[2020 National Audit] Hong Nam-gi "Reviewing Major Shareholder Taxation from Household Aggregation to Individual Basis"

No Change to Major Shareholder Requirement of 300 Million KRW for Capital Gains Tax on Stocks... Tax Equity Maintained

[Image source=Yonhap News]

[Asia Economy Reporter Jang Sehee] Deputy Prime Minister and Minister of Strategy and Finance Hong Nam-ki stated that the government is "considering changing from a household aggregation method to an individual aggregation method" regarding the adjustment of the tax base for capital gains tax on major shareholders. This is the first time the government has announced a policy to change the aggregation method.

Deputy Prime Minister Hong made this remark on the 7th during the '2020 National Assembly Audit' held at the Government Complex Sejong, in response to a question from Woo Won-shik, a member of the Democratic Party of Korea.

According to the current Enforcement Decree of the Income Tax Act, investors (major shareholders) holding stocks worth 1 billion KRW or more in a single company must pay capital gains tax of 22-33% (including local tax) on the capital gains when selling the stocks. The government plans to lower the threshold from 1 billion KRW to 300 million KRW starting April 2021 to expand the taxable base.

At this time, the determination of major shareholder status is based on the aggregation of stocks held by family members, which has caused controversy as it requires checking stock holdings even for adult households living independently and managing their own economic activities. Despite strong criticism, some speculated that the criteria for major shareholder capital gains tax would be revised, but this was dismissed.

Assemblyman Woo said, "It is inappropriate to impose taxes by considering families holding more than 300 million KRW in individual stocks as major shareholders," and pointed out, "Household aggregation was a standard applied to conglomerates to prevent tax evasion through disguised ownership or proxy holdings while increasing control."

In response, Deputy Prime Minister Hong said, "Lowering the major shareholder tax base to 300 million KRW has been a policy set for two years from the perspective of tax fairness between asset income and earned income rather than a tax increase," and added, "We are considering switching from household aggregation to an individual basis."

However, regarding the question that "considering stockholders holding more than 300 million KRW as major shareholders does not align with public sentiment," Deputy Prime Minister Hong made it clear that there are no plans to change, citing "consistency in government policy."

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