A bill to deduct up to 100% of capital gains tax if so-called "Korean retail investors trading U.S. stocks" return to the domestic market has passed a National Assembly standing committee.
According to the Ministry of Finance and Economy on the 17th, the National Assembly's Finance and Economy Committee held a full session that day and approved a total of eight amendments to tax laws. First, the approved bills included an amendment to the Act on Restriction on Special Cases Concerning Taxation centered on introducing a special tax regime for the Overseas Stock Domestic Market Reentry Account (RIA).
Accordingly, if an individual investor sells overseas stocks and invests in domestic stocks through an RIA, up to 100% of the capital gains tax on the overseas stock sale will be reduced. Specifically, after depositing overseas stocks into the RIA, converting the funds obtained by selling them into won, and investing those funds in domestic stocks for more than one year, the investor can receive tax benefits.
The capital gains tax reduction rate by timing of overseas stock sales is ▲ 100% if sold by May 31 ▲ 80% if sold by July 31 ▲ 50% if sold by year-end. The original bill said capital gains tax would be 100% deducted if overseas stocks were sold in the first quarter (by the end of this month). But as the bill's handling was delayed, the 100% deduction window was pushed back by two months.
That day, the National Assembly also created a one-year temporary income deduction for capital gains tax on currency-hedged products to aid individual investors lacking tools to manage exchange-rate risk. A bill was also passed to temporarily raise for one year the exclusion from taxable income rate on revenue dividends received from foreign subsidiaries to 100% from the current 95%.
In addition, the Special Tax for Rural Development Act, centered on exempting from The Special Tax for Rural Development the special tax regimes for RIAs and for currency-hedged derivatives, was approved.