"'Trying to do 'Gukjeok Shopping'...' How much is citizenship including taxes?"

Annual Average of 20,000 Koreans Leaving
Major Shareholders Must Pay Capital Gains Tax When Moving Abroad
78 Major Shareholders Have Left in the Past 5 Years

From 2012 to 2022, a total of 262,305 Koreans lost or renounced their nationality. On average, about 20,000 people leave Korea each year. The main reasons are the availability of various welfare benefits and, above all, the ability to provide a high-quality educational environment for their children. In particular, when applying for investment immigration to countries such as the United States, Canada, and New Zealand, the period to obtain permanent residency is short, and applicants can reside in their desired regions, enjoy free public education for their children, and spouses can also work, leading to a steady increase in the number of applicants. However, the costs are rising every year.

BLACKPINK member Ros? was born in New Zealand and immigrated to Australia at the age of 8. She currently holds dual citizenship in South Korea and New Zealand.

First, those who want to apply for investment immigration to the United States, the most preferred destination among Koreans, usually need to invest $800,000 (about 900 million KRW) or $1.05 million (about 1.1 billion KRW) in a U.S. company. In investment immigration, the investment can be cash, inventory assets, secured debt, tangible assets, or cash equivalents, all valued at the fair market price in U.S. dollars. If the invested business is located in a targeted employment area or a targeted employment area (TEA), an investment of $800,000 is required; otherwise, $1.05 million must be invested.

To apply for Canadian investment immigration, known for its good welfare benefits, one must prove assets of 20 million Canadian dollars (about 1.8 billion KRW) and invest 12 million Canadian dollars (about 1.1 billion KRW) interest-free for five years. However, the Canadian federal government's investment immigration program has been on hold for a long time, and only Quebec regional investment immigration is available. Even this program has been suspended until next year due to continuous increases in the investment amount. Since Quebec is a French-speaking region, many permanent residents move to other provinces after obtaining residency, and it is known that the program will resume after addressing these side effects.

New Zealand's investment immigration amounts rank among the highest worldwide. Especially, New Zealand is highly attractive because it has almost no inheritance tax or capital gains tax. There are two categories for New Zealand investment immigration: the first requires a minimum investment of 50 million New Zealand dollars (about 4 billion KRW), and the second requires 150 million New Zealand dollars, approximately 12 billion KRW.

Australia also divides investment immigration into small, large, and ultra-large investments, with different qualification requirements. The small investment amount is 1.5 million Australian dollars (about 1.2 billion KRW), the large investment amount is 5 million Australian dollars (about 4.2 billion KRW), and the ultra-large investment amount is 15 million Australian dollars (about 12 billion KRW). Like New Zealand, Australia has almost no restrictions on large investment immigration, but small investment immigration has point and age limits.

Ros?, a member of BLACKPINK.

For entrepreneurs considering investment immigration, the 'exit tax' is also a major obstacle. This system requires domestic residents who are major shareholders holding stocks to pay taxes on capital gains as if they had sold their domestic stocks when they leave the country for reasons such as moving abroad. This is similar to the U.S. 'Expatriation tax.' Since 2008, the U.S. has imposed an expatriation tax on citizens or permanent residents who have lived in the U.S. for at least 8 of the last 15 years before renouncing citizenship or permanent residency, treating all assets as if they were sold at the time of renunciation. This is a kind of penalty imposed on wealthy individuals who flee to so-called 'tax havens' to avoid high taxes.

Not only the U.S. but also major countries worldwide have tax systems for those who renounce nationality. Taxation methods are broadly divided into two types. The U.S., Canada, and Australia impose taxes by treating all assets of the renouncer as sold at market value. In contrast, countries like Japan, New Zealand, France, Germany, Denmark, and Austria have narrower exit tax systems compared to the U.S., taxing only securities among the renouncer's assets.

Korea introduced the exit tax following the OECD's recommendation in 2016 and has been imposing taxes since January 1, 2018. According to investigations by the Ministry of Economy and Finance and the National Tax Service, 78 people reported capital gains tax subject to the exit tax over five years from 2018 to last year. Although the number is small, the total tax amount reached 84 billion KRW, meaning that on average, over 1 billion KRW in exit tax was imposed per person.

As interest in overseas immigration grows, the government's offshore tax evasion monitoring network is becoming more stringent. Under current law, capital transactions such as purchasing real estate or foreign stocks abroad must be reported in advance to the Bank of Korea or foreign exchange banks. The reason domestic real estate is excluded from the exit tax is that most tax treaties allow domestic income tax to be imposed on domestic-source income even for non-residents. Penalties are also increasing. Failure to report real estate transactions or submitting false documents results in a fine of 10% of the acquisition or disposal amount (up to 100 million KRW).

It is expected that more countries will impose regulations like expatriation tax or exit tax when leaving the country. Tax avoidance by wealthy individuals through overseas migration is a problem faced by virtually all countries in the era of globalization.

However, there are criticisms that the exit tax infringes on the freedom to change residence. Some major shareholders may renounce nationality for personal reasons unrelated to offshore tax evasion. Therefore, voices have emerged that taxes should only be imposed on those immigrating to tax havens. It is suggested that exit tax should be applied only when moving to countries like Hong Kong or Singapore, which have relatively low income tax rates and do not tax capital gains.