This step, introduced by the Ministry of Strategy and Finance, has been adopted to ease capital inflows and to curb increases in short-term debt.
This is the second such step the ministry has taken this year to ease market volatility.
Earlier this year, the ministry re-introduced a 14% withholding tax on interest paid to foreign investors in government bonds. The ministry also lowered the ceiling on bank foreign exchange positions and imposed a levy on bank foreign currency liabilities.
This latest measure concentrates on Kimchi bonds – foreign currency-denominated bonds issues in South Korea.
Foreign investors will be required to pay a 14% tax on interest income on such bonds.
The changes, which are subject to parliamentary approval, will take effect next year.
