The Q&A gives an overview of the main equity and debt markets/exchanges, regulators and legislation, listing requirements, offering structures, advisers, prospectus/offer document, marketing, bookbuilding, underwriting, timetables, stabilisation, tax, continuing obligations and de-listing.
To compare answers across multiple jurisdictions visit the Capital Markets Country Q&A tool.This Q&A is part of the PLC multi-jurisdictional guide to capital markets law. For a full list of jurisdictional Q&As visit www.practicallaw.com/capitalmarkets-mjg.
1. What are the main equity markets/exchanges in your jurisdiction? Outline the main market activity and deals in the past year.
The main equity market/exchange is the Korea Exchange (KRX) (www.krx.co.kr). The KRX was created in 2005 with the merger of the three existing exchanges (the Korea Stock Exchange (established in 1956), the KOSDAQ (established in 1996) and the Korea Futures Exchange). The KRX operates two equity trading markets, which are the:
KOSPI. This market focuses mainly on large blue-chip companies. As at the end of 2011, this market has 791 listed companies, a market capitalisation of KRW1,042 trillion and a daily trading volume of KRW6.863 trillion (as at 1 December 2012, US$1 was about KRW1,081).
KOSDAQ. This market provides a platform for small and medium-sized companies and high-tech start-up companies. As at the end of 2011, this market has 1,031 listed companies, a market capitalisation of KRW105 trillion and a daily trading volume of KRW2.25 trillion.
As of 1 July 2012, 17 foreign companies were listed on the KRX.In 2011, the total amount of equity raised from IPOs on the KRX was US$3.562 billion, with 73 companies newly listed on the KRX (as at 1 December 2012, US$1 was about EUR0.8). The largest IPOs have been from:
Samsung Life Insurance in 2010, with a market capitalisation after the IPO of KRW22 trillion. Hyundai WIA in 2011, with a market capitalisation after the IPO of KRW1.672 trillion.Some companies have postponed their IPOs for various reasons, such as adverse market conditions. However, there is no formal data on the exact number of IPOs that were postponed in 2011.
2. What are the main regulators and legislation that applies to the equity markets/exchanges in your jurisdiction?
The KRX is responsible for the review of listing applications and regulates all matters related to listing, including market disclosures and de-listings. The KRX adopts regulations and rules applicable to listed companies.
The Financial Services Commission of the Republic of Korea (FSC) and the Financial Supervisory Services of Korea (FSS) are responsible for all matters regarding the equity markets, including public offerings and all market regulations related to public offerings.
The main piece of legislation applicable to the equity markets is the Financial Investment Services and Capital Market Act of Korea (Act No. 8635 of 2007, as amended) (FSCMA). The FSCMA also provides for the establishment and business of the KRX. The KRX has its own regulations and rules regarding the listing, market disclosures, its operations and related matters.
For primary listing on the main markets/exchanges, the KRX applies both quantitative and qualitative criteria. The qualitative requirements apply to both KOSPI and KOSDAQ and include:
The status of the company as a going concern. Growth potential of the company. Management transparency. Any concerns for investor protection.The quantitative requirements vary depending on the relevant equity trading market. Some of the general requirements include:
Minority shareholders must hold at least 25% of the applicant company's capital (see below, Shares in public hands).
There must have been no change in identity of the largest shareholder in the previous year before the application for listing.
Shares must be freely transferable. Lock up period:KOSPI market. The largest shareholder is locked in for six months after listing(except for a secondary KOSPI listing);
KOSDAQ market. The largest shareholder is locked in for one year after listing (except for a secondary KOSDAQ listing).
Revenue: KRW30 billion (in the most recent year) and KRW20 billion (three-year average) and one of the below:
profit: KRW2.5 billion (in the most recent year) and KRW5 billion (three-year sum); ROE: 5% (in the most recent year) and 10% (three-year sum);3% ROE or KRW5 billion profit (only for a company with KRW100 billion of shareholders' equity) and positive operating cash flow.
Market capitalisation of KRW100 billion and revenues of KRW50 billion (in the most recent year).Market capitalisation of KRW50 billion and revenues of KRW70 billion and cash flows of KRW2 billion (in the most recent year).
KOSDAQ market. At least one of the following three requirements must be fulfilled: Income: return on investment (ROI) of 10% (in the most recent year). Net profit: KRW2 billion (in the most recent year). Market capitalisation of KRW30 billion and revenues of KRW10 billion (in the most recent year). In any case, a KOSDAQ applicant cannot have its capital impaired for the recent year.KOSPI market. A listing on KOSPI requires KRW10 billion of equity capital, or KRW20 billion market capitalisation.
