On the 17th, the South Korean National Assembly's Finance Committee passed the 'foreign exchange stability law,' which aims to encourage the return of overseas investors, commonly referred to as 'seohakgaemi,' to the domestic market. This law allows individual investors to receive a capital gains tax deduction of up to 100% on foreign stocks sold and reinvested in domestic accounts, provided these stocks were held before December 23 of the previous year. The initiative is expected to stimulate the inflow of dollars into the domestic market amid rising exchange rates due to supply-demand imbalances in the foreign exchange market.

Initially, the law proposed a tax exemption for all foreign stock sales until the end of the first quarter; however, due to delays in the legislative process, the deadline has been extended to the end of May. The rate of tax deduction will decrease to 80% for sales made until the end of July and 50% for sales until the end of the year, with a cap on the deduction set at 50 million won per sale. The Finance Committee also introduced new tax provisions for individuals who buy foreign exchange hedging products, stating that 5% of the purchase amount would be deductible from capital gains, thereby potentially increasing the supply of dollars in the foreign exchange market and mitigating risks for investors.

Additionally, the legislation raises the tax exemption rate for domestic firms receiving dividend income from foreign subsidiaries from 95% to 100% by year-end, thereby providing additional incentives for companies to repatriate retained earnings. The final vote on this comprehensive tax reform is scheduled for the plenary session on the 19th, with additional regulatory details to be announced shortly after. This move is seen as crucial for stabilizing the local economy while facilitating international investment strategies.