Securities Transaction Tax: Who Qualifies and What You Get
Understand how the Securities Transaction Tax works for stock sales in South Korea and how the deduction is handled by your broker.
Securities Transaction Tax is a tax applied to the sale of listed stocks within the market.
Who it's for
This tax applies to anyone who is selling listed stocks. If you are trading stocks that are officially listed on a public exchange, you are required to pay this tax upon the sale of those assets. It is not based on whether you made a profit or a loss, but rather on the fact that a sale of a listed security has occurred.
What you get
While this is a tax rather than a benefit, it provides a standardized system for taxing market activity. The tax is calculated as a flat rate applied to the total transaction value of your stock sales. This means the tax is determined by the total gross amount of the sale rather than the net profit you might have made from the trade.
What it costs you
The cost of this scheme is the amount of tax owed based on the total value of your transactions. You do not need to manually calculate or send payments to a government body yourself. Instead, the cost is automatically deducted by your brokerage firm at the time of your sale. This ensures that the tax is settled immediately as part of your trading activity.
The catch to know
The most important detail to keep in mind is that the tax rate is not fixed permanently; it is gradually decreasing. Because the rate is designed to drop in stages, the percentage you pay will change over time. To manage your trading costs and financial stability effectively, you must check the specific percentage applicable to the current year.
How to apply
- Ensure you have a trading account through a brokerage firm.
- Sell your listed stocks through your trading platform.
- Confirm that the brokerage has deducted the tax automatically from the sale proceeds.
- Check the current year's tax rate to stay updated on the gradual decreases.