Domestic stocks subject to 'Securities Transaction Tax' regardless of profit or loss... Overseas stocks subject to 22% Capital Gains Tax

When investing in stocks, understanding the tax system is emphasized as an element as important as the rate of return. This is because the applicable tax rates and taxation methods differ depending on whether the investment target is domestic or overseas stocks, and whether the generated profit is capital gains or dividends. According to a National Tax Service video, the major taxes incurred during the stock investment process are classified into Securities Transaction Tax, Capital Gains Tax, and Dividend Income Tax.

'Securities Transaction Tax' occurs when selling domestic stocks regardless of profit or loss

When selling domestic listed stocks, Securities Transaction Tax is imposed. A participant in the video explained the characteristics of the Securities Transaction Tax, stating, "Just because we sold, it doesn't necessarily mean my profit is low," and "Whether you made a loss or a profit, you must pay it unconditionally." In other words, even in a 'stop-loss' situation where one sells after losing money on a stock investment, the Securities Transaction Tax cannot be avoided. This tax is operated in a manner where the securities firm acts as an agent to pay it to the National Tax Service upon sale.

Meanwhile, in the case of domestic stocks, Capital Gains Tax on trading profits is, in principle, only imposed when one falls under the category of a major shareholder. Most general investors do not meet the major shareholder requirements, so the burden of Capital Gains Tax is limited, but it should be noted that if one meets the major shareholder criteria under the tax law, they become subject to paying Capital Gains Tax.

Overseas stock capital gains tax applies a 22% rate after a 2.5 million won deduction

The taxation method for overseas stocks is vastly different from domestic stocks. There is no Securities Transaction Tax incurred upon sale for overseas stocks, but instead, Capital Gains Tax is imposed on the capital gains generated over one year. Capital Gains Tax is calculated based on the net profit of overseas stocks generated during one year.

The video explained the calculation method for overseas stock capital gains tax using a specific example. For up to 2.5 million won of the annual net profit, a basic deduction is applied, so no tax is imposed. For profits exceeding 2.5 million won, a total tax rate of 22% is applied, which consists of a 20% Capital Gains Tax plus local income tax (2%, which is 10% of the Capital Gains Tax). For example, if one earns a profit of 10 million won from overseas stocks, a 22% tax is imposed on the 7.5 million won remaining after excluding the 2.5 million won deduction.

Separately, Dividend Income Tax is imposed on dividends generated during the process of holding stocks. The dividend income tax rate is 15.4%, and there is no need for the investor to report it directly, as the securities firm withholds the tax and pays the remaining amount. The participant added, "If the dividend amount came in smaller than expected, it is because it came in after the tax was deducted."