Korea to Allow Multiple RIA Accounts; $36,000 Tax Exemption Cap Stays

South Korea will allow investors to open multiple "Return to Domestic Market Accounts" (RIA), which offer tax benefits to retail investors who sell overseas stocks and reinvest proceeds in domestic equities. The government initially planned to limit holdings to one account per person but revised the policy to reflect the reality that investors maintain accounts at multiple brokerages. The tax deduction cap remains at 50 million won ($36,000).

According to the financial investment industry and political sources on the 22nd, investors will be able to open RIA accounts at multiple securities firms. Although the "Exchange Rate Stabilization Three Laws" providing the legal basis for tax benefits have not yet passed the National Assembly plenary session, the product launch date has been set for the 23rd.

Under the new system, investors can open and use RIA accounts at their preferred brokerages. The deduction cap of 50 million won applies to the combined sale amounts across all accounts. A Ministry of Economy and Finance official said, "There were complaints that limiting it to one account per person would force investors to transfer holdings from Company A to Company B, causing inconvenience. We considered the convenience of those who regularly use multiple brokerage accounts."

Approximately 20 securities firms are expected to launch accounts on the 23rd. Investors who sell overseas stocks by May 31 this year will receive a 100% exemption on capital gains tax, with the rate dropping to 80% through July 31 and 50% through year-end.

The key issue is that with the exchange rate remaining above 1,500 won to the dollar, Korean retail investors in U.S. stocks can profit from currency gains simply by holding their positions, reducing the incentive to sell. Additionally, with U.S. markets declining over the past three to four months, fewer investors than expected may be willing to sell hastily.

With multiple account holdings now permitted, competition among securities firms to secure customers is expected to ease somewhat. The Korea Financial Investment Association has also decided not to implement separate marketing restrictions after the launch.