S. Korea to offer tax benefits to retail investors investing back home

Seoul, Dec 24 The finance ministry here on Wednesday announced a package of tax benefits aimed at revitalising the domestic capital market, including a new incentive program for retail investors who sell overseas stocks and reinvest the proceeds in domestic assets.

The latest steps come as part of a series of measures by foreign exchange authorities amid continued net capital outflows by domestic investors, with the Korean won nearing its weakest level against the U.S. dollar in 16 years, reports Yonhap news agency.

Under the plan, individual investors who sell overseas stocks, convert the proceeds into Korean won and make long-term investments in domestic equities will be granted temporary tax relief on capital gains from overseas stock sales for a period of one year, the Ministry of Economy and Finance said.

The ministry added that tax relief will be applied on a differentiated basis depending on the timing of the reinvestment, noting that the specific details will be finalised after further review.

In addition, the government will support major brokerage firms in swiftly launching forward-selling products for individual investors, as many retail investors currently lack sufficient tools to manage FX risks.

To reduce double taxation on dividends received by domestic parent companies from overseas subsidiaries, the government will raise the dividend income exclusion ratio from the current 95 percent to 100 percent, the ministry said.

"While the domestic stock market has shown one of the strongest performances among global capital markets this year, individual investors' overseas stock investments have surged, whereas investment in domestic equities has declined," the ministry said.

The benchmark Korea Composite Stock Price Index (KOSPI) has surged about 70 percent so far this year, driven by government-led market reform measures and optimism surrounding the AI boom.

The ministry further noted that calls are growing for measures to encourage the repatriation of overseas assets held by exporters and other companies in order to attract domestic employment and investment.

Earlier in the day, the ministry said in its latest verbal intervention that an excessively weak Korean won was not desirable, adding that the market would soon see the government's strong commitment and capacity for comprehensive policy measures to stabilise the local currency.

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