KOSDAQ market. A listing on the KOSDAQ requires KRW3 billion of equity capital or KRW9 billion market capitalisation.
Foreign applicants may choose to apply the market capitalisation requirement in lieu of the equity capital requirement.
For either of the KOSPI market or the KOSDAQ market, the company must have been established and operating for at least three years.
KOSPI market. An applicant must have an auditor's unqualified opinion for the latest fiscal year and an unqualified or qualified opinion for the two years before that time. Any qualified opinion resulting from limitation on the scope of audit, however, is not deemed to meet the listing requirement.
KOSDAQ market. For a listing on the KOSDAQ market, an unqualified auditors' opinion is required for the latest fiscal year only.
For both markets, auditors must use the International Financial Reporting Standards (IFRS) or US Generally Accepted Accounting Practices (GAAP).
KOSPI market. There must be at least 1,000 minority shareholders in total and one of the following conditions must be met:
Minority shareholders must hold at least 25% of the equity. At least 25% of shares are offered.Where at least 10% of shares are offered, certain numbers must be issued depending on the equity capital or market capitalisation:
equity capital of KRW50 billion to KRW100 billion, or market capitalisation of KRW100 billion to KRW200 billion: one million shares must be offered;
equity capital of KRW100 billion to KRW250 billion, or market capitalisation of KRW200 billion to KRW500 billion: two million shares must be offered;
equity capital of KRW250 billion or more, or market capitalisation of KRW500 billion or more: five million shares must be offered.
If an applicant is already listed on a foreign exchange, it is exempted from the above distribution ratio requirement (including the minority shareholding percentage of 25% or higher), provided that at least 1,000 minority shareholders acquire shares in the Korean offering.
For companies making IPOs in Korea and another foreign jurisdiction simultaneously, at least 10% of the total shares offered (the 10% must also be at least one million shares) must be offered in Korea.
KOSDAQ market. There must be at least 500 minority shareholders in total and one of the following conditions must be met:
If less than 25% of shares are held by minority shareholders at the time of the listing eligibility review application, at least 10% should be offered.
If more than 25% of shares are held by minority shareholders, at least 5% should offered.Where at least 10% of shares are offered, certain numbers must be issued depending on the equity capital or market capitalisation:
equity capital of KRW50 billion to KRW100 billion, or market capitalisation of KRW100 billion to KRW200 billion: one million shares must be offered;
equity capital of KRW100 billion to KRW250 billion, or market capitalisation of KRW200 billion to KRW500 billion: two million shares must be offered;
equity capital of KRW250 billion or more, or market capitalisation of KRW500 billion or more: five million shares must be offered.
A market applicant already listed on a foreign exchange is exempted from the above distribution ratio requirement (including the minority shareholding percentage of 25% or higher), provided that at least 500 minority shareholders acquire shares in the Korean offering.
For a foreign company already listed on a foreign exchange, one of the following conditions must be satisfied:
At least 300,000 shares must be offered in Korea.At least 25% of shares should be offered from the date of notice of the listing eligibility review result to the date of listing application.
For companies making IPOs in Korea and another foreign jurisdiction simultaneously, at least 20% of the total shares offered (the 20% must also be at least 300,000 shares) must be offered in Korea.
4. What are the main ways of structuring an IPO?Most IPOs are structured as public offerings of new shares. However, a limited number of IPOs are structured as secondary offerings of existing shares by large shareholders (with or without a combination of offerings of new shares). Since Samsung Card's IPO in 2007, large Korean IPOs are often made both inside and outside Korea. International equity offerings are made in the form of either a Regulation S offering or Rule 144A placement (that is, US Securities Exchange Commission rules and procedures that provide safe harbours for certain offers of securities, including those made outside the US).
5. What are the main ways of structuring a subsequent equity offering?Subsequent equity transactions by a listed company are usually made as issuances of new shares, which are categorised as either:
Rights offerings. Third-party allotment (that is, an issuance of new shares to a limited number of investors).Any issuance of new shares must be approved by the board of the issuer. Due to the existence of pre-emptive rights of existing shareholders, a general public offering of new shares is not common for a listed Korean company. A third-party allotment is permitted only to the extent provided for in the articles of incorporation of the issuer and the Commercial Code.
