Democratic Party Calls for Grace Period... Government Maintains 'Major Shareholder 300 Million Won' Stance

Deputy Prime Minister Hong: "Already Reflected in Enforcement Decree from Two and a Half Years Ago... Only Family Aggregation to Individual Conversion"
Ruling and Opposition Parties to Further Discuss at November Tax Subcommittee

[Image source=Yonhap News]

[Asia Economy Reporter Jang Sehee] There is a clear difference in stance between the Democratic Party of Korea and the government regarding the 300 million KRW threshold for major shareholders subject to capital gains tax on stock transfers. While the Democratic Party advocates for a delay due to concerns about adverse effects on the stock market, the Ministry of Economy and Finance insists on maintaining the 300 million KRW threshold as planned but changing the family aggregation rule to an individual basis as per the existing amendment proposal.

According to the government on the 24th, the major shareholder threshold will remain at 300 million KRW, but considering market conditions, the aggregation method will be switched from family-based to individual-based.

Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, stated at the National Assembly’s Planning and Finance Committee comprehensive audit on the 22nd, "The plan to strengthen the major shareholder threshold from 1 billion KRW to 300 million KRW was already revised in the enforcement decree two and a half years ago, so it must proceed as is," adding, "However, we are preparing to switch from family aggregation to individual aggregation."

According to the current Income Tax Act enforcement decree, the stockholding amount criterion for determining whether someone is a "major shareholder" subject to capital gains tax on stock transfers will be lowered from 1 billion KRW to 300 million KRW starting next year. If a major shareholder sells the relevant stock after April next year based on the end of this year, they will have to pay a capital gains tax of 22-33% (including local tax) on the profits. If the aggregation scope changes from family to individual, the government expects the effective holding amount threshold to rise to around 600 to 700 million KRW.

However, since both ruling and opposition parties oppose the 300 million KRW threshold for major shareholders, additional amendments and supplements cannot be ruled out. Both sides have previously agreed on postponing the reduction of the major shareholder threshold from 1 billion KRW to 300 million KRW.

Choo Kyung-ho, a member of the People Power Party, said earlier, "Most ruling party members also share the same opinion regarding the 300 million KRW major shareholder threshold," adding, "Let’s gather opinions at the November subcommittee and quickly resolve the market uncertainty." He further stated, "The decision-making authority of the law lies with the National Assembly."

Meanwhile, the opposition party has already submitted a partial amendment bill to the Income Tax Act. Representative Choo submitted a bill to the National Assembly that maintains the existing 1 billion KRW threshold and abolishes the family aggregation clause. The amendment bill elevates the criteria for stock ownership ratio and market capitalization in the capital gains tax process, which were previously stipulated in the enforcement decree, to the Income Tax Act itself. The proposal is to regulate stock ownership ratio and market capitalization by law rather than by enforcement decree.

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