Settlement dates and cash balances
When you buy shares and the order “fills”, money and shares don’t change hands at that moment. Korean stocks go through settlement, the actual exchange of money and shares, two trading days later (T+2). Shares bought on Monday settle on Wednesday (excluding holidays).
- Sale proceeds: money from shares sold today becomes withdrawable cash on the settlement date (D+2). Most brokers, though, let you use it right away to buy other shares.
- Dividends and rights: to receive a dividend you must be on the shareholder register on the record date, so counting back from settlement you must buy by two trading days before the record date. The next trading day is the ex-dividend date.
- Cash balance display: the D+1 and D+2 balances on a broker’s screen are calculated in advance as the cash that will remain once settlement is done.
Korean stock settlement (T+2)
- 1Monday · fillOrders matched, trade confirmed
- 2Tuesday · D+1Settlement preparation
- 3Wednesday · D+2 settlementMoney and shares actually move; sale proceeds withdrawable
Unsettled buys, margin and forced selling
Sometimes an order goes through even if you have only part of the amount (the deposit) rather than all of it. If you don’t deposit the shortfall by the settlement date, the purchase becomes an unsettled buy, and the broker sells those shares by force the next morning (forced liquidation).
Margin trading means formally borrowing money from the broker to buy shares. You pay interest for as long as you borrow, and the shares you buy become collateral. If the price falls and the collateral value drops below a set ratio (the maintenance ratio), you are asked to deposit more money; if you can’t, the shares are sold by force.
How debt magnifies losses (₩10 million own + ₩10 million borrowed)
How commissions are structured
A broker’s commission is its own brokerage fee plus related-agency charges paid to the exchange, the securities depository and others. Even “zero commission” promotions often charge the agency fees separately. Online commissions for Korean stocks are commonly around 0.015% as a sample value, but they differ by broker, account and promotion, so check the actual rate on your own account.
Securities transaction tax
This tax is charged on the sale amount when you sell Korean stocks, whether you made a profit or a loss. The rate differs by market and has changed several times in recent years.
| Market | Rate (on sale amount) | Breakdown |
|---|---|---|
| KOSPI | 0.20% | KOSPI: securities transaction tax 0.05% + special rural tax 0.15% |
| KOSDAQ | 0.20% | KOSDAQ: securities transaction tax 0.20% (no special rural tax) |
Selling ₩10 million of shares means about ₩20,000 in tax. US stocks carry no Korean transaction tax, but very small US regulatory fees apply (chapter 10).
Dividend tax and comprehensive financial income tax
Dividends on Korean stocks arrive with 15.4% withheld — 14% income tax plus 1.4% local income tax. For most people that is the end of it (separate taxation).
But if your financial income — interest and dividends combined — exceeds ₩20 million a year, the excess is added to your other income, such as wages or business income, and taxed again at progressive rates under comprehensive financial income taxation. The more other income you have, the higher the real tax rate on dividends. Financial income can also count toward national health insurance premiums.
Tax rates at a glance (as of 2026, needs confirming)
Usually final once withheld (separate taxation)
Withheld in the US
On a year’s gains − ₩2.5 million
Interest + dividends above this are combined with other income
Who pays capital gains tax on Korean stocks
Most individuals pay no capital gains tax on profits from buying and selling listed Korean stocks on the exchange. The exception is major shareholders: people who hold more than a set ownership percentage or amount of a single stock pay capital gains tax on profits from selling it. The amount threshold for major shareholders has changed several times in recent years with political and policy debate, so check it every year (needs confirming).
Taxes that depend on the account type
The same product can be taxed differently depending on which account you buy it in.
| Account | Features (summary; check detailed conditions) |
|---|---|
| Regular brokerage account | The basic taxation described above |
| ISA (individual savings account) | Gains and losses inside the account are netted and tax-free up to a set amount; the excess is taxed separately at a low rate. Has a minimum holding period |
| Pension savings and IRP | Tax credit on contributions; tax deferred while invested and a low rate when taken as a pension. Penalties for early withdrawal |
How IPO subscriptions work
When a company lists and sells new shares, individual investors apply by subscription. You put down a set share of the amount you apply for (usually 50%) as a subscription deposit, and after allocation the unused deposit is returned a few days later (the refund date).
- Equal allocation: shares are split equally among everyone who applied for at least the minimum quantity. If there are many applicants some people may not get even one share, so a lottery is mixed in.
- Proportional allocation: shares are split in proportion to the deposit put in. The higher the competition, the fewer shares you get even with a large deposit.
- Book building: before the public subscription, institutional investors submit the price and quantity they want. The offer price and the share of institutions committing to lock-ups are set here.
IPO subscription steps
- 1Book buildingInstitutions submit price and quantity → offer price set
- 2SubscriptionApply with a deposit (usually 50%)
- 3AllocationEqual + proportional allocation
- 4RefundUnused deposit returned
- 5ListingTrades in a wide price range on day one
Date calculation example: dividends and settlement
US stocks settle T+1, so the ex-dividend date and the record date are the same. Because the date changes a day later in Korean time, remember that you must buy during the US regular session (night in Korea) the day before the US ex-dividend date (chapter 10).