxes are broadly divided into three types: ① 'capital gains tax' on the gain you make by selling, ② 'dividend income tax' (15.4%) when you receive dividends, and ③ 'securities transaction tax' levied on the transaction amount when you sell. This article focuses on the first of these, capital gains tax.

And this capital gains tax has completely different rules depending on whether it's a domestic or foreign stock. Knowing this difference is so important that you could say it's the whole point of this article.

For domestic listed stocks, if you're an "ordinary individual investor (minority shareholder)," no capital gains tax is levied on trading gains. It means that even if you buy Samsung Electronics and make 10 million KRW, there's no capital gains tax on that gain itself.

Capital gains tax applies when you fall under "major shareholder." As of 2026, the major-shareholder criteria are holding a single stock worth 5 billion KRW or more, or a stake above a certain ratio (1% for KOSPI, 2% for KOSDAQ). Most individual investors do not fall into this.

For a while, a 'financial investment income tax' that would tax even minority-shareholder domestic stocks was discussed, but its abolition was confirmed as of January 2025. So the taxation method for ordinary individuals' domestic listed stocks is still the same as before. However, when you sell, the securities transaction tax (about 0.20% in 2025) applies regardless of whether you're a major shareholder.

Foreign stocks (U.S., China, Japan, etc.) are a completely different story. Even for an ordinary individual, if the net profit earned over a year exceeds 2.5 million KRW, you must pay 22% (20% national tax + 2% local income tax) on the excess.

The calculation goes like this. First, sum the gains and losses of all foreign stocks sold over the year (January–December) (offsetting gains and losses). Subtract 2.5 million KRW from this, then multiply by 22% for the tax.

For example, if the year's net profit is 8 million KRW, (8 million − 2.5 million) × 22% = 1.21 million KRW; if it's 10 million KRW, (10 million − 2.5 million) × 22% = 1.65 million KRW in tax. The 2.5 million KRW is deducted just once for the whole year, not per stock.

The thing to be most careful about is that "it isn't withheld automatically." Unlike dividend tax, which the company withholds at source, you must file and pay the foreign-stock capital gains tax yourself on Hometax in May of the following year (May 1–31). Forget it and a penalty tax is added.

For foreign-stock tax, there's another variable as important as the stock price: the "exchange rate."

The capital gain is calculated not in dollars but in the "amount converted to Korean won." It applies the exchange rate at the time of buying and the exchange rate at the time of selling, respectively. So even if the stock price stays the same, if the USD/KRW rate rises in the meantime, a "gain in won terms" arises and tax can be owed.

Conversely, even if it's a gain in dollars, if the exchange rate falls greatly, it can become a loss in won terms. The exchange rate used here is not the value you actually converted at, but the standard exchange rate published by the National Tax Service (based on the acquisition and transfer dates), so it can differ from what you feel.

This is exactly why our site "does not hide the FX effect" when showing returns. The dollar return and the won return can differ, and tax is levied on a won basis.

Many people look at the pre-tax number when they say they "made money." But what actually remains in your account is the "after-tax return," with taxes, fees, and currency-exchange costs all subtracted.

Foreign stocks in particular have a 22% rate that is by no means small. If you made 10 million KRW, 1.65 million KRW of it is tax, so what you actually pocket is around 8.35 million KRW. Add currency-exchange fees and the gap widens further.

That does not mean "foreign stocks are no good because of taxes." This article does not tell you to buy or sell any asset. The purpose is simply to make you aware that domestic and foreign tax rules differ, and to build the habit of judging by after-tax rather than pre-tax. Only then can you answer the question "how much would it be now" honestly.