The government guides domestic retail investors in the stock market through the "Three Laws of Exchange Rate Stability"...

The government decided on the 14th to revise the so-called Three Laws for Exchange Rate Stabilization, including tax support, to redirect individual investors’ funds staying in overseas stock markets back to the domestic stock market. Recently, due to external uncertainties such as instability in the Middle East, the won-to-dollar exchange rate has remained at a high level. This move reflects the government’s policy intention to reduce demand for the dollar and guide capital flows into the domestic capital market.

At the State Council meeting held at Cheong Wa Dae, chaired by President Lee Jae-myung, 31 legal enactments including amendments to the “Tax Exemption Limitation Act” and the “Agricultural and Fishery Village Special Tax Act,” 12 presidential decrees, and 5 general proposals were deliberated and approved. The core content is to significantly reduce the tax burden for so-called “Western learning ants” (referring to Korean retail investors investing in overseas stocks) when they meet certain conditions to return to the domestic market. If individual investors sell their overseas stocks before December 23, 2025, deposit the proceeds into a “domestic market return account,” and invest in the domestic stock market for one year, they can enjoy a tax deduction of up to 100% on overseas stock transfer gains.

The government also announced measures to ease the pressure of rising exchange rates. It decided to apply a new tax exemption for gains from the sale of foreign exchange hedging derivatives, aimed at reducing the risk of exchange rate fluctuations this year. Currency hedging refers to investing in financial products with opposite directions to reduce losses caused by sharp rises or falls in exchange rates. The government believes such support will help reduce additional dollar demand from individual investors. Additionally, the proportion of dividends received by domestic parent companies from overseas subsidiaries that are not subject to taxation—i.e., not included in taxable income—will be temporarily increased from 95% to 100%. This is interpreted as a measure to increase domestic capital inflows into enterprises.

The meeting also addressed proposals aimed at reducing burdens in the energy and logistics sectors. The government approved the “Emergency Supply and Demand Adjustment Measures for Petrochemical Products,” which prohibits hoarding of raw materials for petrochemical products. The purpose is to prevent market disruption during supply chain instability and maintain fair trading order. Meanwhile, to support transportation and logistics industries burdened by high oil prices, it was decided to exempt line buses and late-night freight vehicles operated by Korea Road Corporation from toll fees on expressways for one month.

In addition, to facilitate the relocation of the Presidential Office from Cheong Wa Dae, the meeting approved a general contingency fund expenditure of 20.58 billion won for the reorganization of the Ministry of National Defense and the Joint Chiefs of Staff office buildings, as well as a purpose contingency fund expenditure of 19.57 billion won for personnel and operational expenses related to the constitutional revision referendum management. These measures address current issues such as foreign exchange market instability, energy price burdens, and government organizational restructuring. Market analysts believe that the key variable determining the policy’s effectiveness is how much overseas investment funds can actually return to the domestic stock market. Such trends may continue in the future depending on exchange rate stability and whether domestic stock supply and demand improve.