With ETFs in Korea, the same return can leave you with different money, because the tax depends on which type you hold.
So this article answers three things. How much each type is taxed, where the rules are most often misread, and what to check before buying. The rates come from the Income Tax Act and Local Tax Act; the type classification is taken from asset manager material, marked as such.
What does a 10 million won gain cost?
On trading gains alone, the split looks like this.
| ETF type | Rate | On a 10m won gain |
|---|---|---|
| Korean equity (Korean shares only) | Exempt | 0 won |
| Other assets (Korea-listed but bonds, commodities, derivatives) | 15.4% | 1,540,000 won |
| Overseas equity, Korea-listed | 15.4% (holding-period basis) | up to 1,540,000 won |
| Listed abroad (NYSE, NASDAQ) | 22% after a 2.5m won annual deduction | 1,650,000 won |
Zero on Korean equity funds is the largest single difference. Two things below — what actually counts as a Korean equity fund, and distributions — mean this table alone is not enough to choose on.
8.33 million won is the crossover
For the same overseas exposure, buying the Korea-listed version or the foreign-listed one changes which tax applies. On headline rates 15.4% beats 22%, but the foreign-listed route carries a 2.5 million won annual deduction that flips the result below a certain gain.
| Annual trading gain | Korea-listed overseas equity (15.4%) | Listed abroad (22% after 2.5m) | Cheaper |
|---|---|---|---|
| 3m won | 462,000 won | 110,000 won | Listed abroad |
| 5m won | 770,000 won | 550,000 won | Listed abroad |
| About 8.33m won | 1,283,000 won | 1,283,000 won | Level |
| 10m won | 1,540,000 won | 1,650,000 won | Korea-listed |
| 20m won | 3,080,000 won | 3,850,000 won | Korea-listed |
Solving for equality puts the crossover at 8.33 million won. Below it the deduction outweighs the rate difference; above it the 22% takes over. A fuller comparison by gain band is in US ETFs versus Korea-listed.
One more thing narrows it. The Korea-listed side is taxed on a holding-period basis, which can come in under 15.4%.
“The 15.4% dividend tax applies only to the lesser of the rise in NAV over the year and the actual trading gain.”
— Kiwoom Asset Management, ETF tax guidance (August 2025). Asset manager material, not an agency text.
“The lesser of” is the operative phrase, so the effective rate can fall. How far is situation-dependent and not given, so no figure appears here. Which means the 8.33 million won line above is set conservatively against the Korea-listed option.
The most common error — “Korea-listed means exempt”
What is exempt is an ETF made up of Korean shares, not every ETF listed in Korea.
“Korea-listed ETFs investing in bonds, commodities or derivatives rather than Korean equities are classified as 'other assets', and the 15.4% dividend tax applies to their trading gains too.”
— Kiwoom Asset Management, ETF tax guidance (August 2025)
What is inside matters before where it is listed. Buying a bond ETF or a gold ETF believing “Korea-listed, so exempt” means 1.54 million won on a 10 million won gain arrives unexpectedly.
Distributions are 15.4% regardless of type
Trading gains split four ways; distributions do not split at all.
| ETF type | Trading gains | Distributions |
|---|---|---|
| Korean equity | Exempt | 15.4% |
| Other assets | 15.4% | 15.4% |
| Overseas equity, Korea-listed | 15.4% (holding period) | 15.4% |
| Listed abroad | 22% after 2.5m | 15.4% |
The first row is the striking one. A Korean equity ETF is exempt on trading gains and taxed 15.4% on distributions — the same money from the same fund, taxed at 0% or 15.4% depending on how you take it. Tax is withheld as the distribution lands, so the more a fund distributes, the earlier the tax falls due. That matters most with monthly-distribution products, covered in covered call and leveraged ETFs.
Above 20m won of financial income, the comparison flips
Everything above assumes the 15.4% settles the matter. Once interest and dividends together pass 20 million won a year, it does not.
