Tax-free return account requires full reinvestment at home

Yonhap News

Investors must fully reinvest proceeds from overseas stock sales into domestic assets to qualify for tax exemptions under the government’s newly announced Return Investment Account (RIA), according to the Ministry of Economy and Finance.

Under the RIA scheme unveiled Wednesday, investors who sell up to 50 million won ($34,500) worth of overseas-listed stocks and reinvest the proceeds in the Korean market for at least one year will be exempt from capital gains tax on those foreign assets. The program is expected to launch in the first quarter of next year.

Only overseas-listed stocks and exchange-traded funds such as Tesla, Nvidia, QQQ and VOO qualify. Selling U.S.-linked ETFs listed in South Korea and reinvesting domestically does not confer tax benefits, officials said.

Each individual may open only one RIA, and up to 50 million won worth of overseas stocks may be transferred into the account. As a result, investors cannot repeatedly move separate batches of overseas stocks into the RIA across different quarters to claim multiple tax exemptions. For example, transferring 50 million won worth of Tesla shares into an RIA in the first quarter to receive a full capital gains tax exemption, and then transferring another 50 million won worth of Nvidia shares in the second quarter to seek an additional tax benefit, would not be allowed.

The RIA also requires investors to remain invested in domestic stocks for at least one year. A finance ministry official said investors will be allowed to freely switch holdings within the account, stressing that the requirement does not mean a single stock must be held for a full year.

For instance, an investor who transfers 50 million won worth of Nvidia shares into an RIA may initially invest the proceeds entirely in Samsung Electronics, then later sell those shares and reallocate the funds across multiple stocks such as SK hynix, Hanwha Ocean and Alteogen, as long as the funds remain invested in the domestic market for at least one year.

While investors are free to switch between domestic stocks within the account, holding cash for extended periods will disqualify them from tax benefits. Some residual cash may be permitted due to price mismatches, though detailed thresholds will be set during the legislative process.

Concerns raised by lawmakers that investors could arbitrage the system by buying overseas stocks in separate accounts are under review, the ministry said, adding that safeguards are needed to ensure the scheme supports currency stability rather than mere tax avoidance.