As the Won Weakens, Korea Turns to Tax Policy to Attract Investor Capital (Image supported by ChatGPT)
SEOUL, Jan. 20 (Korea Bizwire) – The South Korean government said Tuesday that it would introduce a temporary tax incentive aimed at encouraging retail investors to bring money back home, as policymakers seek to stem persistent capital outflows that have weighed on the nation’s currency.
Under the plan, individual investors who sell overseas stocks this year and reinvest the proceeds in domestic assets for at least one year will be eligible for an income deduction on capital gains earned from foreign equity sales, according to the Ministry of Economy and Finance.
Capital gains on overseas stock investments are currently taxed at 20 percent.
The incentive will be capped at 50 million won, or about $33,900, per person, with the size of the deduction tied to when the assets are sold. Investors who liquidate overseas holdings in the first quarter of 2026 will be eligible for a full 100 percent deduction, while those selling in the second quarter will receive an 80 percent deduction. Sales made in the second half of the year will qualify for a 50 percent deduction.
Officials said the program is designed to reward early participation while limiting speculative behavior.
To prevent investors from exploiting the system by briefly repatriating funds only to reinvest them abroad, the government said it would impose safeguards. While money transferred into designated domestic accounts may be invested freely in local stocks and equity funds, the tax benefit will be reduced if investors make net purchases of overseas equities through separate accounts during the holding period.
An advertisement promoting overseas investment services from a local brokerage is displayed on a screen in western Seoul on Dec. 25, 2025. (Yonhap)
The ministry also announced a separate incentive aimed at encouraging currency stability. Retail investors who purchase currency-hedged investment products will be allowed to deduct 5 percent of their investment amount from overseas stock capital gains, with the deduction capped at 5 million won per person.
The measures form part of a broader package of tax and foreign-exchange policies unveiled earlier by the government, as authorities grapple with sustained net outflows from domestic investors — a trend they say has been a key factor behind the won’s weakness against the U.S. dollar.
Officials stressed that the incentives will be temporary, intended to ease pressure on the foreign-exchange market rather than permanently alter the tax system.
“The revision will be submitted for discussion during an extraordinary session of the National Assembly in February,” a ministry official said.
Ashley Song (ashley@koreabizwire.com)