Under the FSC's regulations, the issue price of a new share to be issued by a listed company must be either:
70% or more of the market price on a general public offering. 90% or more of the market price on a third-party allotment. There is no restriction on the issue price on a rights offering to existing shareholders.A secondary offering of existing shares by a large shareholder as a subsequent equity offering is also permitted. However, a block trade on the market is commonly used for a block deal of existing shares in Korea, often being followed by a distribution to a number of foreign investors.
6. What are the main steps for a company applying for a primary listing of its shares? Is the procedure different for a foreign company and is a foreign company likely to seek a listing for shares or depositary receipts?
The main steps in applying for a listing on the KRX are: The lead manager carries out due diligence on the business and property of the applicant. The applicant submits the listing eligibility review application and related documents to the KRX.The KRX conducts the listing eligibility review. As the final step of the review, the listing committee of either the KOSPI market or KOSDAQ market decides whether the applicant should be accepted for listing or not.
After receiving approval from the listing committee, the applicant files the securities registration statement with the FSC, as well as the executed underwriting agreement (not including the agreed issue price).
The lead manager carries out marketing activities to certain institutional investors.The lead manager and the applicant agree on the issue price, and the applicant files the amended securities registration statement with the FSC, together with the executed underwriting agreement setting forth the agreed issue price.
The lead manager carries out the subscription procedures to all investors, and allocates the shares. The shares are issued and listed on the KRX. Additional steps are required for the listing of a foreign applicant, including:Before starting the due diligence by the lead manager and its legal counsel, some pre-IPO reorganisation and/or pre-IPO investment may need to be made to meet the legal requirements for a foreign applicant (see Question 3). The kind of securities offered for listing (whether ordinary shares or depositary receipts) must be determined.
During the legal due diligence, the articles of association or their equivalent constitutive documents must be reviewed to check whether any amendments are necessary for the further protection of domestic investors. If necessary, an amendment to the constitutive documents should be made.
The KRX (and the Korea Securities Depository) should be consulted for the most efficient procedures and advice.
The choice of securities to be offered is subject to the law of the jurisdiction where the foreign applicant is established. Given the depositary systems in Korea and the relevant foreign jurisdiction(s) of the offered shares, a foreign applicant can only offer ordinary shares directly in Korea if the law under which the foreign applicant is established recognises each Korean retail investor as legal shareholder of the shares held. Therefore, foreign applicants from certain jurisdictions, such as Japan, Singapore, Australia, the UK and some states of the US, offer Korean depositary receipts, while those from China (or special purpose companies (SPCs) whose main businesses are in China) offer ordinary shares.
7. Outline the role of advisers used and main documents produced in an equity offering. Does it differ for an IPO?
Lead manager and listing sponsor. The lead manager is also the listing sponsor for the listing of the applicant. The lead manager on an IPO will:
confirm listing eligibility by conducting due diligence; provide direction and check compliance with finance, accounting and corporate governance rules; assist with preparing the listing eligibility review application and related filing documents; evaluate the share value; conduct marketing activities and bookbuilding (see Question 14); conduct procedures for the subscription and allocation of shares and closing of the IPO.The role of the lead manager for an equity offering (other than an IPO) is similar to the above, except for those items related to the listing and IPO.
Underwriters. The underwriters underwrite the shares to be offered in accordance with the terms of the underwriting agreement.
Legal advisers. A foreign applicant for a listing on the KRX must have a legal adviser under the KRX rules. The legal adviser to the foreign applicant issues its legal opinion for the listing of the applicant. Although the KRX rules do not require domestic applicants to retain a legal adviser, a growing number of Korean applicants for the KRX listing and their respective lead managers retain their own legal advisers. In particular, it is customary that legal advisers to the applicant and the lead manager advise on large-size IPOs. Legal advisers assist in preparing the listing and offering documents, and advise on legal issues regarding the listing requirements and related documents.
Accountants. The role of the accounting firm includes:conducting external auditing and publishing the auditor's report concerning the financial statements of the applicant;
issuing a comfort letter verifying the accuracy of financial information stated in the listing and offering documents.
For a foreign applicant, the accounting firm issues the review report about the operation of the company's internal accounting control system.
The key documents for a listing on the KRX include the listing eligibility review application and its attached documents. The key documents for an IPO include the:
Securities registration statement. Prospectus. Underwriting agreements.For a foreign applicant's listing of depositary receipts, a deposit agreement executed between the applicant and the Korea Securities Depository is also required.
