Stock ROI & Tax Basics

Last updated: 2026-06-25

When you start investing, the first question you hit is "Am I up or down right now?" It sounds simple, but once cost basis, fees, taxes and dividends are tangled together, it gets surprisingly confusing. This guide organizes five basics so a beginner can check their own P/L: cost basis calculation, realized ROI, Korean stock taxes, dividends and compounding.

1. Start with cost basis (average purchase price)

It is rare to buy all your shares at once. Usually you buy across several purchases, and the average price per share you paid is your cost basis. The key is that it is a quantity-weighted average, not a simple average of prices.

The formula is simple: cost basis = total invested ÷ total shares. For example, buying 10 shares at 70,000 KRW and 20 shares at 50,000 KRW gives a total invested of 700,000 + 1,000,000 = 1,700,000 KRW and 30 shares, so the cost basis is about 56,667 KRW. Because the most shares were bought at the lowest price, the cost basis is pulled down toward it.

Buying more after a price drop to lower your cost basis is commonly called "averaging down." The lower the added price and the larger the quantity, the more the cost basis drops. But lowering your cost basis does not erase the loss — judging the stock's underlying value matters more. You can find your cost basis instantly by entering your buys in the Average Cost Calculator.

2. Displayed return vs realized return

The return shown in your broker app is usually the valuation return computed as (current price − cost basis) ÷ cost basis. But the realized return you actually pocket when you sell is a bit lower, because buy/sell fees and the sell-side securities transaction tax are deducted.

The realized return is computed as follows. Net P/L = sell amount − buy amount − buy fee − sell fee − securities transaction tax, and ROI = net P/L ÷ buy amount × 100. For example, buying 100 shares at 50,000 KRW and selling at 60,000 KRW shows +20% nominally, but after two-way fees and the transaction tax, the realized return is slightly lower. Check the exact figures by entering your account's fee rate in the Stock ROI Calculator.

3. Taxes on Korean stocks

Compared with other countries, the tax structure for Korean listed stocks is quite favorable to ordinary investors. The three key items are summarized below.

Capital-gains-tax exemption — For Korean listed stocks, ordinary minority shareholders' trading gains are not subject to capital gains tax. So even if you buy at 10,000 KRW and sell at 20,000 KRW for a 100% gain, there is no tax on that gain itself. However, a "major shareholder" holding a certain ownership ratio/amount in a single stock is subject to capital gains tax, and that threshold can change each year, so check whether you qualify as a major shareholder.

Securities transaction tax 0.18% — Charged only when selling, based on the sell amount. There is no transaction tax on buying. The rate has been reduced in steps over recent years and may change.

Dividend tax 15.4% — When you receive a dividend, 15.4% (14% dividend income tax + 1.4% local income tax) is automatically withheld. After-tax dividend = gross dividend × (1 − 0.154). On a 1,000,000 KRW gross dividend, 154,000 KRW is withheld and you receive 846,000 KRW.

Note that, unlike domestic stocks, overseas stocks are subject to capital gains tax on trading gains (22% including local tax, after a 2.5 million KRW annual deduction), so be careful not to confuse the tax structures of domestic and overseas stocks.

4. Dividends and comprehensive financial income tax

A dividend is money a company distributes to shareholders from its profits. Dividend yield (%) is the annual dividend per share divided by the current stock price; at a 50,000 KRW price with a 2,500 KRW dividend per share, the yield is 5%. Because dividends are a cash flow separate from price movements, they appeal to long-term investors.

Two things to watch out for, though. First, the ex-dividend drop. On the trading day after the dividend right is fixed, the price tends to fall by roughly the expected dividend, so receiving a dividend does not increase your net profit by that full amount. Second, the comprehensive financial income tax. If your annual interest + dividend total exceeds 20 million KRW, the excess can be combined with other income and taxed at progressive rates. At or below 20 million KRW, the 15.4% withholding settles it as separate taxation. You can check gross and after-tax dividends in the Dividend Calculator.

5. The power of compounding and the Rule of 72

The reason people say time is return in investing is compounding. Compounding earns interest on interest, so the longer the period, the more the effect grows exponentially. In regular investing, where you contribute a fixed amount each month and let it compound, money contributed earlier grows for longer, so starting earlier is more favorable.

A quick way to gauge the power of compounding is the Rule of 72. Divide 72 by the annual return (%) to get the approximate years to double your money. At 6%, 72 ÷ 6 = about 12 years; at 8%, about 9 years. It is only an approximation, but it is handy for building compounding intuition. For detailed simulations, use the Rule of 72 Calculator and the Compound Interest Calculator.

Wrap-up — what to check first

To recap, to check your own investment P/L, we recommend this order: ① confirm your average purchase price with cost basis, ② compute the realized ROI after sell fees and the securities transaction tax, ③ apply the 15.4% after-tax rate if you have dividends, and ④ sketch the big picture with compounding and the Rule of 72 for long-term plans. All figures in this guide are for reference as of 2025; rates and major-shareholder thresholds can change each year, so also check official sources such as the National Tax Service and the Korea Exchange. Investment decisions and outcomes are your own responsibility.

Last updated: 2026-06-25