How South Korea’s Exit Tax (국외전출세) Impacts High Net Worth Individuals Leaving the Country

What is the Exit Tax (국외전출세)?

The exit tax under Korean law (소득세법 제118조의9) is a deemed disposal tax applied when a resident who qualifies as a 대주주 (major shareholder) leaves the country, becoming a non-resident. It treats certain domestic assets—primarily shares—as if they were sold on the day of departure. (g.nts.go.kr)

Key Conditions to Trigger Exit Tax

1. Residence duration: The departure precedes after having had an address or domicile in Korea for at least 5 of the previous 10 years. (g.nts.go.kr)
2. Major shareholder status (대주주): Under relevant definitions, you must meet shareholding thresholds by quantity or value, or have large ownership in special types of securities. (g.nts.go.kr)
3. Asset type: Domestic shares and other “stock-type” assets held at the time of departure. Other asset classes may be outside the rule. (g.nts.go.kr)

How the Tax is Calculated & Timed

• The unrealised gain = fair market value on exit date minus acquisition cost.
• Tax rates: Exiting major shareholders owe capital gains tax—20% on gains up to KRW 300 million, and 25% on amounts exceeding that. (g.nts.go.kr)
• Filing deadline: You must file within three months after the end of the month in which you depart. (g.nts.go.kr)
• Payment: Default is payment upon deemed disposal; but in some cases, you may apply for deferred payment (납세 유예) if you provide guarantee or appoint a tax agent. Deferred period often limited to 5-years (longer in specific cases like overseas study). (g.nts.go.kr)

Who is Affected & Example

Example: Mr. Lee owns 10% of a Korean tech company, qualifies as a major shareholder, and has lived in Korea continuously for 10 years. He plans to emigrate on September 30, 2026. He holds these shares which cost him ₩200 million, but are valued at ₩1 billion at exit. Under exit tax rules:

• He is deemed to sell them on that date; gain = ₩800 million
• Apply 20% on first ₩300 million (₩60 million), 25% on remaining ₩500 million (₩125 million) = ₩185 million total tax liability
• File by end of December 2026 (3 months after September), pay unless deferred under guarantee.

Planning Opportunities & Risks

• Assess whether you meet major shareholder thresholds—in some cases share sales before exit or restructuring ownership may avoid or reduce tax.
• Valuation matters: Have objective and defensible valuation at exit date, especially if the shares aren’t publicly traded.
• Consider deferral if needed: If staying abroad for studies or maintaining certain ties, deferral with guarantee may reduce cashflow stress.
• Treat exit tax in your overall international tax strategy: For example, consider cross-border tax credits in your new country if applicable.

Caveats & Ongoing Uncertainties

• What counts as a major shareholder can be legally complex—look at share percentage, market cap, type of shares.
• Asset categories other than shares are less clearly covered; there’s ambiguity in regulation for non-stock asset unrealised gains.
• International treaty effects: Some tax treaties may reduce double taxation or offer relief; but exit tax is a domestic legal construct and may not be fully covered.

For high net worth individuals, the exit tax is a major consideration when planning to leave Korea. Structuring ownership, planning timing, and ensuring valuations are prepared can make a big difference.