Tax for loss-making securities investors reconsidered

Tax for loss-making securities investors reconsidered

Loss-making securities investments may not subject to income tax if investors can prove their losses, according to a draft decree amending the Law on Personal Income Tax.

Under the current regulation, investors can choose between two alternative ways of paying taxes: 20 per cent on investment profits or 0.1 per cent of each transfer value. Those who follow the first method must register with tax authorities early in the year.

However, this rule has drawn criticism from investors, who suffered a hard year due to the market's prolonged decline. As nearly all investors are paying taxes at the rate of 0.1 per cent of each transfer value, they still have to pay taxes on loss-making share sales.

"All of our customers choose to pay the tax rate of 0.1 per cent of the transfer value because it's much simpler than the tax rate of 20 per cent on investment profits," said Huynh Minh Quang, analyst of Woori CBV Securities Corporation.

"The first method requires investors to collect receipts or documents proving they incurred losses from a deal. In addition, investors feel hesitant to go to the tax authorities before the end of the year." In order to make tax payment easier for investors, the new regulation no longer requires investors to register their tax payment method from the end of the previous year.

"This means if investors think they may incur losses during the year, they can choose to pay at the 20 per cent on profits rate by the end of the year and can ask for a tax refund for their loss-making deals," an expert from the Ministry of Finance who asked to be unnamed said.

"However, to be eligible for the refund, investors must show proof of reasonable cost." Incomes from dividends, she added, were still subject to taxation.

The draft decree, prepared by the Ministry of Finance, will take effect in July.

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