Income Tax Act, article 14(3)6 — interest and dividend income whose combined total is 20 million won or less … shall not be aggregated in computing the global income tax base
Above it the income joins global income at progressive rates of 6–45%, so 15.4% becomes a floor rather than a ceiling and this article's “Korea-listed is taxed less” comparison wobbles. The 22% on foreign-listed ETFs is schedular and does not combine with other income.
Everything treated as dividend income here — distributions and the trading gains of Korea-listed ETFs — counts toward that total. Note that the health insurance threshold is 10 million won, a different figure entirely (see health insurance after retirement), and the two should not be conflated.
ETFs holding foreign shares — no advance refund from 2025
ETFs holding foreign shares have tax withheld at source abroad before the distribution arrives: 15% in the US, 10% in China, 15.315% in Japan.
| Previously | From 2025 | |
|---|---|---|
| Foreign tax paid | Refunded in advance and included in the gross distribution | Advance refund abolished |
| Korean tax base | 15.4% withheld on the gross distribution | Based on the amount net of foreign tax |
| Foreign tax credit | Received up front | Credited at the Korean withholding stage |
| For the investor | More available to reinvest | The refund arrives later |
The reconciliation itself is simple — where the foreign rate exceeds the Korean 15.4% nothing further is due; where it falls short, only the difference is. At the US 15%, that is 0.4 percentage points.
The issue is timing rather than the amount. As the material puts it, “the amount available to reinvest over the long term falls, and tax deferral and compounding effects are partly reduced.” A separate problem is flagged for pension accounts: the net-of-foreign-tax amount is then invested inside the account and “taxed again at 3.3–5.5% pension income tax on withdrawal”, which the material calls “a structure in which double taxation can arise.”
An amendment applying to ISAs and pension accounts is described as under discussion — accruing 14% of the gross amount as a credit at each distribution and offsetting it at withdrawal. “Under discussion” means it should not be read as settled.
What to check, in order
| Step | Check | Why |
|---|---|---|
| ① | What is inside — Korean shares only, or bonds, commodities and derivatives | Decides 0% against 15.4% on trading gains |
| ② | Where it is listed — Korea or abroad | Changes the tax from dividend to capital gains |
| ③ | Whether your annual gain will exceed 8.33m won | Above it Korea-listed wins; below it, foreign-listed |
| ④ | How much it distributes — 15.4% regardless of type | The more it distributes, the earlier the tax |
| ⑤ | Whether your financial income is near 20m won | Above it, 15.4% becomes the starting point |
| ⑥ | Which account — pension accounts and ISAs differ | Double taxation is flagged |
If ETFs are new to you, start with what an ETF is; for what to look at when choosing one, see choosing a Korea-listed ETF.
Questions people ask
Where does 15.4% come from?
Two statutes added together. The 14% is the rate on other dividend income in Income Tax Act article 129(1)2(b); the remaining 1.4% is Local Tax Act article 103-13(1), “10% of the income tax withheld.” So 1.4% is not a separate rate but 10% of the 14%. The same rule turns 3% business income withholding into 3.3% and 20% other income into 22%.
Isn't everything listed in Korea exempt?
No. Only ETFs made up of Korean shares are. A Korea-listed ETF holding bonds, commodities or derivatives is classified as “other assets” and taxed 15.4% on trading gains too. Composition comes before listing venue.
How does the 2.5 million won deduction work?
Trading gains on foreign-listed ETFs are untaxed up to 2.5 million won a year, with 22% on the excess. Income Tax Act article 103 shows it is one 2.5 million won allowance across all “shares and similar” — not per holding — and that it does not carry forward. Unused allowance expires with the year. Assets in a different subparagraph, such as property, get their own.
What is loss offsetting?
Taxing “only the net figure after gains and losses are combined inside the fund.” Where an ETF holds both Korean and overseas equities, a loss on one side can reduce the taxable base on the other. Note that the material explaining this links to the manager's own products alongside it, so the concept is worth separating from the promotion.
Are there ETFs that do not distribute?
