Government to Keep Major Shareholder Threshold for Stock Capital Gains Tax at 5 Billion Won to Boost Market

                                        

       

Keeping the Major Shareholder Threshold for Stock Capital Gains Tax at 5 Billion Won: What's the Background and Meaning?

       

The market's attention is focused on the government's decision to maintain the major shareholder threshold for stock capital gains tax at 5 billion won, a figure that was initially planned to be lowered to 1 billion won. The government's final decision to keep the existing threshold was made in consideration of market instability and investor backlash. In this post, we will take a detailed look at the meaning and background of the decision to maintain the 5 billion won major shareholder threshold for stock capital gains tax, as well as future prospects.

   

   

What Does the Decision to Maintain the Major Shareholder Threshold at 5 Billion Won Mean?

   

1. Background of the Decision to Maintain the 5 Billion Won Major Shareholder Threshold

   

The government recently announced that it will maintain the scope of major shareholders subject to stock capital gains tax at the existing '5 billion won or more per stock.' This reverses the initial plan to strengthen the standard to 1 billion won and is the result of a comprehensive consideration of various market factors.

   

       
• Stock Market Stabilization and Revitalization: The strengthening of the major shareholder threshold has consistently been criticized for causing large-scale sell-offs at the end of each year, increasing market volatility. There were concerns that lowering the threshold to 1 billion won would expand the tax base and intensify this selling pressure. Accordingly, the government chose a measure to minimize market instability in line with the public's desire to revitalize the stock market.
       
• Public Opinion on the Policy: According to a poll, nearly half of the public (47%) responded that the current 5 billion won threshold should be maintained. This can be interpreted as meaning that not only investors but also the general public sympathize with the government's policy direction to revitalize the stock market.
       
• Minimizing Tax Revenue Shortfalls: The government expected that there would be no significant tax revenue shortfall if the major shareholder threshold was maintained at 5 billion won. It appears that the judgment that tax revenue from other tax items, such as the securities transaction tax, could be supplemented if the stock market is revitalized and trading volume increases, also played a role.
   

          

                    

   

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2. Relationship with Financial Investment Income Tax (FIT)

   

The Financial Investment Income Tax (hereinafter referred to as FIT), which has attracted a lot of investor attention along with the stock transfer tax, is a system that taxes profits from financial products such as stocks, bonds, and funds. The implementation of the FIT, which was scheduled to begin in 2025, has recently been postponed.

   

If the FIT were introduced, a tax rate of 22% to 27.5% would be applied to annual profits of 50 million won or more from domestic listed stocks. There were concerns that this could increase the burden on individual investors, as it would impose taxes on capital gains from domestic stocks, which were previously tax-exempt for small-scale investors.

   

By maintaining the major shareholder threshold for stock capital gains tax and simultaneously postponing the implementation of the FIT, the government is attempting a dual policy approach to reduce the tax burden on investors and secure liquidity in the capital market. This seems to reflect the opinions of experts who believe that the introduction of the FIT could reduce market liquidity.

   

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3. Future Outlook and Implications

   

The decision to maintain the major shareholder threshold is expected to have a positive short-term impact on the domestic stock market. With the year-end selling pressure alleviated, investor sentiment may improve, which could contribute to a stable upward trend in the stock market. The market's positive response has already been seen, with the KOSPI and KOSDAQ indexes reaching new annual highs since the policy was announced.

   

However, from a long-term perspective, challenges remain. Discussions will continue regarding the principle of taxing where there is income and the relatively low domestic stock transfer tax rate compared to major foreign countries. In addition, continuous discussion and social consensus are needed on the future direction after the postponement of the FIT. The government must present a consistent policy direction that can build trust with investors.

   

In conclusion, the decision to maintain the major shareholder threshold for stock capital gains tax can be evaluated as a realistic measure focused on stabilizing the stock market and improving investor sentiment at this time. It also suggests that continuous discussion on future financial tax reform and efforts to solve the fundamental problems of the capital market are needed.

   

        Key Summary:
        The maintenance of the major shareholder threshold for stock transfer tax at 5 billion won is expected to have a positive short-term impact by alleviating year-end selling pressure on the stock market. In the long term, continuous discussion on financial tax reform and policy consistency remain important tasks.    

   

       

The content of this blog is for reference in investment decisions only, and investment decisions should be made under an individual's own judgment and responsibility. In no event shall the information in this blog be used as legal evidence for the results of an investment.