South Korea may ease the capital gains tax rule on big shareholders to lure more rich individuals into the local stock market.
“We’re aware that the planned new rules on capital gains tax on large shareholders are seen as too harsh, and talks are being held to consider loosening them,” said a senior official from the Financial Services Commission (FSC) on Wednesday.
Korea currently levies a capital gains tax on large shareholders whose holdings in a single stock are more than 1.5 billion won ($1.22 million), or whose stake exceeds 1 percent of total shares on the main Kospi or 2 percent of shares on the secondary Kosdaq. Amendments have been made to lower the threshold to 1 billion won starting April this year and to 300 million in April 2021. The tax rates fall between 20 and 30 percent depending on the size of the gains.
“Given the increased market volatility from the coronavirus fallout, we need to raise the investment appeal of local stock markets and provide more liquidity,” the FSC official said.
If the task of redefining the threshold takes too long, the government may instead decide to defer the implementation of the new rules, according to insider sources.
Korea is also considering further lowering the stock transaction tax. Taxes imposed on trading Kospi and Kosdaq stocks were cut to 0.25 percent from 0.3 percent last May.
The finance ministry said a guideline on financial tax revisions is scheduled for release in June.
By Jin Young-tae, Kim Je-lim and Kim Hyo-jin
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