South Korea Investment Income Tax Guide 2026

Dividend Income — Withholding Tax

Cash dividends paid by Korean corporations are subject to withholding tax at source:

• Base rate: 14% of gross dividend
• Resident surtax (주민세): 10% of the base tax = 1.4% of gross dividend
• Total withholding rate: 15.4%

Stock dividends are generally treated as taxable income at the market value of the shares distributed. Dividends received from Korean real estate investment trusts (REITs) and infrastructure investment companies are subject to the same 15.4% withholding. Foreign-source dividends received by Korean residents are subject to Korean IIT but carry a foreign tax credit for taxes withheld abroad.

Interest Income — Withholding Tax

Interest income is also subject to 15.4% withholding (14% + 1.4% surtax):

• Bank deposits (savings accounts, CDs, time deposits)
• Corporate and government bonds
• Non-marketable securities
• Private loans (차용증)

Interest on certain types of savings may be tax-exempt up to specified limits (e.g., non-taxable savings accounts for low-income individuals, agricultural co-op deposits). Interest on national bonds and municipal bonds may receive partial tax exemptions or reduced rates depending on the specific issuance.

Financial Income Taxation Regime (since 2026)

As of 2026, South Korea's financial income taxation (formerly known as the 금융투자소득세 proposal) operates as follows: financial income (interest + dividends) exceeding KRW 10 million per year may be subject to separate taxation or included in global income. The taxpayer may choose the more favourable treatment:

• Separate taxation: Financial income below KRW 10 million is taxed only at the 15.4% withholding rate (final tax). Income above KRW 10 million may opt for separate taxation at 25% (plus 2.5% surtax = 27.5%) on the excess, rather than inclusion in global IIT.
• Comprehensive taxation (종합과세): If the taxpayer does not elect separate taxation, total financial income (above a KRW 10M deduction) is added to other global income and taxed at progressive IIT rates (6–45%). This may result in a higher or lower effective rate depending on the taxpayer's income level.

Taxpayers with financial income above KRW 10 million should compute both methods and select the advantageous one. The election is made on the annual global income tax return (due 31 May).

Foreign Investment Income

Korean residents must report worldwide investment income. Foreign dividends and interest received are subject to Korean IIT (included in global income). The foreign tax credit (외국납부세액공제) prevents double taxation — the credit is limited to the Korean tax attributable to the foreign income. Treaty benefits may reduce withholding rates in the source country. Exchange gains and losses on foreign-currency-denominated investments are generally treated as capital gains or ordinary income depending on the nature of the investment.

Tax Planning for Investment Income

Key planning considerations for Korean investment income taxation:

• Spouse splitting: Financial income is assessed per individual. Distributing assets between spouses can utilise the KRW 10 million threshold for each spouse, potentially avoiding comprehensive taxation.
• Tax-exempt savings: Utilise non-taxable savings products (e.g., 장기펀드, 소득공제장기펀드) where available within annual limits.
• Pension accounts: Investment income within pension savings accounts (연금저축, 퇴직연금) is tax-deferred, with withdrawals taxed at pension income rates (typically lower).
• Foreign tax credit planning: When investing abroad, consider treaty withholding rates and the availability of the foreign tax credit.

Reporting Requirements

Financial institutions report interest and dividend income to the NTS through the consolidated reporting system. Taxpayers with total financial income from a single institution exceeding KRW 10 million (or interest from a single account exceeding KRW 10 million) will have the income pre-filled in their tax return. However, individuals with financial income from multiple sources must manually aggregate income on their tax return. Failure to report all financial income can result in negligence penalties of 20–40% of the unreported tax.

FAQs

Is the 15.4% withholding tax the final tax on dividends?

For taxpayers with total annual financial income (interest + dividends) below KRW 10 million, the 15.4% withholding is a final tax — no further reporting is required. Above KRW 10 million, additional tax may be due under separate (27.5%) or comprehensive (IIT rates) taxation.

Can I deduct investment expenses?

Investment management fees, advisory fees, and other investment-related expenses are generally not deductible for individual investors against financial income. Cost basis adjustments apply for capital assets.

How are foreign dividends reported?

Foreign dividends must be reported on the global income tax return (종합소득세) by 31 May. The foreign tax credit is claimed on Form 외국납부세액공제 신청서. Supporting documents showing foreign tax paid are required.

What happens if I don't report financial income?

Unreported financial income is subject to penalties of 20–40% (depending on the nature of the omission) plus daily late-payment interest (currently 3.5% per annum). The NTS increasingly uses data matching to detect unreported income.

Disclaimer

This guide provides general information about South Korean investment income taxation for the 2026 tax year. Tax laws and rates may change. Always consult with a qualified Korean tax advisor (세무사) or the NTS directly for advice specific to your situation. InvestmentKit does not provide tax advice.