By Park Hyong-ki
The government has decided to lower the stock transaction tax rate by 0.05 percentage points to 0.25 percent this year, and seek to gradually abolish it by 2024.
At the same time, it will increase the scope of capital gains taxes on the trading of KOSPI and KOSDAQ shares, while offering incentives to funds investing in tech companies.
These are part of comprehensive measures jointly announced Thursday by the Ministry of Economy and Finance and the Financial Services Commission (FSC) to boost financial innovation and vitalize capital markets by encouraging more investment in startups.
"We will revise the relevant tax laws to benefit funds investing in such companies," President Moon Jae-in said during an event to introduce his administration's vision for financial innovation the same day.
He added the finance ministry will soon draw up a clearer plan to reduce the stock transaction tax in tandem with specifics regarding the capital gains tax.
The tax rate has been fixed at 0.3 percent since the late 1970s. It was reintroduced to keep speculators from the market after the country discontinued imposing the tax to attract investment to develop the capital market in the early 1970s.
Korea's 0.3 percent rate is higher than Singapore's 0.2 percent, and China and Hong Kong's 0.1 percent. The United States and Japan do not have transactions taxes.
Investors had to pay a 0.15 percent tax included in the 0.3 percent rate whenever they bought or sold KOSPI or KOSDAQ listed stocks. The 0.15 percent collected by the government is used for the development of rural areas. This will remain unchanged.
As the finance ministry and the regulator are increasing state support for startups and investment funds such as venture capital and private equity, they said they hope this will help companies to list and relist their shares first on the KONEX, and then on the main bourse as they grow.
The President said his government will overhaul the system to enable startups to get funding based purely on their technological and future potential, instead of on how much assets such as property and facilities they have.
FSC Chairman Choi Jong-ku told the press the day before the event that the regulator will change rules governing the listing of those companies in accordance with the sectors in which they operate.
For example, the stock market regulator will not apply the same listing rules to biotech companies that need to go through years of testing their drugs to get approval, as it does with traditional manufacturers.
"We will apply a set of distinctive rules enabling biotech and other innovative companies to raise funds in the capital market based on their future potential and technology," the FSC chairman said.
He said the FSC will seek to increase the number of companies related to the Fourth Industrial Revolution listed on the KOSDAQ to 80 within the next three years, from the 38 over the past three years.
The government has decided to lower the stock transaction tax rate by 0.05 percentage points to 0.25 percent this year, and seek to gradually abolish it by 2024.
At the same time, it will increase the scope of capital gains taxes on the trading of KOSPI and KOSDAQ shares, while offering incentives to funds investing in tech companies.
These are part of comprehensive measures jointly announced Thursday by the Ministry of Economy and Finance and the Financial Services Commission (FSC) to boost financial innovation and vitalize capital markets by encouraging more investment in startups.
"We will revise the relevant tax laws to benefit funds investing in such companies," President Moon Jae-in said during an event to introduce his administration's vision for financial innovation the same day.
He added the finance ministry will soon draw up a clearer plan to reduce the stock transaction tax in tandem with specifics regarding the capital gains tax.
The tax rate has been fixed at 0.3 percent since the late 1970s. It was reintroduced to keep speculators from the market after the country discontinued imposing the tax to attract investment to develop the capital market in the early 1970s.
Korea's 0.3 percent rate is higher than Singapore's 0.2 percent, and China and Hong Kong's 0.1 percent. The United States and Japan do not have transactions taxes.
Investors had to pay a 0.15 percent tax included in the 0.3 percent rate whenever they bought or sold KOSPI or KOSDAQ listed stocks. The 0.15 percent collected by the government is used for the development of rural areas. This will remain unchanged.
As the finance ministry and the regulator are increasing state support for startups and investment funds such as venture capital and private equity, they said they hope this will help companies to list and relist their shares first on the KONEX, and then on the main bourse as they grow.
The President said his government will overhaul the system to enable startups to get funding based purely on their technological and future potential, instead of on how much assets such as property and facilities they have.
FSC Chairman Choi Jong-ku told the press the day before the event that the regulator will change rules governing the listing of those companies in accordance with the sectors in which they operate.
For example, the stock market regulator will not apply the same listing rules to biotech companies that need to go through years of testing their drugs to get approval, as it does with traditional manufacturers.
"We will apply a set of distinctive rules enabling biotech and other innovative companies to raise funds in the capital market based on their future potential and technology," the FSC chairman said.
He said the FSC will seek to increase the number of companies related to the Fourth Industrial Revolution listed on the KOSDAQ to 80 within the next three years, from the 38 over the past three years.
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