Securities Transaction Tax to Rise from January: KOSPI 0.05%, KOSDAQ 0.20%

To Take Effect on the 1st of Next Month
After Public Comment Period Until the 15th

The government will revise the enforcement decree of the tax law to establish regulations for the reinstatement of securities transaction tax rates and the rationalization of the tax scope for capital reserve reduction dividends, which will take effect next month. As a result, starting in January next year, the securities transaction tax rates for KOSPI and KOSDAQ will be 0.05% and 0.20%, respectively.

The Ministry of Economy and Finance announced on the 1st that it will amend the enforcement decrees of the Securities Transaction Tax Act and the Income Tax Act to reflect these changes. The proposed amendments will be open for public comment until the 15th, and are scheduled to take effect on the 1st of next month after passing through the Vice Ministers' Meeting and the Cabinet Meeting.

The amendment to the Securities Transaction Tax Act will raise the flexible securities transaction tax rate for KOSPI from 0% to 0.05%, and for KOSDAQ and K-OTC (the over-the-counter stock trading platform operated by the Korea Financial Investment Association) from 0.15% to 0.20%. A Ministry of Economy and Finance official stated, "This is to enhance tax equity," and added, "It will apply to transfers made on or after January 1 of next year."

The amendment to the enforcement decree of the Income Tax Act includes provisions to improve the tax system for capital reserve reduction dividends (reduction dividends), which have been abused as a means of tax avoidance by major shareholders. While reduction dividends are currently tax-exempt, going forward, dividend income tax will be imposed on the portion exceeding the acquisition cost of shares held by major shareholders of listed companies and shareholders of unlisted companies. However, minority shareholders of small and medium-sized enterprises traded on K-OTC will be excluded.

Meanwhile, the National Assembly's Strategy and Finance Committee passed a total of 11 tax amendment bills the previous day, including the Income Tax Act and the Restriction of Special Taxation Act. The Restriction of Special Taxation Act sets the highest separate taxation rate for dividend income exceeding 300 million won at 25%, which is 10 percentage points lower than the 35% proposed by the government in September.

Specifically, the government had proposed a single tax rate of 35% for amounts exceeding 300 million won, but after discussions in the National Assembly, it was decided to apply a 25% tax rate for amounts exceeding 300 million won up to 5 billion won. For amounts exceeding 5 billion won, a 30% tax rate will apply. The prerequisite for application is that dividends must not have decreased compared to the '2024 business year.'

This content was produced with the assistance of AI translation services.