Will Some Regulations Be Relaxed Amid Controversy Over the "3 Billion Won Capital Gains Tax for Major Shareholders"?

[Image source=Yonhap News]

[Sejong=Asia Economy Reporter Kim Hyunjung] As market backlash intensifies against the planned tightening of capital gains tax requirements on stock transfers next year (from 1 billion KRW to 300 million KRW for major shareholders), the government is increasingly likely to reconsider the related regulations. There are talks within and outside the government and political circles that the rules, mainly the controversial family aggregation provisions, will be relaxed and re-announced.

According to related ministries on the 4th, the Ministry of Economy and Finance is reviewing the possibility of easing the major shareholder requirements together with the Financial Services Commission. This comes in response to voices opposing the tax burden as the stock holding threshold for determining 'major shareholders' subject to capital gains tax will be drastically lowered from the current 1 billion KRW to 300 million KRW starting next year.

Under the originally announced regulations, shareholders holding more than 300 million KRW worth of a specific stock as of the end of this year, the major shareholder determination date, will be classified as major shareholders under tax law and must pay 22-33% (excluding basic deduction, including local tax) of capital gains as tax from April next year.

At this time, the stock holding amount is calculated by aggregating not only the shareholder's own holdings but also those of spouses (including common-law partners), parents, grandparents, great-grandparents, children, grandchildren, great-grandchildren, and other special related parties such as affiliated companies under management control. This was introduced following the government's tax law revision in 2017. The government has lowered the major shareholder threshold from 2.5 billion KRW to 1.5 billion KRW in 2018, 1 billion KRW in 2020, and 300 million KRW in 2021.

Not only general investors but also the ruling party has requested a review of the major shareholder scope at the party policy committee level. Kim Byungwook, the ruling party's ranking member of the National Assembly's Political Affairs Committee and chairman of the Special Committee on Capital Market Activation, held a press conference on the 29th of last month, stating, "The expansion of the major shareholder scope must be postponed." He said, "There are many concerns that individual investors' net selling will surge excessively at year-end," adding, "It will cause unnecessary volatility in the domestic stock market abruptly."

Regarding the family aggregation rule, there are expectations inside and outside the government that it may be revised since it was originally introduced to prevent intentional tax evasion by controlling shareholders of large corporations. A Ministry of Economy and Finance official said, "We are internally reviewing the expansion of the major shareholder scope."

Meanwhile, a petition titled "Abolish the 300 million KRW major shareholder capital gains tax" posted on the Blue House's national petition site has garnered support from over 200,000 people.

This content was produced with the assistance of AI translation services.