Capital gains tax for nonresidents

Date: Dec 24, 2020

I. Introduction

Calculating capitalgains 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 for nonresidents

1. Tax liability

Any nonresident individual who has income fromdomestic sources.

2. Calculation of taxable period

3. The place of tax payment

The place where income is generated from a source in Korea

III. Tax exemption for nonresidents with a single house

1. Nonresidents are not the subject ofnon-taxation or long-term holding deduction for high price houses

◎Judicial precedents

①The plaintiff has the U.S. Nationality and her husband is a civilian militaryworker and the rest families do not live in Korea. Therefore, she falls intonon-resident category, being exempt from non-taxation for a household with ahouse.

②Where all family members acquire foreign nationality and live overseas but someof the members enter into Korea, leaving all other family members overseas, heor she is not entitled to have benefits of non-taxation for single house ownersunless his or her job and property is deemed to reasonable to settle down inKorea.

③Any individual who moved to other countries enters into Korea is regarded as nonresident unless his or her job and property is deemed to reasonable to settle down in Korea.

2. Non-taxation on emigrants to overseas

Where whole family members of a householde migrate overseas they could be the subject of non-taxation benefits regardless of holding period or residency period under the condition of having a single house and selling the house within 2 years from the departure date.

IV. Withholding tax on non residents for real-estateincome and capital gains

1. The agent liable for withholding tax iscorporate transferee. Individual transferees are exempt from withholding taxpursuant to income tax act 156. In case where a transferor files preliminaryre-turn on transfer gain of property and reports to the tax office having jurisdiction over the place of payment or receives a certification document from the tax office having jurisdiction over the place of payment withholding tax shall be exempt.

2. Taxable period: by the 10th of the nextmonth from payment

3. Tax liability: Any nonresident individualwho has transfer gains from domestic sources shall pay withholding taxes.Lesser amount will be levied between 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 real estate 

4. Documentation of PAYE situation a writtennotice

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 tax agent's tax office having jurisdiction over the place for tax payment 

6. Filing withholding tax return for transferor

Even though a transferee filed withholding taxr eturn a transferor shall file preliminary and final return on capital gain of property. In this case, based on the amount of withholding tax paid by transferee transferor's tax will be deducted as a form of prepaid tax. For deduction, invoice of withholding tax for nonresident's capital gains should be attached.

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