Overview of the Financial Investment Income Tax

The financial investment income tax ("geumtu-se" for short) was a tax that sought to bundle together and tax the transfer gains arising from various financial investment products such as stocks, bonds, funds, and derivatives.

The key point is that it aimed to include even the "transfer gains of small shareholders in domestic listed stocks," which had been tax-exempt until then, as taxable. In return, it set a large basic deduction, designed so that no tax would be levied up to 50 million won a year for domestic stocks and the like, and 2.5 million won for others. The rate was discussed as 22% on a tax base of 300 million won or less and 27.5% on the portion above (including local tax).

The history of the geumtu-se was "a series of postponements."

2020: The law was created by bipartisan agreement, and it was originally to take effect in 2023. End of 2022: Citing insufficient market preparation and other reasons, implementation was pushed back two years to January 1, 2025. December 10, 2024: An amendment to the Income Tax Act passed the National Assembly, confirming the "abolition" of the geumtu-se. January 1, 2025: In the end, it was abolished without ever being implemented once.

Cited as background for the abolition were concerns that the domestic market could shrink and strong opposition from individual investors. The process of introduction, deferral, and abolition itself shows how deeply tax policy is entangled with market sentiment and politics.

With the geumtu-se abolished, the transfer gains of small shareholders in domestic listed stocks remain tax-exempt as before. In other words, even if you make a large gain on domestic stocks (as long as you are not a major shareholder), the structure of paying no capital gains tax remains intact.

But this is merely "the system at the present time." As the history of the geumtu-se shows, tax systems can be discussed again depending on political and market conditions. So rather than building an investment plan on the assumption that a particular tax regime will last forever, it is important to respond flexibly on the premise that the system may change.

Because the names are similar, they are often confused, but the geumtu-se and the comprehensive financial income tax are entirely different taxes.

The comprehensive financial income tax is a system that, when "financial income" such as interest and dividends exceeds 20 million won a year, combines it with other income and taxes it progressively; it is still in normal operation today.

By contrast, the geumtu-se was a system that sought to tax the "transfer gains" of stocks and the like, and it was abolished and is not in force. It helps to remember them separately: people who receive a lot of dividends still need to be mindful of the comprehensive financial income tax, and gains on domestic stocks are still tax-exempt (for small shareholders).