South Korea’s finance minister announced Monday the government will scrap plans to significantly lower the threshold for taxing stock gains by wealthy investors, a reversal that reflects concerns about capital flight from one of Asia’s major equity markets.
Deputy Prime Minister Koo Yoon-cheol said the government will maintain the current $3.6 million ownership threshold that determines when investors face capital gains taxes on stock sales.
Under South Korea’s existing tax regime, only investors who own more than $72,000 in a single listed company are subject to capital gains taxes-effectively targeting controlling shareholders or corporate insiders, rather than general retail investors.
The Finance Ministry had proposed in July slashing that threshold to just $72,000, which would have subjected tens of thousands of additional investors to the tax for the first time.
The policy reversal comes as South Korea’s benchmark Kospi index has underperformed regional peers this year, with foreign investors pulling money from Korean stocks amid broader concerns about the country’s economic growth prospects.
Korean officials have been under pressure to boost market activity and prevent further capital outflows.
The original proposal would have aligned South Korea more closely with tax policies in countries like the United States, where capital gains taxes apply to most stock transactions regardless of ownership levels.
However, Korean policymakers ultimately prioritized market competitiveness over tax revenue expansion.
“We comprehensively considered public demand for capital market revitalization,” Koo said during a government meeting at the National Assembly.
The decision suggests Korean authorities remain focused on attracting foreign investment and maintaining Seoul’s position as a regional financial hub.
The threshold reversal may provide some relief to Korean equity markets, which have struggled with low trading volumes and limited foreign participation compared to markets in Hong Kong, Singapore and Tokyo.
International investors often view tax policy changes as key indicators of a country’s commitment to maintaining competitive capital markets.
South Korea’s decision contrasts with global trends toward higher taxation of wealthy investors, as seen in recent U.S. proposals to raise capital gains taxes and similar measures in European countries.
The Korean approach prioritizes market liquidity and foreign investment attraction over progressive taxation goals.
