Profit from domestic listed stocks, subject to personal deduction… Foreign stocks not allowed

A’s father received personal deductions for dependents for his wife and son at the year-end settlement in February last year (deducted in 2019), but this time (deducted in 2020), only the son of the two can be included in the deduction. This is because the wife’s stock investment income exceeded the income requirement for the dependents subject to personal deduction.

According to the National Tax Service on the 17th, in order for the dependents of workers to be eligible for personal deduction (basic deduction), the total annual’income amount’ must be less than 1 million won.

Here, the income amount is the remaining value from the total amount of income, excluding deductions for each type of income or necessary expenses. Among various income amounts, the amount of capital gains is calculated by deducting necessary expenses and special deductions for long-term holdings from the amount of transfer (selling price). The capital gains amount of stocks is the selling price minus the purchase price, commission, and transaction tax.

A’s mother is not eligible for personal deduction because it exceeds 1 million won even if the fee and transaction tax are excluded from the 3 million won earned by Mr. A’s Tesla. Mr. A’s investment in stocks earned much larger returns than his mother, but the amount of capital gains is zero because domestic listed stocks are not subject to capital gains tax. It can be the subject of the father’s personal deduction.

The National Tax Service said, “We do not individually check the transfer income of overseas stocks of workers and their dependents for year-end settlement.” If it turns out, you have to pay additional tax along with the unpaid tax,” he said.

On the other hand, as foreign stock investments surged enough to be called the ant craze last year, the number of individual investors who are required to report and pay the stock transfer income tax in May this year is also expected to increase rapidly.

The enthusiasm for overseas stock investment was also shown in the 2019 capital gains tax return. Overseas stocks are included in unlisted stocks under the tax law, and there is no obligation to return a planned capital gains tax and only a final return is required. In 2019, the number of final reports on the transfer of unlisted stocks was 11,4419, up 74,000 cases, 186% higher than a year ago.

The time to report foreign stock capital gains is every May. At the end of April every year, the National Tax Service receives transaction data from securities companies and informs them of the report to those subject to capital gains tax, such as foreign stock investors.