Tax Exemption on Offshore Funds to Be Extended

By Park Hyong-ki

Staff Reporter

The government has decided to extend tax exemption on capital gains from investing in offshore funds. It will also allow tax exemption on stock transactions on funds.

The Financial Services Commission said it reached an accord with the Ministry of Strategy and Finance to extend such tax exemption measures.

Hong Young-man, director general of the capital market policy division for the commission, said the agreement came as part of efforts to prevent the stock market from further deteriorating amid the global economic slowdown.

``We hope this extension will help turn the stock market around,'' said Hong.

The exemption program on stock transactions through domestic public offering funds was initially slated to expire by the year's end.

Also, investors in offshore funds created here and investing in foreign equities were only to enjoy tax exemption on capital gains until August next year.

Offshore funds set up in foreign markets and investing in both foreign and domestic stocks were not included in the tax waiver program last year.

Also, he said that the two sides agreed not to look into introducing a tax on derivatives transactions until the stock market recovers from the bearish run.

``We agreed to do so for the sake of stock market stability,'' Hong said.

However, the regulator will beef up its monitoring of short selling through securities lending practices to maintain market credibility.

It called on the National Pension Service, the country's pension fund manager, and other institutional investors to invest more in domestic stocks to help stabilize the stock market from growing jitters and volatility.

``I believe the pension fund has the capability to invest more than 10 trillion won in the stock market,'' said Hong.

``We are expecting the fund will follow through with its stock investment plan,'' he added.

The pension fund had announced its plan to increase its stock investment portion to 40 percent of its portfolio by 2012.

phk@koreatimes.co.kr