You want exposure to US indexes, and there are two routes. ① Buy a Korea-listed ETF that tracks a US index, or ② buy the US-listed ETF directly. Same index — but the tax is calculated completely differently. Not a different rate: a different tax head altogether.
1. What it costs you. On a KRW 5 million annual gain: US-listed 550,000 won vs Korea-listed 770,000 won — US-listed is 220,000 won cheaper. On KRW 20 million: US-listed 3.85 million vs Korea-listed 3.08 million — a 770,000 won reversal. The crossover sits near KRW 8.33 million (our calculation).
2. Where the risk is. The KRW 2.5 million deduction does not carry over — if you don't sell by December, that year's allowance is gone. Currency conversion takes about 1.7%, and the Korea-listed route is dividend income, so it aggregates with your other interest and dividends.
3. What to do. Below 8.33 million a year, US-listed wins on tax; above it, Korea-listed does. Add the Korea-listed holding-period rule and that point moves lower — treat 8.33 million as an upper bound.
The rates below come from an asset manager's private material; the won figures are our own calculation.
First — it's not the rate, it's the tax head
| Korea-listed overseas equity | Listed abroad | |
|---|---|---|
| Tax head | dividend income | capital gains |
| Rate | 15.4% | 22% |
| Annual exemption | none | KRW 2.5 million |
| Basis | holding-period — “the lesser of the year's NAV rise and the actual realised gain” | the realised gain itself |
| Distributions | 15.4% | 15.4% |
Rows two and three pull in opposite directions. The overseas route has a higher rate but an exemption; the Korea-listed route has a lower rate and no exemption. So the exemption dominates at small gains and the rate gap dominates at large ones.
The crossover sits near 8.33 million won
The arithmetic (our own calculation). With P as the annual realised gain —
Listed abroad = (P − 2.5m) × 22%
Korea-listed overseas = P × 15.4%
Equal when P = 550,000 ÷ (0.22 − 0.154) = about KRW 8.33 million
Check: 8.33m × 15.4% = 1.283m / (8.33m − 2.5m) × 22% = 1.283m — they match
| Annual realised gain | Listed abroad | Korea-listed overseas | Lower |
|---|---|---|---|
| KRW 2m | 0 | 308,000 | abroad |
| KRW 5m | 550,000 | 770,000 | abroad |
| KRW 8.33m | 1,283,000 | 1,283,000 | equal |
| KRW 10m | 1,650,000 | 1,540,000 | Korea-listed |
| KRW 50m | 10,450,000 | 7,700,000 | Korea-listed (2.75m apart) |
Do not take this table as the conclusion. Three things are missing.
- Holding-period basis is not modelled. The Korea-listed route taxes only “the lesser of the two,” so the real bill can be below 15.4% — which pushes the crossover lower than 8.33 million.
- Aggregate financial income taxation is not modelled. The Korea-listed route is dividend income and may be aggregated with other financial income; we could not verify the thresholds. The overseas route is a different tax head.
- Currency conversion is excluded. Buying abroad means buying in dollars. Working back two Korean bank exchange screens gave spreads of about 1.73% and 1.75% on US dollar cash — see the spread article.
Here is what “it does not carry over” costs, against realising the same gain in slices.
And one thing changed in 2025
ETFs holding foreign stocks are taxed abroad first — the cited rates are 15% in the US, 10% in China, 15.315% in Japan. How that foreign tax is handled changed in 2025.
| Previously | From 2025 | |
|---|---|---|
| Foreign tax paid | refunded in advance, added to the pre-tax dividend | advance refund abolished |
| Korean taxable base | the pre-tax dividend | the amount net of foreign tax |
| Effect | more to reinvest | the refund arrives later |
The settlement is simple — “if the foreign rate exceeds the Korean rate (15.4%) nothing further is due; if it is lower, only the difference is taxed.” What changed is timing, not the amount, and the source notes “tax deferral and compounding effects may be partly reduced.”
Pension accounts carry a separate issue — 3.3–5.5% pension income tax applies again at withdrawal, which the source calls “a structure where double taxation can arise.” The whole tax picture is in the ETF tax guide.
Set the three countries side by side and it is clear why the change is about timing, not amount.
