Calculating Capital Gains Tax on Overseas Stocks

Unlike domestic listed stocks, overseas stocks are taxed on the transfer gain (sale price − purchase price) even for small shareholders. The rate is 22%. It is made up of a 20% capital gains tax + 2% local income tax = 22%.

Fortunately, not every bit of profit is taxed. From the transfer gains realized during one year (January–December), 2.5 million won is subtracted as a basic deduction. In other words, if your net annual gain is 2.5 million won or less, the tax is zero.

The formula looks like this: (annual realized net gain − 2.5 million won) × 22% = tax due.

If during a single year you gained on some stocks and lost on others, you calculate by combining the gains and losses. This is called "gain-loss netting." If you made 8 million won on stock A and lost 3 million won on stock B, the taxable amount is not 8 million but the net gain of 5 million won.

Filing and payment are done in "May of the year following" the year the gain occurred. For example, gains realized by selling in 2025 are reported and paid finally between May 1 and 31, 2026. (In 2026, May 31 falls on a Sunday, so it is extended to June 1.)

Unlike domestic dividend tax, which ends with withholding, the key point is that you (or your tax agent) must file the overseas stock capital gains tax yourself. If you miss the filing, penalty taxes are added.

The most confusing part of overseas stock capital gains tax is the exchange rate. Because the tax is calculated on a won basis, the profit earned in dollars must be converted into won.

The exchange rate used here is the base rate on the "settlement date (the date payment is completed)," not the date the trade was executed. The acquisition price is converted at the settlement-date rate at purchase, and the transfer price at the settlement-date rate at sale.

So you could have a loss on a dollar basis but a gain on a won basis. For example, if the rate is 1,200 won when you buy and 1,400 won when you sell, then even if the stock price is unchanged, an exchange gain arises in won terms and can become taxable. Conversely, an exchange loss can reduce your gain. If you ignore the "exchange-rate effect," you will under- or over-estimate the tax.

Suppose that over the year 2025 you realized a net gain of 10 million won (won-converted) from trading U.S. stocks.

Tax base = 10 million won − 2.5 million won (basic deduction) = 7.5 million won. Tax = 7.5 million won × 22% = 1.65 million won.

So even if you make 10 million won, what remains in hand after tax is about 8.35 million won. Had the net gain been 2.5 million won or less, the tax would have been zero. Splitting the timing of your sales to use the annual 2.5 million won deduction every year is a common tax-saving idea, but this depends on the situation, so it is best to judge after understanding the structure.