No. of overseas capital gains taxpayers surges amid US equity boom

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The number of Korea’s retail investors paying capital gains tax on overseas stock investments more than doubled last year, driven by a strong U.S. equity rally, as policymakers remain concerned about capital outflows and currency volatility, market watchers said Friday.

The surge reflects the shift in retail investor behavior since the COVID-19 pandemic. The domestic capital market lagged far behind its global peers, pushing many toward U.S. "Magnificent Seven" stocks: Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta and Tesla.

According to data submitted by the National Tax Service to Rep. Park Sung-hoon of the main opposition People Power Party, 523,709 investors filed overseas stock capital gains tax returns for income earned in 2024.

This is a 152.7 percent jump from 207,231 a year earlier and the highest level on record.

Under the law, investors with overseas stock holdings must report their net annual profits to the tax agency in May of the following year. They pay a 22 percent capital gains tax on amounts exceeding 2.5 million won ($1,700).

The sharp increase in overseas stock holdings coincides with U.S. market rally.

In 2024, the S&P 500 and Nasdaq Composite gained 23.3 percent and 28.6 percent, respectively, far outperforming Korea’s benchmark KOSPI, whose gains were limited to 9.6 percent.

The number of overseas capital gains tax filers stood at 139,909 in 2020, but has since nearly doubled to 242,862 in 2021.

It then plunged to 100,374 in 2022 during the market slump, but rebounded to over 200,000 in 2023.

Last year’s figure was nearly four times that of the 2020 number.

Profits grew accordingly.

Combined overseas stock capital gains in 2024 reached 14.42 trillion won, more than quadrupling the previous year’s 3.58 trillion won.

Taxpayer gains averaged about 28 million won.

The figure was 11 million won in 2022 amid the global downturn, before recovering to 17 million won in 2023.

It then rose more than 10 million won last year, illustrating the strength of retail U.S. investment returns.

Investors are continuing to expand U.S. stock holdings.

Korea Securities Depository data shows that U.S. stocks under its custody stood at $44.2 billion in 2022, but it rose to $68.0 billion in 2023.

It further surged to $112.1 billion in 2024. By the end of last year, the figure came to $163.6 billion.

Capital outflow has deepened concerns over foreign exchange volatility, prompting the government to introduce a return investment account (RIA) policy during an extraordinary parliamentary session.

According to the plan set to be announced next month, investors who move overseas stocks into an RIA and reinvest proceeds into the domestic equity market will receive capital gains tax relief of up to 50 million won per person.