Beyond tax
| Korea-listed overseas | Listed abroad | |
|---|---|---|
| Currency | won | dollars — conversion needed |
| Trading hours | Korean market hours | overnight in Korea |
| Choice of products | narrower | much wider |
| Price versus NAV | both — the SEC writes that an ETF's market price “may reflect a premium or a discount” to NAV | |
| Deposit insurance | neither — “not guaranteed or insured by the FDIC or any other government agency” | |
Product counts and trading costs were not verified numerically, so only the direction is stated. What to check before picking a fund is in the selection guide.
So how to decide
| If this is you | Leans toward | Basis |
|---|---|---|
| Annual realised gain under 2.5m | listed abroad | the exemption makes it zero |
| Annual realised gain below roughly 8.33m | listed abroad | the calculation above (ours) |
| Annual realised gain above 10m | Korea-listed | the 6.6pp rate gap outweighs the exemption |
| You trade often | don't generalise | realisation timing and FX costs recur |
| You have large other financial income | get advice | aggregation thresholds not verified |
How far the ₩2.5 million goes — per holding, or does it carry over?
Whether this allowance is one per holding, and whether an unused portion rolls into next year, is where the real bill is decided. The Income Tax Act answers both — and the provision sits somewhere unexpected.
The basis is Article 103
Article 103 (Basic Deduction for Capital Gains) (1) For a resident with capital gains, ₩2.5 million per year shall each be deducted from the capital gains for the taxable period for each of the following categories of income:
… 2. income under Article 94(1)3 …
Opening Article 94(1)3 in turn, item (c) reads:
(c) shares etc. issued by a foreign corporation or listed on a market located abroad, as prescribed by Presidential Decree
Overseas shares sit under “shares etc.,” not under “foreign assets.” The Act has a separate basic deduction for foreign assets (Article 118-7), but overseas shares fall under Article 103(1)2 instead. Both say “₩2.5 million per year,” so the figure is the same — but the governing provision differs.
Which also means the rate differs: for foreign real estate and the like, Article 118-5 applies “the rates under Article 55(1)” — the 6–45% global income schedule. Overseas shares are not governed by that article. The 22% (including local income tax) this piece uses belongs to the shares side.
So: does it pool, and does it carry over?
- It pools — per category. The text says “for each of the following categories … each”, so all income falling under Article 94(1)3 shares a single ₩2.5 million. Not ₩2.5 million per holding.
- Separate from property. Subparagraph 1 (land, buildings) and subparagraph 2 (shares) are different categories, so each gets its own ₩2.5 million. Sell a home and overseas shares in the same year and the deduction applies twice.
- It does not carry over. The text is anchored to “the capital gains for the taxable period,” and the article contains no carry-forward sentence. Unused allowance simply lapses at year end.
- Even the order is fixed (Art. 103(2)): where reduced or exempted income exists, deduct first from income that is not reduced or exempted, and within that “from the capital gains of assets transferred earlier, in order.”
“No carry-forward” is the point that bites hardest in practice. If you are sitting on an unrealised gain under ₩2.5 million in December and do not sell, that year's allowance is simply gone. Realise ₩5 million next year and the deduction is still ₩2.5 million.
Which is why realising up to the allowance before year end is arithmetically favourable — and buying the same holding straight back raises your cost basis, shrinking next year's taxable gain.
This article recommends no particular trade. Commission, FX cost and price movement all come with it, and whether any restriction applies to repurchasing the same holding is something we did not check.
One thing we will not assert — Article 94(1)3 places items (a) and (b) (domestic shares) and item (c) (overseas shares) inside the same subparagraph. On structure alone that reads as one ₩2.5 million for the subparagraph, but whether domestic and overseas share gains and losses are actually offset against each other may be governed elsewhere, and we did not settle it. Confirm with Hometax or a tax professional before filing.
Questions that remain
Is 8.33 million a fixed threshold?
No — it is our calculation and a simplified one. Adding holding-period basis lowers the Korea-listed bill, which moves the crossover below 8.33 million. Aggregate taxation and FX costs are excluded entirely. Treat it as a sense of where it flips, not a rule.
Does the 2.5 million exemption reset each year?
