Major Shareholder Requirement Remains at 300 Million KRW... "Issues of Tax Fairness and Policy Consistency"
[Asia Economy Reporter Jang Sehee] Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, has expressed his intention to proceed with the plan to tighten the criteria for major shareholders who pay capital gains tax on stocks to 'holding 300 million KRW per stock (currently 1 billion KRW)' starting next year. However, due to strong opposition from general investors and requests for reconsideration from the ruling party, supplementary measures are expected to be prepared.
According to the government on the 9th, the Ministry of Economy and Finance has reportedly concluded that it is difficult to change the 300 million KRW threshold for major shareholder requirements. The rationale is to maintain fairness between various types of income and capital gains arising from stocks.
The government also expressed concerns that this could undermine policy consistency. Three years ago, it was decided to gradually lower the major shareholder criteria through related legal amendments, and reversing this could damage the government's credibility.
In fact, Deputy Prime Minister Hong said regarding the 300 million KRW major shareholder requirement, "The 300 million KRW is per stock. For two stocks, it would be 600 million KRW." He added, "There may be opinions that it is too high or too low, but from the government's perspective, since the law was changed two years ago and the enforcement decree announced the 300 million KRW threshold, reversing it would be a difficult decision considering policy consistency and fairness in asset income taxation."
The current Income Tax Act enforcement decree requires major shareholders holding more than 1 billion KRW in a single company to pay capital gains tax ranging from 22% to 33% (including local tax) on stock sales. Those who do not meet this criterion only pay securities transaction tax. However, from April next year, the major shareholder threshold is planned to be lowered to 300 million KRW.
Moreover, the regulation that includes shares held by direct relatives and spouses when calculating major shareholder holdings has sparked controversy over a 'guilt-by-association' system.
In response, the government plans to lower the stock holding amount threshold to 300 million KRW as scheduled but is considering switching from household aggregation to individual aggregation.
Deputy Prime Minister Hong explained, "If switched to individual aggregation, the 300 million KRW applies per stock," adding that changing from household to individual aggregation would effectively relax the threshold to about 600 million to 700 million KRW.
Meanwhile, on the 5th, a post titled 'Strongly Requesting the Dismissal of Minister Hong Nam-ki of the Ministry of Economy and Finance' was uploaded on the Blue House's public petition board. This post has attracted the attention of individual investors, gaining over 50,000 endorsements by the afternoon of the 7th.
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