South Korea's ruling party and government have agreed to pass the "Three Currency Stabilization Bills" within this month, centered on creating a capital gains tax exemption for the Reshoring Investment Account (RIA), to defend against high exchange rates caused by the Middle East crisis. The move aims to lower exchange rates by encouraging the return of investment funds that have flowed into overseas stock markets. RIA policy account products are expected to launch as early as next month.
The Democratic Party of Korea announced this decision on the 6th after holding a party-government consultative meeting with the Ministry of Economy and Finance. Rep. Jeong Tae-ho, the ruling party's chief secretary on the National Assembly's Strategy and Finance Committee, said, "The government requested swift processing of the three bills submitted to the National Assembly for exchange rate stabilization."
The Three Currency Stabilization Bills refer to amendments to the Restriction of Special Taxation Act and the Special Tax on Rural Development Act, which Rep. Jeong introduced in January this year. "We call them the 'three bills' because the two pieces of legislation contain three main provisions," Rep. Jeong explained.
The amendments establish new capital gains tax exemption requirements allowing those who sell overseas stocks to receive up to 100% tax deduction when investing in domestic capital markets through RIA, depending on the timing of the sale. However, the current draft requires overseas stocks to be sold within the first quarter of 2026 to receive the full 100% deduction, making revisions inevitable. "As legislation has been delayed, the timing for the 100% income deduction will be readjusted during the bill review process," Rep. Jeong explained.
Additionally, new capital gains tax deduction requirements for currency hedging products will be established to help individual investors manage exchange rate volatility risks. The key provision allows 5% of currency hedging product purchases to be deducted from overseas stock capital gains, up to a limit of 5 million won.
The bills also seek to temporarily raise the "dividend exclusion ratio"—the percentage of dividend income that domestic parent companies receive from overseas subsidiaries that is excluded from taxable income—from 95% to 100%. This aims to encourage the repatriation of earnings retained in overseas subsidiaries.
The party and government plan to pass these Three Currency Stabilization Bills as early as December 19th. "We will convene the Strategy and Finance Committee subcommittee next week to deliberate on the bills," Rep. Jeong said. "We're looking at around the 19th as possible for floor submission, and the government has requested expedited processing."
Given concerns that the special taxation law amendments alone cannot resolve the high exchange rate issue, various other bills are expected to be discussed, including amendments to the National Pension Act that would allow the National Pension Service to issue foreign currency bonds. Choi Byeong-kwon, senior specialist advisor to the Strategy and Finance Committee, noted, "Expanding foreign currency supply by inducing overseas stock sales is a temporary measure to stabilize foreign exchange supply-demand imbalance and has limitations as a fundamental solution to the high exchange rate problem."
However, the timing of committee meetings remains uncertain since the Strategy and Finance Committee chair belongs to the People Power Party. A Democratic Party official said, "It will be difficult for the People Power Party to ignore requests to convene the committee for bills necessary for exchange rate stabilization. We will work to persuade them to hold the committee meeting."
Meanwhile, the party and government announced they are considering introducing maximum price controls by fuel type to limit price increases at gas stations. A Democratic Party official said, "The government's position is that it will prepare to introduce maximum price controls by fuel type and region if necessary. The pace of response will be determined based on on-site inspections of gas stations."
Regarding this, Deputy Prime Minister and Minister of Economy and Finance Koo Yun-cheol emphasized at the consultative meeting, "A joint government task force is conducting comprehensive inspections of gas stations and monitoring hoarding and other issues. We will respond with zero tolerance for any legal violations, with the determination that we absolutely cannot allow profiteering that exploits the national situation."