Yes — it is tied to “the taxable period,” so it renews annually and does not carry over (Income Tax Act art. 103(1); see above). It is one ₩2.5 million across all “shares etc.” and separate from the property category. The filing procedure is still unconfirmed. Below is the note we kept before that.
The source said “the first KRW 2.5 million a year is exempt.”
Can I just use both?
This article recommends no particular allocation. The table does show that the first 2.5 million of gain abroad is untaxed and that the Korea-listed route improves as gains grow. Any actual split depends on your realisation plans and other financial income.
How much does currency conversion cost?
Two Korean bank exchange screens, worked back, gave spreads of about 1.73% and 1.75% on US dollar cash — roughly 2,500 won per 100 dollars. Brokerage preferential rates differ and were not verified. The structure is in the spread article.
What if I hold it in a pension account?
The source flags possible double taxation — an amount already taxed abroad can face 3.3–5.5% pension income tax at withdrawal. ISA and pension account rules themselves are not covered by this source.
Same index, two tax heads: 15.4% dividend income on one side, 22% capital gains with a 2.5-million exemption on the other. The lower rate is Korea-listed, yet the exemption wins at small gains — and the crossover lands near 8.33 million won.
Sources
- Korea Ministry of Government Legislation, National Law Information Centre — Income Tax Act, Article 103 (basic deduction for capital gains). Source for “for each of the following categories … ₩2.5 million each per year,” for subparagraph 2 pointing at Article 94(1)3, and for paragraph 2's deduction order. The absence of any carry-forward sentence was confirmed here too.
- National Law Information Centre — Income Tax Act, Article 94 (scope of capital gains), subparagraph 3. Item (c), “shares etc. issued by a foreign corporation or listed on a market located abroad” — the basis for overseas shares falling under “shares etc.”
- National Law Information Centre — Income Tax Act, Article 118-7 and Article 118-5. Foreign assets have their own ₩2.5 million and are taxed at “the rates under Article 55(1)” — the control case showing that overseas shares are governed by different provisions.
- Kiwoom Asset Management (an asset manager's own material, not agency source text) — Kiwoom Lounge, “ETF taxes…” (19 August 2025; compliance review no. 2025-259). Source for holding-period taxation (“15.4% on the lesser of the year's NAV rise and the actual realised gain”), 22% capital gains tax abroad with a KRW 2.5m annual exemption, 15.4% on distributions, foreign withholding rates (US 15%, China 10%, Japan 15.315%) and the 2025 abolition of the advance refund, and the pension-account “structure where double taxation can arise” with 3.3–5.5% pension income tax. The same article links repeatedly to the firm's own ETF products.
- Korea National Tax Service — withholding tax rate table (residents and domestic corporations; screen checked July 2026). Source for “other dividend income — 14%.” The remaining 1.4% (local income tax) is not in this table.
- US Securities and Exchange Commission — ETFs. Source for “an ETF's market price may reflect a premium or a discount to the ETF's underlying value or NAV” and “not guaranteed or insured by the FDIC or any other government agency.”
- Our own calculation. The 8.33 million crossover and the tax-by-gain table are computed by us from the rates above and appear in no source. The equation is (P − 2.5m) × 22% = P × 15.4%, and both sides were checked to equal 1,283,000 won.
Where to check further
- The real crossover with holding-period basis included. The Korea-listed route taxes “the lesser of the two,” so the effective rate can sit below 15.4%. Each product's prospectus and management report (KOFIA electronic disclosure) shows the NAV path you would need to narrow it.
- Aggregate financial income rules and overseas-stock filing. The Korea-listed route is dividend income, so it aggregates with other interest and dividends. Thresholds, brackets and filing steps are on the National Tax Service Hometax site.
- Brokerage FX rates. The 1.7%-range spread here is a bank cash rate. Check your own broker's FX fee schedule for the preferential rate that applies to you.
As of July 2026. Rates come from an asset manager's private material, the 14% dividend rate from Korea's National Tax Service withholding table, and ETF structure from US SEC source text — with the tier of each marked. The 8.33 million figure is our calculation. Tax law changes and outcomes vary by situation — get professional advice for large amounts. For the whole tax picture see the ETF tax guide; for conversion costs, exchange rate spreads. This is general information, not tax or financial advice.
