Investors seeking an 80% capital gains deduction through a Return to Domestic Investment Account (RIA) must place sell orders in time for the final settlement process to be completed by the end of this month.
The Financial Supervisory Service (FSS) said in a consumer advisory on the 26th that "when overseas stocks are sold in an RIA account, the capital gains deduction rate is determined based on the sale settlement completion date, not the sale order execution date." The capital gains deduction rate for sold overseas stocks is 80% until the end of this month, after which it will be reduced to 50% (until the end of December this year). The deduction applies to overseas stocks acquired by December 23 last year.
The FSS advised that because there is a time gap between the order execution date and the settlement date for overseas stocks, investors must confirm the settlement completion date with their trading brokerage. Investors holding US stocks must sell by the 29th to have settlement completed before the 31st. The tax benefit is granted only when proceeds from the sale of overseas stocks are invested for at least one year from the RIA account into domestic listed stocks, domestic equity funds including exchange-traded funds (ETFs), or deposits.
The FSS also introduced major complaint cases related to Integrated Management Accounts (IMA) and ETFs. IMA products generally cannot be terminated midway, and in addition to management fees, sales fees and performance fees may be charged, so investors should carefully review product disclosure documents before subscribing.
When investing in ETFs through a bank's specified money trust, trust fees and early termination fees are charged in addition to transaction fees and taxes, which can result in an actual ETF return lower than the originally targeted return. For specified money trust ETFs, a high upfront trust fee of around 1% is typically charged at the time of subscription. Since a fee of around 1% also applies when a trust is terminated early, investors should be aware that they may bear high fees in the case of short-term investment.