The working teams and documentation requirements for an equity offering are simpler than those for an IPO. No listing sponsor is required, and no listing eligibility review application is required. The key documents for an equity offering have are still the securities registration statement, prospectus, and underwriting agreements.
8. When is a prospectus (or other main offering document) required? What are the main publication or delivery requirements?
For an offering as defined in the FSCMA, a securities registration statement and a prospectus must be filed with the FSC, and a prospectus must be ready for the review of potential investors, before the start of the solicitation of the offered securities.
An offering is defined, with certain exceptions, as a solicitation to 50 or more investors for the purchase of certain securities. An IPO is generally classed as an offering under the FSCMA. In addition, certain transactions that involve fewer than 50 investors are deemed to be an offering under the FSC regulations. For example, any issuance of new shares by a listed company which is offered to less than 50 investors is an offering if the shares are not deposited with the Korea Securities Depository for one year.
The securities registration statement and the prospectus must be prepared in the Korean language.9. What are the main exemptions from the requirements for publication or delivery of a prospectus (or other main offering document)?
The following transactions are not deemed to be an offering, and are therefore exempt from the prospectus requirement (see Question 8):
A solicitation or offer to less than 50 persons (with certain exceptions (see Question 8)).A solicitation or offer, or a series of solicitations or offers made within one year without filing any securities registration statements, of a total amount of KRW1 billion or less.
For the purpose of calculating the number of persons solicited, the following are not included: Professional investors as defined in the FSCMA. Certain persons related to professional investors, such as the: largest shareholder; 5% shareholders; affiliated companies and their directors.10. What are the main content or disclosure requirements for a prospectus (or other main offering document)? What main categories of information are included?
A securities registration statement and a prospectus must include material information to allow potential investors to make informed decisions. This must include:
Information regarding the offering, including: general information regarding the offering; a description of the securities to be offered; risk factors involved in the acquisition of the securities; the underwriter's opinion on the securities; the use of proceeds; issue price and other matters as prescribed by the FSC. Information regarding the issuer, including: general information on the issuer; business of the issuer; finances of the issuer; external auditor's audit opinion; details of the board of directors and other decision bodies of the issuer; details of the affiliates of the issuer; details of the shareholders; details of the directors and other officers; interested party transactions; other matters as prescribed by the FSC.Financial statements must be prepared in accordance with IFRS or (for non-Korean companies) GAAP (see Question 3, Trading records and accounts).
11. How is the prospectus (or other main offering document) prepared? Who is responsible and/or may be liable for its contents?
The securities registration statement and prospectus are prepared by the issuer with the assistance of the lead manager and other advisers such as legal advisers and accountants (see Question 7, Main advisers).
The FSC may review filed securities registration statements. If it finds any untrue statements or omission of material information, the FSC can request the issuer to amend the securities registration statement.
Where there is any untrue statement or omission of material information in a securities registration statement or prospectus, the following persons are liable for it:
The issuer. Directors of the issuer.Accountants, appraisers, credit rating agents, and/or lawyers who have signed the description in the offering documents is accurate.
Other persons who have consented to include their opinions in the offering documents. The underwriters. Persons who have prepared and/or delivered the prospectus. The selling shareholders (on a secondary offering only).An expert such as an accountant or a lawyer is subject to civil liability for contents that he consented to or signed for, and may also be subject to criminal liability if the incorrect contents have been wilfully made.
Marketing to domestic investors is conducted through investor relation (IR) events and bookbuilding (see Question 14). IR events are hosted intensively for approximately one week before the bookbuilding is conducted. An IR event may be an individual IR briefing, a smaller IR event or a larger IR event, in accordance with the number of potential investors.
Marketing activities targeting international investors are often conducted in larger-sized IPOs. International marketing is conducted through roadshows (that is, marketing presentations to a limited number of professional investors by the issuer's senior management with the assistance of the lead manager) and bookbuilding.
13. Outline any potential liability for publishing research reports by participating brokers/dealers and ways used to avoid such liability.
The following offences are subject to a maximum of five years' imprisonment or a maximum KRW2 billion penalty (FSCMA):
Where a Korean securities company trades securities for its own account during the period between the finalisation of the research report up to 24 hours from the disclosure of the research report.
