The finance ministry in Seoul has introduced a set of tax benefits to stimulate the local capital market. This initiative includes a new incentive scheme for retail investors who sell foreign stocks and reinvest the proceeds in domestic assets. These measures aim to address the ongoing net capital outflows by domestic investors, with the Korean won nearing a 16-year low against the U.S. dollar.
Individual investors who sell overseas stocks, convert the funds into Korean won, and make long-term investments in domestic equities will receive temporary tax relief on capital gains from foreign stock sales for a year. The Ministry of Economy and Finance stated that the tax relief will vary based on the timing of reinvestment, with specific details to be finalized after further assessment.
To assist individual investors, the government will aid major brokerage firms in promptly launching forward-selling products. This move is crucial as many retail investors currently lack adequate tools to manage foreign exchange risks. Furthermore, to prevent double taxation on dividends received by local parent companies from foreign subsidiaries, the government plans to increase the dividend income exclusion ratio from 95 percent to 100 percent.
The ministry highlighted the disparity between the strong performance of the domestic stock market and the decline in investments in domestic equities. Despite the benchmark Korea Composite Stock Price Index (KOSPI) surging by approximately 70 percent this year, individual investors have shown a preference for overseas stock investments. The ministry emphasized the need to encourage the repatriation of overseas assets held by exporters and other companies to promote domestic employment and investment.
In response to concerns about the weakening Korean won, the ministry assured that an excessively weak currency was undesirable. It pledged strong commitment and comprehensive policy measures to stabilize the local currency, emphasizing the government’s readiness to intervene effectively in the market.
