The South Korean government announced on January 20, 2026, temporary tax incentives for retail investors selling overseas stocks this year and reinvesting in domestic assets. The measure aims to address capital outflows by domestic investors that have contributed to the depreciation of the Korean won against the U.S. dollar.
The Ministry of Economy and Finance announced on January 20, 2026, a temporary tax incentive scheme allowing retail investors who sell overseas equities this year and convert the proceeds into Korean won for investment in domestic assets for at least one year to claim an income deduction on capital gains from those sales. Capital gains on overseas stock sales are currently taxed at 20 percent, with the deduction capped at 50 million won ($33,900) per person. The deductible amount varies by sale timing: 100 percent for the first quarter of 2026, 80 percent for the second quarter, and 50 percent for the second half of the year.
To prevent abuse, such as reinvesting in overseas stocks just to exploit the break, the ministry introduced safeguards. Funds in designated domestic accounts can be freely invested in domestic stocks or equity funds, but the deduction will be adjusted if net purchases of overseas stocks occur through separate accounts. Additionally, a special benefit offers a 5 percent deduction of the investment amount from overseas stock capital gains for those investing in currency-hedged products, capped at 5 million won per person.
This initiative forms part of a broader package of tax incentives and foreign-exchange measures to counter ongoing net capital outflows by domestic investors, which officials blame for the Korean won's depreciation against the U.S. dollar. "The revision will be introduced and discussed during an extraordinary session of the National Assembly in February," a ministry official said. The measures are temporary for this year to stabilize the foreign exchange market.