If a lead manager or underwriter of certain securities publishes, distributes or makes the research report available during the blackout period. The blackout period begins on the date of the execution of a mandate or underwriting agreement or any other similar agreement between the issuer and the lead manager(s) or underwriters of the offering, and expires 41 days after the listing of the issuer on the KRX.
The FSC has published various regulations regarding research reports. A violation of FSC regulations results in sanctions from the Korean regulatory bodies. Sanctions range from the cancellation of the financial investment business in Korea to a simple warning to the involved officer or employee, depending on the seriousness of the violation. Under the regulations:
No research report can be published, distributed or made available by any Korean securities company which is a lead manager or underwriter during the blackout period (see above).
No research report can be published, distributed or made available by any Korean securities company which conducts market stabilisation activities (see Question 17) for the issuer's shares in accordance with the FSCMA, to anyone in Korea at any time during the market stabilisation period.
No Korean securities company which holds 5% or more of the shares or other equity-related securities of the issuer can publish, distribute or make available any research report to anyone in Korea at any time. Any Korean securities company holding between 1% and 5% of the shares or other equity-related securities of the issuer must disclose this in the research report. Any Korean securities company which has any other substantial interest in the issuer must include a description disclosing the substantial interest in the research reports distributed in Korea.
No Korean securities company and its research analyst can disclose, or make available for inspection, the result of the research analysis contained in its research report to its corporate finance department or the issuer before the publication or distribution of the research report. However, these restrictions do not apply to business discussions related to the calculation of the public offering price in the case of an IPO on the KRX.
However, a research analyst can consult with the corporate finance department where necessary to verify the correctness of the information contained in its research report. Any matter directly related to the valuation of the securities, including the change in the investment ratings or target price of the shares cannot be discussed. Consultation is subject to the following rules:
The exchange of information between the research department and the corporate finance department must be made through the compliance department.
The verbal discussion between the research department and the corporate finance department must be made in the presence of the compliance officer and a written record of the discussion must be kept.
If a Korean securities company provides a third party (excluding any person involved in the preparation of the research report, such as the securities company's affiliates, directors, officers or employees of the affiliates (Affiliates)) with a research report or its material contents before publication to the general public, the early release of the report must be disclosed to the general public, including the time when the research report was released to the third party. This disclosure must be made at the time of the publication of the report.
The Korean securities company must request any Affiliates who were involved in the preparation of the research report not to be involved in a sales transaction for their own account, concerning the securities which are the subject of the research report. This prohibition lasts from when it is confirmed that the material contents of the research report have been finalised and will not be amended, until 24 hours after the report is published. If an Affiliate declines the request for a prohibition on dealing, then the Korean securities company must take measures to exclude the Affiliate from the preparation of the report.
Korean securities companies must disclose the name of the analyst who prepared the research report, the research analyst's financial interests and the source of any data quoted from an outside source.
Where a Korean securities company publishes a research report prepared by a person who is not its director, officer or employee, the name of that person (or where it is a corporation, the name of the corporation) must be stated in the research report.
14. Is the bookbuilding procedure used and in what circumstances? How is any related retail offer dealt with?
Bookbuilding is used in almost all public offerings of equity securities, and conducted at the same time as IR events and roadshows (see Question 12). The lead manager presents a price band for the offered shares and identifies demand profiles (including prices and quantities). Bookbuilding is conducted on the shares to be allocated to institutional investors, excluding those allocated to retail subscribers. The lead manager and the issuer review the results of the bookbuilding activities and determine the final offer price.
After the final offer price is agreed, orders from institutional investors and retail investors are placed during the subscription period. To prevent default in subscription, the lead manager and underwriters tend to receive a subscription deposit at a certain rate, which is determined in their discretion according to market conditions, the number of shares to be offered, and so on. The subscription deposit must be reserved in a separate bank account until closing.
At the end of the subscription period, the lead manager aggregates subscription orders and allocates offered shares in accordance with its allotment criteria.
15. How is the underwriting for an equity offering typically structured? What are the key terms of the underwriting agreement and what is a typical underwriting fee?
Equity offerings in Korea are typically conducted by full underwriting agreement, under which the underwriters agree to purchase all offered shares, even if not all of the shares are sold to investors. In practice, the subscribed shares are issued and transferred directly from the issuer to the investor, and the underwriters only acquire the shares which have not been subscribed by investors.
