Venture Stock Options Tax-Free Up to 200 Million Won... Increased Tax-Free Limit for Venture Capital Equity Acquisition

Bang Gi-seon, 1st Vice Minister, Holds Meeting with Venture and Startup Companies
Extension of Income Tax Reduction Period to 10 Years for Foreign and Returning Domestic Technical Personnel

[Asia Economy Sejong=Reporter Kwon Haeyoung] The government will raise the non-taxable limit on stock options for venture companies from the current 50 million KRW to 200 million KRW to support the rapid scale-up of venture and startup companies through the influx of outstanding talent and activation of private investment. The income tax exemption period for foreigners and domestic returning technical personnel will be extended to 10 years, and the non-taxable limit on capital gains and dividend income from old shares acquired by venture capital firms will also be expanded to 30% of paid-in capital increase funds.

Bang Kiseon, First Vice Minister of the Ministry of Strategy and Finance, announced this on the 27th during a meeting with venture and startup companies at Tipstown in Seoul. This meeting was organized to listen to the difficulties and suggestions from the venture and startup field and to reflect them in future policy directions.

First, the non-taxable limit on stock options for venture companies will be raised from the previous 50 million KRW to 200 million KRW. To attract outstanding foreign and domestic returning personnel, the 50% income tax reduction period will also be extended from the current 5 years to 10 years. A plan to apply a flat tax rate of 19% instead of the current comprehensive income tax rate to foreign workers is also being pursued. Open innovation will be actively expanded, including corporate venture capital (CVC) linked with large and medium-sized enterprises and the development of win-win models with platform companies.

Tax support for venture capital firms’ equity acquisitions will also be expanded. The non-taxable limit on capital gains and dividend income from old shares acquired by venture capital firms will be increased from the current 10% of paid-in capital increase funds to 30%. By focusing on follow-up investment areas where market difficulties are significant, private venture investment will be expanded, and the activation of exit markets such as mergers and acquisitions (M&A) and initial public offerings (IPO) will be promoted. Funding methods for venture investment will be diversified, including complex financing, and stable management conditions such as multiple voting rights will continue to be expanded.

Furthermore, the government will actively support the global market entry of domestic venture and startup companies through the operation of a global unicorn project and the establishment of overseas local startup infrastructure. The foundation for expanding the inflow of excellent overseas entrepreneurs and global venture capital into Korea will also be strengthened.

Vice Minister Bang emphasized, "We will transform universities into cradles of startups to expand the base of innovative entrepreneurship by maximizing the use of private sector capabilities and focus on supporting leading companies in new industries," adding, "We will actively reform unnecessary regulations that restrict entry into new markets through the 'Economic Regulatory Innovation Task Force (TF)' so that startups with fresh ideas can freely demonstrate their capabilities."