Corporate Tax Cuts for Companies Implementing Shareholder Return Policies (Comprehensive)

Choi Sang-mok, 'Discussion on Capital Market Advancement'
Corporate Tax Relief for Companies That Cancel Treasury Shares
Dividend Income Tax Burden Eased for Shareholders of Companies Increasing Dividends

The government has decided to ease corporate taxes for companies implementing shareholder return policies such as treasury stock cancellation. It will also reduce the dividend income tax burden for shareholders of companies that increase dividends.

Choi Sang-mok, Deputy Prime Minister for Economy and Minister of Strategy and Finance, announced this tax reform direction on the 19th at the ‘Capital Market Advancement-related Meeting’ held at the Government Complex Seoul in Jongno-gu, Seoul. Deputy Prime Minister Choi said, “To encourage more companies to participate in expanding shareholder returns such as dividends and treasury stock cancellation, we will ease the corporate tax burden on a certain portion of the increase in shareholder returns,” adding, “We will also reduce the high dividend income tax burden on shareholders of companies that expand dividends so that shareholders can receive more substantial benefits.”

Choi Sang-mok, Deputy Prime Minister for Economic Affairs and Minister of Economy and Finance. Photo by Jo Yong-jun jun21@

To encourage more companies to participate in expanding shareholder returns such as dividends and treasury stock cancellation, the government has decided to ease the corporate tax burden on a certain portion of the increase in shareholder returns. Listed companies that have both expanded dividends and canceled treasury stock will be eligible for corporate tax relief benefits.

An official from the Ministry of Strategy and Finance said, “We are considering a certain percentage of the increased amount of dividends and shareholder returns and will reduce corporate taxes on that portion,” adding, “However, the specific support method has not yet been decided.” The ministry plans to review the exact scale of dividends and other factors concentrated in March and April and prepare detailed measures accordingly.

To ensure that shareholders receive tangible benefits from dividend increases, the government will reduce the high dividend income tax burden (typically a 15.4% tax rate) on shareholders of companies that expand dividends. The official explained, “Various methods such as tax credits, income deductions, and separate taxation are being considered,” and added, “Specific reduction measures will be decided through simulations.”

This tax incentive is a follow-up measure to the ‘Corporate Value-up Support Plan’ announced in February. The Value-up Support Plan is a government initiative to resolve the undervaluation of the Korean stock market and advance the capital market to the next level. Under this plan, the government launched a Value-up Advisory Group composed of experts and revised the stewardship code to encourage institutional investors such as pension funds to actively utilize corporate value enhancement efforts in their investment decisions.

Deputy Prime Minister Choi said, “Global investment banks and investors evaluate the Value-up Support Plan as a meaningful effort to resolve the undervaluation of the Korean stock market, and institutional investors such as the National Pension Service have also welcomed and expressed their willingness to participate,” but acknowledged, “It is important for the government to pursue this steadily with a mid- to long-term perspective rather than as a one-time event, and there have been requests for additional support measures such as concretizing tax incentives.”

He continued, “We will listen to various opinions and decide on specific support targets and reduction measures through simulations,” emphasizing, “We will continue to communicate sufficiently with the market and upgrade our capital market steadily and with speed.” He also said, “The Value-up Guidelines currently being prepared will be finalized promptly by early May through additional seminars in April, with the schedule advanced as much as possible.”