Korean gov’t to ease targets subject to capital gains tax for stock transfers

[Photo by Yonhap]

The South Korean government will ease the ceiling for large shareholders subject to the capital gains tax for stock transfers to 5 billion won ($3.8 million) from 1 billion won.

According to the government on Wednesday, the Ministry of Economy and Finance will announce a revision in the enforcement ordinance of the Income Tax Law on Thursday. The ease in the large shareholder ceiling can be amended by the government without the National Assembly revising the law.

Currently, large shareholders are defined as those with more than 1 percent ownership in a Kospi-listed company or with a stock that is valued more than 1 billion won. These large shareholders are liable to a 20 percent tax on capital gains following stock sales.

Big investors tend to divest their stocks at the end of the year to evade hefty taxes imposed on their stock ownership, resulting in a series of price declines.

“Lifting the transfer tax on stock ownership was one of the pledges that President Yoon Suk Yeol made during his presidential campaign,” said an unnamed senior official from the government. “The amendment aims to prevent possible stock price falls.”

Earlier, Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho told journalists that the government is not “actively considering easing the transfer tax threshold for high net worth investors.”

The amendment, however, suggests a shift in the government’s position following the recent downturn in the stock market, acknowledging that retail investors may bear the brunt of the market decline.