If overseas investors return to the domestic stock market by May, they will be eligible for a deduction of up to 100 percent of capital gains tax.

Parliament held a plenary session on Monday and passed, under a bipartisan agreement, revisions to the Special Taxation Treatment Control Act and the Rural Special Tax Act, among others, as part of the so-called "three bills for exchange rate stability".

Under the revisions, if an individual investor invests for 1 year in the domestic stock market through a "return-to-domestic-market account" (RIA) using funds from selling overseas shares that the investor had held before Dec. 23 last year, the investor will receive a deduction of up to 100 percent of capital gains tax.

The deduction rate depends on when the sale is made. A sale by May 31 qualifies for a 100 percent capital gains tax deduction. The rate is 80 percent for a sale by July 31 and 50 percent for a sale by Dec. 31.

The contribution limit for an RIA account is 50,000,000 won, and the tax treatment will be introduced for 1 year only.

A new tax benefit was also created to ease the tax burden on capital gains from selling overseas shares for investors who invest this year in "FX hedge derivatives" to hedge exchange rate fluctuation risks.

The benefit allows a deduction equal to 5 percent of the purchase amount of FX hedging products from the capital gains amount on overseas shares. The deduction is capped at 5,000,000 won. It is a tax policy intended to ease upward pressure on the exchange rate by reducing individual investors' demand for dollars.