50 Million Won Income Deduction and 9% Separate Taxation: Government to Reform Capital Market Tax System

The government will push for tax reforms to revitalize the domestic capital market and stabilize the foreign exchange market as a follow-up measure to the 2026 economic growth strategy. A draft amendment to the Restriction of Special Taxation Act and the Special Rural Development Tax Act, which will introduce a new income deduction for converting proceeds from overseas stock sales into won and reinvesting them domestically, tax incentives for currency-hedged products, and eased taxation on dividends from overseas subsidiaries, is scheduled to be discussed at the provisional session of the National Assembly in February.
The Ministry of Economy and Finance announced on the 19th that it will pursue a tax reform plan along these lines.
First, the government will introduce a new system under which, if funds from the sale of overseas stocks are converted into won through a Reshoring Investment Account (RIA) and invested in Korea for one year, an income deduction will be granted on capital gains from overseas stock transactions. The maximum amount of sale proceeds eligible per person is 50 million won, and the deduction rate will vary depending on the timing of the sale: 100% for sales in the first quarter of this year, 80% in the second quarter, and 50% in the second half.
Funds deposited into an RIA may be freely invested in domestically listed stocks, domestic equity funds, and similar products. However, if an investor has made net purchases of overseas stocks through a regular account, the income deduction benefit will be adjusted in proportion to that amount.
In addition, when individuals invest in currency-hedged products, a special measure will allow a deduction equal to 5% of the investment amount from capital gains on overseas stocks. The maximum deduction per person will be 5 million won. At the same time, the portion of dividend income from overseas subsidiaries that can be excluded from taxable income for domestic parent companies will be raised from the current 95% to 100%.
These special tax measures for repatriating overseas stock investments, incentives for currency-hedged investments, and the higher exclusion rate for dividend income from overseas subsidiaries will all apply on a temporary basis this year.
Furthermore, if investors hold a stake for at least three years in the National Growth Fund, a public participation vehicle scheduled for launch between June and July this year, dividend income generated within a contribution limit of 200 million won will be subject to a separate 9% tax rate.
Income deduction benefits will also be provided by investment size. For investments up to 30 million won, 40% will be deductible; for the 30 million to 50 million won portion, 20%; and for the 50 million to 70 million won portion, 10%. The same separate 9% tax rate will apply to Business Development Companies (BDC).
The amendment will be introduced in the form of a member-sponsored bill and is expected to be discussed at the provisional session of the National Assembly in February. The Ministry of Economy and Finance plans to coordinate with relevant institutions to sequentially roll out financial products eligible for these tax benefits, including the Reshoring Investment Account, in line with the timing of the law’s implementation.
hippo@fnnews.com Kim Chan-mi Reporter