Tax Planning
Tax Planning for High-Net-Worth Individuals Considering the Exit Tax in South Korea
Navigating exit tax obligations can be daunting for high-net-worth individuals (HNWIs) — this article delivers key planning strategies to minimize tax exposure when moving abroad.
By NomadicTax Research Team • 5-8 min read • September 3, 2026
## Understanding South Korea’s Exit Tax (국외전출세)
South Korea’s **exit tax**, codified under **소득세법 §118조의9**, mandates that a resident who satisfies certain conditions becomes subject to tax upon relocation abroad (i.e. becoming non-resident) on domestic shares and similar equity interests held at the time of departure. ([taxlaw.nts.go.kr](https://taxlaw.nts.go.kr/qt/USEQTA002P.do?ntstDcmId=200000000000004145&wnkey=cfa5cd7b-4714-4447-a102-7ef42e4c41b0&utm_source=openai))
### Key Conditions
- The individual must have been a resident in Korea for at least **5 years out of the last 10 years** before exit. ([taxlaw.nts.go.kr](https://taxlaw.nts.go.kr/qt/USEQTA002P.do?ntstDcmId=200000000000004145&wnkey=cfa5cd7b-4714-4447-a102-7ef42e4c41b0&utm_source=openai))
- The individual must be a **“major shareholder”** as of the end of the prior fiscal year, based on thresholds like shareholding percentage or market value, whether for listed or unlisted companies. ([nts.go.kr](https://www.nts.go.kr/nts/cm/cntnts/cntntsView.do?cntntsId=7821&mi=2515&utm_source=openai))
- Assets in scope include domestic listed or unlisted shares and related instruments. Other assets like real estate may not be covered under this mechanism, though other capital gains rules apply. ([nts.go.kr](https://www.nts.go.kr/nts/cm/cntnts/cntntsView.do?cntntsId=7821&mi=2515&utm_source=openai))
## Exit Tax Rates & Reporting Obligations
- If threshold criteria met, the owner is deemed to have **realized a capital gain upon exit** and must report it. ([taxlaw.nts.go.kr](https://taxlaw.nts.go.kr/qt/USEQTA002P.do?ntstDcmId=200000000000004145&wnkey=cfa5cd7b-4714-4447-a102-7ef42e4c41b0&utm_source=openai))
- The rate depends: **20%** for gains up to KRW 300 million, **25%** above that level. ([nts.go.kr](https://www.nts.go.kr/nts/cm/cntnts/cntntsView.do?cntntsId=7821&mi=2515&utm_source=openai))
- Reporting is due within **3 months after the exit date**; failure to report or underreporting can lead to penalties. ([nts.go.kr](https://www.nts.go.kr/nts/cm/cntnts/cntntsView.do?cntntsId=7821&mi=2515&utm_source=openai))
## Planning Strategies
| Strategy | How it Helps | Key Considerations |
|----------|---------------|---------------------|
| Exit earlier vs later | Delaying exit past holding gains may allow more time for planning; some thresholds like shareholder status measured at prior fiscal year-end. | Must be resident 5/10 years; careful about major shareholder status – a late exit may increase liability. |
| Gift/liquidate before exit | Transferring or disposing of assets before exit can avoid triggering exit tax. | Related party gifted? Valuation rules; possible gift tax implications. |
| Use corporate structures or trusts | Holding shares through a legal entity or trust may change who is the owner, potentially altering outcome. | Must evaluate whether entity counts as ‘major shareholder’ and how control is taxed. Use legal arrangements well in advance. |
| Tax treaty planning | Where applicable, treaties may affect treatment of exit or offer credits. | Few treaties have specific exit tax clauses; check treaty text carefully. |
## Practical Example
**Case**: Ms. Lee has held domestic unlisted company shares worth KRW 5 billion. She has lived in Korea for the past 8 years.
- She plans to relocate in **June 2027**. Her status as of end–2026 would make her a major shareholder under unlisted thresholds. She will pay exit tax on gains as of her exit date.
- If she gifts 30% of those shares to a trust or offspring in 2026, she may reduce what is owned at exit—but accordingly, gifts may trigger gift tax.
- Alternatively, she could exit earlier (e.g. late 2026), prior to some valuation changes, if this reduces gains. But timing must be aligned with rules.
## Action Items for HNWIs Considering Exit
1. **Assess whether you meet exit tax conditions**, especially major shareholder thresholds and 5-of-10 resident years.
2. **Calculate fair market value** of equity holdings as of anticipated exit date; compare gains.
3. **Consider using gift, sale, or restructuring** before exit, evaluating gift tax and other implications.
4. **Keep rigorous documentation**, particularly of residence days, share ownership at year-end, and valuations.
5. **Engage a tax professional** to ensure that you fully understand treaty relief or administrative procedures.
Exit tax changes less often, but staying vigilant ahead of legislative reforms is prudent. This ensures you structure your relocation with minimal surprises.