[Asia Economy Reporter Koh Hyung-kwang] The controversy over lowering the major shareholder requirement from a 1 billion KRW individual stock holding amount per item to 300 million KRW or more is expected to come to a close soon. Due to the backlash from so-called Donghak Ants and individual investors, and with the political sphere stepping in to consider adjustments, a final conclusion is expected this week.
According to the financial investment industry on the 2nd, the ruling party, government, and Blue House held a four-hour closed-door meeting yesterday evening at the Prime Minister’s official residence in Samcheong-dong, Jongno-gu, Seoul, discussing recent issues such as major shareholder criteria, property tax, and the Korean New Deal.
Regarding the major shareholder criteria for imposing capital gains tax on stocks, it is reported that the government proposed a relaxed amendment of '5 billion KRW per individual,' compared to the existing 3 billion KRW. This is a step back from '3 billion KRW combined for family' to '3 billion KRW per individual,' and then further relaxed to '5 billion KRW per individual.'
However, the ruling party still insisted on a 'two-year grace period,' making it difficult to reach a consensus. The party argues that due to strong opposition from individual investors and concerns that a large volume of sell-offs could destabilize the stock market immediately, they are demanding to maintain the current 'major shareholder 1 billion KRW' threshold until 2023.
A final decision is expected to be announced as early as this week. A government official stated, "The major shareholder issue cannot be prolonged, so a conclusion will be reached soon and may be announced as early as this week."
If the existing policy remains unchanged, the stock holding threshold for classification as a major shareholder will be lowered from 1 billion KRW to 300 million KRW starting next year. According to the Enforcement Decree of the Income Tax Act, currently, if an individual holds more than 1% (2% for KOSPI) of a specific stock or the holding amount exceeds 1 billion KRW, they are classified as a major shareholder, but this standard will be significantly lowered from next year. If a major shareholder sells the stock after April next year, capital gains tax of 22-33% (including local tax) will be imposed on the profits.
Because of this, individual investors strongly oppose maintaining the major shareholder requirement at 300 million KRW despite the economy having grown compared to the past, arguing that it is outdated and will negatively affect stock market revitalization. According to the Korea Securities Depository, as of the end of last year, there were 80,861 shareholders holding stocks of '300 million KRW or more but less than 1 billion KRW' in specific stocks. The amount of stocks they hold is 41.5833 trillion KRW, about 10% of the total stock holdings of individual investors, which is 417.8893 trillion KRW. Considering the strong stock investment enthusiasm of Donghak Ants this year, the number of shareholders subject to the changed major shareholder criteria is expected to have increased significantly compared to last year.
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