Seoul: The government has announced a new initiative to provide temporary tax incentives for retail investors who decide to sell their overseas stocks and reinvest the proceeds into domestic assets. This was revealed by the finance ministry on Tuesday as part of a broader strategy to stimulate domestic investment.

According to Yonhap News Agency, the scheme allows investors who sell overseas equities and convert the resulting funds into Korean won for domestic investment to be eligible for an income deduction on capital gains from these overseas transactions. Currently, such capital gains are taxed at a rate of 20 percent.

The finance ministry clarified that the tax exemption will be limited to 50 million won (approximately US$33,900) per individual. The deductible amount will vary based on the timing of the overseas stock sale, with a 100 percent deduction available for sales completed in the first quarter of 2026, decreasing to 80 percent in the second quarter, and 50 percent in the latter half of the year.

To prevent potential misuse of this incentive, the ministry outlined measures to ensure that funds are not reinvested back into overseas stocks merely to gain tax advantages. Investments made through designated domestic accounts may be freely directed towards domestic stocks and equity funds, but the tax deduction will be recalibrated if investors engage in net purchases of overseas stocks via a separate account.

Additionally, the government is set to introduce a special tax benefit for those investing in currency-hedged products. This measure will allow a deduction of 5 percent from the capital gains on overseas stocks, with a cap set at 5 million won per person.

These initiatives form part of a previously announced package aimed at addressing the ongoing net capital outflows by domestic investors, a factor that authorities believe has significantly contributed to the weakening of the Korean won against the U.S. dollar. The finance ministry emphasized that these measures are temporary and are intended to stabilize the foreign exchange market.

"The revision will be introduced and discussed during an extraordinary session of the National Assembly in February," a ministry official stated.