Fractional share trading tax free, Finance Ministry says

Electronic display boards at Hana Bank in central Seoul show Thursday markets. [YONHAP]

Profit generated from the trading of fractional shares will not be taxed, according to the Finance Ministry.

The Ministry of Economy and Finance announced Thursday that gains from trading of less than a single share of a company will not be subject to the dividend or capital gains taxes.

If holdings add up to more than a single share, taxes will apply.

Fractional trading allows investors to buy a portion of a share, dividing ownership among several fractional shareholders.

Financial authorities have been struggling to figure out whether to impose taxes on fractional share trading as regular stock trades or profit from collective investment funds. The two are imposed at different taxes.

For stock trading, Korea currently imposes a capital gains tax on major shareholders who own more than 1 billion won ($720,000) of shares in a single firm. The stake must also be more than 1 percent of the total for Kospi stocks and 2 percent for Kosdaq stocks.

The threshold will be 10 billion won starting in 2023.

BY JIN MIN-JI [jin.minji@joongang.co.kr]