The South Korean won (Reuters filepix)

SEOUL (Dec 21): South Korea will relax the threshold for major shareholders who are subject to capital gains tax to those holding five billion won (US$3.83 million) worth of listed stocks, eased from current one billion won, its finance ministry said on Thursday.

Starting January 2024, investors holding more than five billion won of shares in a single company will be considered a large shareholder who will need to pay capital gains tax of 20% to 25%, the ministry said in a statement.

"This measure takes into account the capital market situation, such as the high borrowing costs environment and heightened internal and external uncertainty, and is designed to ease market volatility caused toward the year-end stock sell-offs to avoid taxes," the ministry said.

Easing of the capital gains tax rule comes ahead of the general election slated for April 2024, when the government often attempts to appease retail investors to win votes.

South Korea said on Nov 5 that it is banning stock short-selling until June 2024 to improve rules and systems, temporarily boosting share prices but inviting criticism that it will make the market less transparent and reduce liquidity.