April 19, 2024

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[THE INVESTOR] More foreigner investors with stakes in listed Korean companies will face capital gains tax starting from July, according to the Ministry of Strategy and Finance on Jan. 8.

Currently, offshore investors holding more than 25 percent equities in Korean stock markets are liable to capital gains tax. But based on a new tax code that will go into effect this summer, the threshold will be lowered to 5 percent or more. Korean investors, on the other hand, are subject to capital gains tax if they hold 1 percent or more equities. 

Critics are concerned that the new rules would dampen investor sentiment. Foreign investors currently account for more than 35 percent of the KOSPI market. But the government said such worries are unwarranted.

“The impact would be limited, as the new tax code will apply only to investors from countries with which Korea has not yet signed a tax treaty,” said Choi Young-rok, head of the tax and custom office at the Finance Ministry.

Investors from only 12 countries including Luxembourg, Singapore and Hong Kong will be subject to the tax revision, according to the ministry.

By Park Ga-young (gypark@heraldcorp.com)