Capital gains tax for nonresidents

Date: March 12, 2021

I. Introduction

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

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 10^th 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 tax return a transferor shallfile 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 willbe deducted as a form of prepaid tax. For deduction, invoice of withholding taxfor nonresident's capital gains should be attached.

Learn more about Korean tax system by visiting our website

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