This material does not draw that distinction. What it confirms is that “ETFs often pay distributions as well as producing trading gains,” and that where a distribution is paid it is taxed 15.4% regardless of type.
Sources
- Korean Law Information Center — Income Tax Act, article 129 (withholding rates) and Local Tax Act, article 103-13 (special collection). Source for “other dividend income, 14 per cent” and for “10 per cent of the income tax withheld, collected as local income tax,” together with the tenth-of-the-following-month payment deadline. These two provisions establish that the 1.4% inside 15.4% is 10% of the 14% rather than a rate of its own.
- Korean Law Information Center — Income Tax Act, article 103 (basic capital gains deduction) and article 94 (scope of capital gains). Source for “2.5 million won each, by category of income” and for subparagraph 2 pointing to article 94(1)3(c), “shares and similar issued by a foreign corporation or listed on a market abroad” — where foreign-listed ETFs sit. The deduction order in article 103(2) and the absence of any carry-forward provision come from the same articles.
- Korean Law Information Center — Income Tax Act, article 14 (computation of the tax base), paragraph 3(6). Basis for combined interest and dividend income of “20 million won or less” not being aggregated into global income.
- National Tax Service — withholding rate table (residents and domestic corporations, checked July 2026). Source for “other dividend income — 14%” and “other interest income — 14%”. Local income tax does not appear in this table.
- Kiwoom Asset Management (asset manager material, not an agency text) — Kiwoom Lounge, ETF taxation guide (19 August 2025, compliance review no. 2025-259). Source for the type classification and “other assets”, the holding-period basis as “the lesser of the rise in NAV over the year and the actual trading gain,” the 22% capital gains tax with a 2.5 million won annual exemption on foreign-listed ETFs, the statement that distribution taxation “does not vary by ETF type but applies identically to all ETFs,” the definition of loss offsetting, foreign withholding rates (US 15%, China 10%, Japan 15.315%) and the 2025 abolition of the advance refund, the pension account “structure in which double taxation can arise” with 3.3–5.5% pension income tax, and the proposed credit mechanism for ISAs and pension accounts. The same article carries several links to the manager's own ETFs — it is written by an interested party.
- US Securities and Exchange Commission — ETF guidance. Source for the definition of an ETF and for “ETFs are not insured or guaranteed by the FDIC or any other government agency.” US material, unrelated to Korean taxation.
- The amounts are our own calculation. The tax by type on a 10 million won gain (0, 1.54m and 1.65m won), the comparison by band, and the 8.33 million won crossover were computed by us from the statutory rates and deduction; no agency publishes them. Cross-check: 8.33m × 15.4% = 1,283,000 and (8.33m − 2.5m) × 22% = 1,283,000.
- What we read into it. “8.33 million won is the crossover” is what falls out of setting the two formulas equal; no source presents it. The calculation is also conservative against the Korea-listed option — holding-period taxation can bring its effective rate below 15.4%, but by how much is not given, so 15.4% was used as-is. Separately, article 94(1)3 places Korean shares (a and b) and foreign shares (c) in the same subparagraph, and whether gains and losses across the two are netted may be governed elsewhere, so we have not asserted it.
Where to check further
This article goes as far as the statutes allow. The rest is best looked at here.
- Which type your ETF is — checked here, in the prospectus. The classification test for “other assets” and the treatment of mixed funds are not in the material above. Composition sets the tax, so do not judge by the name.
- Filing capital gains — check National Tax Service guidance. The scope of the 2.5 million won deduction is confirmed from the statute, but the filing procedure is outside this article.
- Financial income above 20m won — ask a tax professional. The aggregation threshold is confirmed, but the reconciliation of withheld amounts is not covered, and in that band the comparison here changes shape.
As of August 2026. Rates and deductions come from the Income Tax Act and Local Tax Act, the type classification and the 2025 change from asset manager material, each marked accordingly; the amounts and the crossover are our own arithmetic. Tax law changes. For large sums or complicated situations, take professional advice. This is general information, not tax or financial advice.