For an IPO on the KRX with an international tranche, a supplemental underwriting agreement covering the international tranche is executed, while the Korean underwriting agreement covers both the Korean and international tranche. The major clauses of the supplemental underwriting agreement and the Korean underwriting agreement are similar, but some typical clauses customary in a Rule 144A or Regulation S underwriting agreement, such as typical representations and warranties and indemnification clauses, are added in the two agreements (see Question 4).
Underwriting fees vary, but typically range from 1.5% to 3% of the aggregate offer price. The underwriting fee in an IPO by a foreign issuer usually ranges from 3% to 8% of the aggregate offer price, due to the special aspects of the transaction.
Please note that the periods and numbers of days set forth below are only for illustrative purposes, and do not include the exact requirements under the applicable laws and regulations.
A typical timetable for an equity offering is as follows: Day (D). Appointment of the lead manager and other advisers. Up to D plus one month. Preparation of the securities registration statement and prospectus.D plus one month. Board resolution for the equity offering. Filing of the securities registration statement and prospectus with the FSC and commencement of the offering.
D plus 50 days. Effectiveness of the securities registration statement (after which the pricing and the execution of agreements regarding the securities is permitted) together with pricing and execution of the underwriting agreement with the offer price.
D plus 51 to 60 days. Subscription to and allocation of the shares. D plus 60 days. Closing.An IPO requires certain procedures for the listing, and the typical timetable for an IPO is as follows:
D. Appointment of the lead manager and other advisers.Up to D plus one month. Checking of listing eligibility requirements; preliminary consultation with KRX.
D plus three months. Board resolution for the IPO. Filing of the listing eligibility review application.
D plus five months. Preliminary approval for the listing by the KRX.D plus 170 days. Filing of the securities registration statement and prospectus with the FSC and commencement of the offering.
D plus 185 days. Effectiveness of the securities registration statement together with pricing and execution of the underwriting agreement with the offer price.
D plus 185 to 195 days. Subscription to and allocation of the shares. D plus 195 days. Closing and filing of the listing application. D plus 200 days. Listing and start of trading on the KRX.For an IPO by a foreign issuer, several additional months (subject to the laws of the applicable jurisdictions) may be necessary for restructuring of the issuer's corporate structure and amending constitutional documents, if required.
In principle, price stabilisation or pegging is generally prohibited by the FSCMA. However, some forms of price stabilisation or market-making are permitted.
A Korean securities company that has disclosed its plan for stabilisation and/or market making in the relevant securities registration statement (or, if there is no securities registration statement, the underwriting agreement) (Permitted Securities Company) must disclose its plan in the prospectus of the subject securities. Immediately after the first market-making activity, the Permitted Securities Company must file a market-making report with the FSC and the KRX.
The period for the market-making is 20 days ending on the last date for subscription of the subject securities. However, if the offer price is determined during that 20-day period, the market-making period must start on the day after the price is determined.
The purchase price paid by the Permitted Securities Company must not exceed the price to be calculated by one of the formulas prescribed by presidential decree of the FSCMA.
A Permitted Securities Company may conduct stabilisation for six months starting on the listing date of the subject securities by:
Disclosing its plan for stabilisation in the prospectus. Filing a stabilisation report with the FSC and the KRX before the stabilisation. The Permitted Securities Company must not: Purchase the securities at prices higher than the offer price. Sell the securities at prices lower than the offer price.Generally, capital gains earned by a Korean company or individual arising from the transfer of equity securities are subject to capital gains tax in Korea. A Korean company is taxed on capital gains at the normal corporate income tax rate. The rate of capital gains tax for a Korean individual is usually 11% (including local income surtax) to 33% (including local income surtax). However, capital gains earned by a Korean individual through the KRX are not subject to capital gains tax unless the individual is a major shareholder under the Individual Income Tax Law (the definition of major shareholder under the Individual Income Tax Law may be different from that under other Korea laws).
Capital gains earned by a non-resident individual or non-Korean corporation (non-resident) who transfers equity securities in a Korean company may be subject to Korean withholding tax at the lower of 11% (including local income surtax) of sales proceeds or 22% (including local income surtax) of capital gains, unless exempt under an applicable double taxation treaty. A non-resident is not subject to Korean income tax on capital gains realised on the sale of equity securities through the KRX if the non-resident has owned, together with certain related parties, less than 25% of the total issued equity securities at any time during the year of sale and the five calendar years before the year of sale.
In addition, securities transaction tax on the transfer of equity securities is imposed at the rate of: