Capital gains tax for nonresidents
Date: October 14, 2019
Calculating capital gains tax differs in residents and nonresidents.This post is to help those who file capital gains tax return for non-residents.
II. Filing capital gains tax return fornonresidents
1. Tax liability
Any nonresident individual who has income from domestic sources.
2. Calculation of taxable period
￭ The date when any individual registers one’s address in Korea
￭ Where a ground of acknowledging domicile in the ROK occurs.
￭ Where any individual who has his/her domicile in Korea for at least 183 days
￭ The next day of changing any individual’s domicile overseas
￭ Where a ground for regarding any individual as nonresident occurs
- acquiring foreign nationality, permanent residency, or assets overseas
￭ flight attendants who stay overseas for most of the year
Criteria for taxable period
The date when all family members depart from Korea
The date when any individual acquires permanent residency or other entitlement equivalent to it overseas
3. The place of tax payment
The place where income is generated from a source in Korea
III. Tax exemption for nonresidentswith a single house
1. Nonresidents are not the subject of non-taxation or long-term holdingdeduction for high price houses
◎ Judicial precedents
① The plaintiff has the U.S. Nationality and her husband is a civilianmilitary worker and the rest families do not live in Korea. Therefore, shefalls into non-resident category, being exempt from non-taxation for ahousehold with a house.
② Where all family members acquire foreign nationality and liveoverseas but some of the members enter into Korea, leaving all other familymembers overseas, he or she is not entitled to have benefits of non-taxation forsingle house owners unless his or her job and property is deemed to reasonableto settle down in Korea.
③ Any individual who moved to other countries enters into Korea isregarded as nonresident unless his or her job and property is deemed toreasonable to settle down in Korea.
2. Non-taxation on emigrants to overseas
Where whole family members of a household emigrate overseas they couldbe the subject of non-taxation benefits regardless of holding period orresidency period under the condition of having a single house and selling thehouse within 2 years from the departure date.
IV. Withholding tax on nonresidents forreal-estate income and capital gains
1. The agent liable for withholding tax is corporate transferee.Individual transferees are exempt from withholding tax pursuant to income taxact 156. In case where a transferor files preliminary re-turn on transfer gainof property and reports to the tax office having jurisdiction over the place ofpayment or receives a certification document from the tax office havingjurisdiction over the place of payment withholding tax shall be exempt.
2. Taxable period: by the 10th of the next month from payment
3. Tax liability: Any nonresident individual who has transfer gains fromdomestic sources shall pay withholding taxes. Lesser amount will be leviedbetween 10 percent of sale proceeds and 20 percent of transfer marginal profits.Domestic sources of income include:
￭ Rights on real estate properties: land. Buildings.Rights to use facilities
￭ Securities of corporation excessively owns realestate
4. Documentation of PAYE situation a written notice
Where a transferor is a nonresident B67 (realestate transfer) and B40 (miscellaneous income), and Code 16 (miscellaneousincome) on the tax items should be filled out. Where a transferor is a foreigncorporate body B81 (real estate transfer) and A80 (Corporate source income),and Code 31 (Corporate withholding tax) on the tax items should be filled out.
5. The place of payment: withholding taxagent’s tax office having jurisdiction over the place for tax payment
6. Filing withholding tax return for transferor
Even though a transferee filed withholding taxreturn a transferor shall file preliminary and final return on capital gain ofproperty. In this case, based on the amount of withholding tax paid bytransferee transferor’s tax will be deducted as a form of prepaid tax. Fordeduction, invoice of withholding tax for nonresident’s capital gains should beattached
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