The draft regulation cuts to 5 percent from 25 percent the shareholding ownership threshold at which capital gains tax on listed securities transactions is triggered for such investors, the finance ministry said in a statement.
The remarks followed a note late on Friday by international equity index compiler MSCI that said the proposal, if implemented, could potentially have negative impacts on Korean market accessibility.
"The impact will be very limited and foreign investors subject to tax treaties will be excluded from those subject to taxation," the ministry said.
The revision announced by the ministry this month will cut the threshold for capital gains tax set for listed securities transactions by non-residents and foreign corporations.
The Daeshin Securities said in a note on Monday that the new tax rule was likely to weigh on sentiment for foreign investment until the South Korean government provided a clear guideline.