What Is the Exit Tax Regime (국외전출자 주식등 양도소득세)?
Through the so-called “국외전출자 주식등 양도소득세”, South Korea imposes a tax when resident persons who qualify as “대주주” (significant shareholders) depart the country—typically via emigration or long-term foreign residency. In essence, upon exit, unrealized gains on specified domestic stocks are treated as if sold and taxed. (nts.go.kr)
Key Definitions & Requirements
- 국외전출자 (Person Leaving the Country): a resident who transfers their address or domicile abroad. (nts.go.kr)
- 대주주 Criteria: Being “significant shareholder” involves owning shares above certain thresholds (% ownership or market value), varying by whether it's listed, unlisted, or venture company stock. These thresholds are detailed in 소득세법 시행령 §167의8. (nts.go.kr)
Taxable Assets & Gains
- The tax applies to domestic stock holdings at exit date, with unrealized gains “evaluated” and treated as realized for taxation. (nts.go.kr)
- Reporting of stock ownership details (보유현황 신고) must occur up to the day before exit. Also, one must appoint a tax agent (납세관리인). (nts.go.kr)
Rates, Deadlines, and Reliefs
- Since reforms from January 1, 2019, progressivity applies: up to KRW 300 million of evaluated gain is taxed at 20%, and amounts over that at 25%. (nts.go.kr)
- Filing & payment must happen within three months after the exit date. If you’ve appointed a tax agent, you might follow the “확정신고 기간” timelines. (nts.go.kr)
- You can apply for deferral: If you agree to provide tax security (担保) and set up a tax agent, payment may be postponed until the actual sale of those stocks; typically up to 5 years, or 10 years for those abroad on study. (nts.go.kr)
Planning Strategies
- Measure your exposure: Estimate whether you qualify as “대주주” now—if near the thresholds, any exit could trigger major liabilities.
- Timing matters: If gains are likely to climb, exiting earlier might reduce your total evaluated gain. If declines are expected, delaying exit could reduce the tax base.
- Pre-exit conversions or donations: Shifting assets before exit—e.g. via structured gifts or trusts—can reduce exposure but must be legally robust.
- Seek security and agent appointment swiftly to enable payment deferral if needed.
- Coordinate cross-border tax treaties: If your new place of residence has treaties or credits for foreign taxes, you might reduce net tax burden.
Example
Resident Ms. C is designated a 대주주 holding KRW 10 billion in domestic company shares. The evaluated gain on her holdings is estimated at KRW 500 million by her expected exit date. Under the exit tax:
- First KRW 300 million taxed at 20% → KRW 60 million tax.
- Remaining KRW 200 million taxed at 25% → KRW 50 million tax.
- Suppose she appoints a tax agent and provides required security—often she may defer payment until she sells the shares (or 5 years pass).
Key Tips for HNWIs
- Review whether you already are a “대주주”. Thresholds differ by share type—public, private, venture, etc. Let’s say if you hold over 1% of certain listed firms or over certain valuation in unlisted ones, you count.
- Document your share acquisitions carefully—dates, prices, supporting documents—since evaluated gains are derived using market value less cost.
- If exits are planned, consult both Korean and local advisors on foreign tax credit availability.
- Understand that new reforms might change thresholds or measures. The current rules stem from law effective as of 2018–2019. (nts.go.kr)