Introduction
As a new year begins, tax laws also change, which is a critical topic for investors. Especially for those investing in stocks, real estate, or virtual assets, the tax amendments for 2025 demand attention. In December 2024, the National Assembly passed amendments to 13 tax laws, including the Income Tax Act and Corporate Tax Act, introducing significant updates.
Some proposals were passed as initially suggested, some were amended before approval, and others were rejected entirely. This post summarizes the major tax changes for 2025 and highlights essential points investors should know.
Table of Contents
- Delay in Virtual Asset Taxation
- Abolishment of the Financial Investment Income Tax (FIIT)
- New Marriage Tax Credit and Expansion of Child Tax Credit
- Tax-Free Employer Support for Childbirth
- Inclusion of Stocks in Deferred Taxation on Capital Gains
- Corporate Tax Adjustments for Small Family Businesses
- Rejected Proposals: Changes in Inheritance and Gift Tax
- Conclusion
1. Delay in Virtual Asset Taxation
Taxation on virtual assets such as Bitcoin and Ethereum, which was originally planned to take effect in 2025, has been postponed by two years, with the new start date set for 2027.
- Key Details:
- Initial Plan: Taxation starting January 2025.
- Amended Plan: Taxation delayed until 2027.
- Tax Details: Income exceeding KRW 2.5 million will be taxed at a rate of 20%.
- Impact on Investors:
- Those planning to sell virtual assets can avoid taxation until 2026.
- The postponement allows investors additional time to strategize based on market conditions and upcoming regulations.
2. Abolishment of the Financial Investment Income Tax (FIIT)
One of the most discussed changes in the 2025 tax amendments was the abolishment of the Financial Investment Income Tax (FIIT), which was ultimately confirmed.
- Key Details:
- Previous Policy: Capital gains from domestic stock transactions were exempt from tax, except for major shareholders (holding over KRW 5 billion per stock).
- New Policy: The exemption continues for small investors, and the FIIT has been completely abolished.
- Impact on Investors:
- Most retail investors will continue to benefit from tax-free capital gains on domestic stock transactions.
- The change is expected to boost investor sentiment and further develop the domestic capital market.
3. New Marriage Tax Credit and Expansion of Child Tax Credit
To encourage marriage and boost the birth rate, a new marriage tax credit has been introduced, and child tax credits have been expanded.
- Marriage Tax Credit:
- For couples who register their marriage between 2024 and 2026, a KRW 500,000 tax credit is provided in the year of registration (one-time benefit).
- Both spouses can apply, allowing up to KRW 1 million per couple.
- Expanded Child Tax Credit:
- Eligibility: Children aged 8 or older.
- Changes for 2025 tax filings:
- 1 child: KRW 150,000 → KRW 250,000
- 2 children: KRW 200,000 → KRW 300,000
- 3+ children: KRW 300,000 → KRW 400,000 per child
Impact
Married couples and families with children will see increased tax benefits, reducing financial burdens.
4. Tax-Free Employer Support for Childbirth
From 2024, financial support from employers for childbirth-related expenses will be fully tax-exempt, removing the previous monthly cap of KRW 200,000.
- Key Details:
- Applies to financial support given within two years after childbirth.
- Covers both the employee and their spouse.
- Impact:
- Companies are likely to increase childbirth-related benefits.
- Employees benefit from tax-free income, easing post-birth financial pressures.
5. Inclusion of Stocks in Deferred Taxation on Capital Gains
A widely-used tax-saving strategy among stock investors has been spousal gifting. This allowed investors to gift stocks to a spouse and then sell them at a reduced tax rate by using the gifted value as the acquisition price.
- Key Changes:
- Starting in 2025, deferred taxation on capital gains will apply to stocks gifted to a spouse or direct family members.
- Stocks sold within one year of the gift will use the original acquisition price for calculating capital gains, not the gifted value.
- Impact on Investors:
- Long-term stock gifting for holding purposes remains unaffected.
- However, using gifting to minimize taxes on quick sales will become more challenging.
6. Corporate Tax Adjustments for Small Family Businesses
Small family-owned businesses categorized as “sincere tax-reporting entities” will face higher corporate tax rates starting in 2025.
- Criteria:
- Owned by shareholders with over 50% stake.
- Revenue derived mainly from real estate rentals, interest, or dividends.
- Fewer than 5 employees.
- Key Changes:
- Corporate tax rates increased to 19%–24%, higher than standard rates.
- Impact:
- Family-run businesses, especially those relying on real estate income, may face increased tax burdens.
- Review of corporate structures and tax strategies will become necessary.
7. Rejected Proposals: Changes in Inheritance and Gift Tax
Several major tax reform proposals were rejected, keeping the current system unchanged.
- Rejected Proposals:
- Lowering the top inheritance and gift tax rate.
- Expanding deduction limits for children’s inheritance.
- Enhancing tax benefits for ISA (Individual Savings Account) holders.
- Impact on Investors:
- Current inheritance and gift tax policies remain strict, and long-term tax planning will still be required.
Conclusion
The 2025 tax amendments bring both opportunities and challenges for investors and families. While changes like the abolishment of the Financial Investment Income Tax and the delay in virtual asset taxation are favorable for investors, stricter rules on capital gains deferrals and increased taxes for small family businesses require strategic planning.
For individuals and families, marriage and child-related tax benefits offer much-needed relief, while corporate employers may find it easier to implement childbirth support programs. As always, staying informed and planning ahead are key to maximizing tax benefits and minimizing liabilities.