S Korea to Tax Derivatives Transactions

August 9, 2012 Taxation in South Korea

Korean Derivative TradesSEOUL – South Korea is aiming to quell speculative trading on the national financial market by implementing a new tax on some financial transactions.

In a statement released on August 8th the Ministry of Strategy and Finance of Korea announced that it is changing the tax rules for financial transactions and will soon impose new taxes on options and futures of the Korea Composite Stock Price Index 200 Index (KOSPI200).

The tax on futures will set at 0.001 percent of the transaction value, and the tax on options will be 0.01 percent of the premium for the option.

The newly announced taxes will be imposed from January 2016, and are expected to bring in over KRW 100 billion in extra tax revenues for the government per annum.

In its statement the Ministry explained that the new measures are designed to bring the taxation of derivatives in line with taxation of other securities. However, leaders of the finance industry have already said that the taxes are probably intended to reduce speculative trading activity and cut down the occurrence of computerized high-frequency trading.

Futures and options of the KOSPI 200 are some of the most highly traded derivatives in the world, with the number of number of futures traded per months now exceeding 8 million, according to independent analytics.

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