S Korea offers tax cuts for foreign investors

South Korea on Thursday announced tax breaks for foreigners investing in local bonds to help ease jitters over the country’s foreign exchange liquidity.
Tax will be erased for capital gains including interest if foreign investors buy South Korea’s treasury’s and monetary stabilisation bonds, the Ministry of Strategy and Finance said.
The government will introduce bills in April to amend income and corporate tax laws.
Taxes for interest gained on financial instruments such as bonds are currently between 10 and 14 percent.
Many developed countries already give foreign investors tax breaks for interest earned on their treasury bonds, the ministry said.
It dismissed concerns that South Korea may still be vulnerable to the global credit crunch.
‘The possibility of the country facing a foreign exchange liquidity crisis is extremely thin,’ the ministry and the central Bank of Korea said in a joint statement.
It forecast a 13 billion dollar current account surplus this year, compared to a 6.41 billion dollar deficit in 2008, because imports are falling and fewer people are travelling abroad due to the economic slump.
South Korea has reached currency swap deals with the United States, China and Japan totalling 90 billion dollars to bolster its foreign currency reserves now standing at 201.7 billion dollars, the statement noted.
As of the end of 2008 foreign debts totalled 380 billion dollars.
Of the total, the country has no obligation for 102.7 billion dollars related to currency hedging and advance receipts on shipbuilding contracts.
Taking South Korea’s foreign assets into account and deducting the non-obligatory debts, the country has net foreign assets totalling 70.4 billion dollars, according to the ministry.

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Source:Agence France-Presse . Seoul