On 8 January 2018, the Korean government published a draft bill reducing from 25% to 5% the shareholding ownership threshold at which capital gains tax (CGT) will be triggered for foreign investors on listed securities transactions. In the absence of any domestic and tax treaty exemption, capital gains arising to a non-resident will be subject to Korean tax at the lower of 11% of the sale proceeds and 22% of the capital gains. Though the 5% threshold may be high for many funds, there could be difficulties associated with fund structures because of Korea’s related party and aggregation rules. For instance, investors in several funds that are transparent for tax purposes could be treated as meeting the threshold even if each fund holds less than 5% of a company but the aggregate holding exceeds the limit. As there is no easy means to measure and track collective ownership of shares by foreign investors, it seems likely that brokers may in all sales by foreign investors deduct 11% from the proceeds as an anticipatory measure so that foreign investors would have to seek a refund from the government. It is expected that the measure, if enacted, would come into force on 1 July 2018. For further information, please contact Paul Hale or Anvit Jain.