Jun Ji-hye, a reporter at the finance desk of The Korea Times, focuses primarily on economic policy and government agencies, mainly covering the Ministry of Finance and Economy, the Ministry of Budget and Planning, the National Tax Service and the Korea Customs Service. She previously covered financial authorities, including the Financial Services Commission and the Financial Supervisory Service, and earlier worked on the political, city and business desks, reporting on a wide range of issues.
Up to 200 listed firms face new tax rule targeting stock price suppression
gettyimagesbank
By Jun Ji-hye
The government will introduce a new system aimed at curbing listed companies’ largest shareholders from keeping stock prices artificially low to reduce inheritance and gift tax bills, the Ministry of Finance and Economy said Tuesday. It estimates that as many as 200 listed companies could be subject to the rules, which take effect next April.
The ministry plans to revise the Inheritance Tax and Gift Tax Act, requiring shareholders of companies deemed to have suppressed their stock prices to pay at least 30 percent more in inheritance and gift taxes when transferring shares to related parties.
The measures were included in the ministry’s 2026 tax reform plans announced Monday.
Under current inheritance and gift tax rules, the taxable market value of KOSPI- and Kosdaq-listed shares is calculated using the average closing price over the two months before and after the date of the transfer.
Because lower share prices reduce tax burdens for major shareholders, critics have long blamed the rule for encouraging owners to keep stock prices low, contributing to the chronic undervaluation of Korean equities.
“We have improved the tax valuation method for stocks whose price-to-book ratios (PBRs) have remained excessively low for a prolonged period to prevent artificial stock price suppression, which has been highlighted as an obstacle to capital market development,” Finance Minister Koo Yun-cheol said.
The revision proposes two specific categories of companies that could be flagged for artificially depressing their stock valuations.
The first group includes firms whose PBRs have remained in the bottom 25 percent of their sector on the main KOSPI index or the bottom 10 percent on the Kosdaq over the past six years.
The rule is designed to identify companies that have remained undervalued for a prolonged period while excluding those whose valuations have fallen only temporarily due to business cycles.
The second group targets companies that engaged in value-dilutive corporate actions over the past year, such as subsidiary listings or issuing exchangeable bonds, and subsequently saw their stock valuations fall by at least 30 percent from their three-year average around the time of an inheritance or gift transfer.
Still, meeting either condition will not automatically classify a company as having intentionally depressed its share price, as each case must be reviewed by a National Tax Service panel. Taxpayers can also retain the current valuation method if they prove that they did not suppress their stock prices.
Following legislative revisions, the new rules are scheduled to take effect for stock transfers made on or after April 1 next year.