Number of Korean Overseas Stock Investors Paying Taxes Surpasses 500,000 for the First Time... 2.5-Fold Surge in One Year

3.7-Fold Increase in Four Years Since the Pandemic
Average Capital Gain Per Person Reaches 28 Million Won

The number of Korean retail investors who paid taxes on capital gains from overseas stock trading surpassed 500,000 for the first time last year. This figure more than doubled in just one year, driven by the strong performance of the U.S. stock market and rising demand for dollar-denominated assets.

According to data submitted by the National Tax Service to Assemblyman Park Sunghoon of the People Power Party on January 22, the number of people who filed capital gains tax returns for overseas stock trading for the 2024 tax year reached 523,709. This represents a 152.7% surge from the previous year's 207,231, marking the first time the number has exceeded 500,000.

Overseas stock investors are required to report their net annual gains (total profits minus losses by stock) to the National Tax Service each May. They pay a capital gains tax (including local taxes) of 22% on the amount exceeding 2.5 million won in net gains.

The sharp increase in the number of retail investors paying capital gains tax on overseas stocks is attributed to the robust performance of the U.S. stock market. In 2024, the S&P 500 index rose by 23.3%, and the Nasdaq index climbed by 28.6%. During the same period, Korea's KOSPI fell by 9.6%, and the KOSDAQ dropped by 21.7%.

With abundant liquidity in the market following the pandemic and limited domestic investment opportunities, individual investors flocked to the U.S. stock market, fueling a surge in overseas stock investments.

As a result, the number of people filing capital gains tax returns for overseas stocks increased from 139,909 in 2020 to 242,862 in 2021. In 2022, amid a market downturn, the number dropped to 100,374, but rebounded to 207,231 in 2023, returning to the 200,000 range. Compared to 2020, the figure has grown 3.7 times over four years.

Yonhap News Agency

Profits from overseas stock investments have also soared. The total reported capital gains reached 14.4212 trillion won in 2024, up 303.1% from 3.5772 trillion won the previous year. The average capital gain per filer was about 28 million won.

The average capital gain per person rose from 21 million won in 2020 to 28 million won in 2021, then dropped to 11 million won in 2022. It increased again to 17 million won in 2023, and last year, it grew by more than 10 million won.

Despite a strong exchange rate, Korean retail investors have continued to expand their overseas stock investments. According to the Korea Securities Depository, the amount of U.S. stocks held in custody rose from $44.2 billion in 2022 to $68 billion in 2023, and then surged to $112.1 billion in 2024. By the end of last year, this figure had further increased to $163.6 billion.

To stabilize the foreign exchange market amid heightened volatility driven by strong dollar demand, the government plans to introduce the "Return-to-Domestic Market Account" (RIA) during the temporary National Assembly session next month. Retail investors who open an RIA at their brokerage can transfer overseas stocks from their foreign stock accounts into this account. If they sell the overseas stocks, exchange currency, and purchase domestic stocks through the RIA, they will be eligible for a deduction on overseas capital gains.

The maximum eligible sales amount per person is 50 million won. If investors return in the first quarter, 100% of the capital gains will be tax-exempt. For those returning in the second and third quarters, the tax reduction will be 80% and 50%, respectively. The earlier the return to the domestic market, the greater the tax benefit.