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Korea Urged To Drop Capital Gains Tax Proposal

Mary Swire, Tax-News.com, Hong Kong

22 January 2018


South Korea's capital gains tax regime for securities trading could have negative consequences for the local economy, MSCI, the investment research and analytic tools provider, has said.

MSCI noted that in August 2017 the Ministry of Strategy and Finance (MOSF) in South Korea announced a series of tax reform proposal, including to reduce the shareholding ownership threshold at which capital gains tax would be triggered for foreign investors on listed securities transactions, from 25 percent to five percent. More specifically, the capital gains tax would be triggered if a foreign investor and its related parties collectively hold five percent or more of the listed company's outstanding shares at the time of the sale or at any point in time over the past five years prior to the sale, MSCI said.

The firm said: "This proposal, if implemented as presented, could potentially have negative impacts on Korean equity market accessibility and hence, the replicability of the MSCI Korea Indexes and the MSCI Emerging Markets Index," said MSCI in a research note published on January 19, 2018. "Based on initial feedback from market participants, the introduction of the new rule may result, among other things, in delays related to potential tax reclaims which could affect the timing of fund redemptions as well as uncertainties related to practical implementation of the new rules."

The proposal is the subject of a public consultation by the MOSF until January 29, 2018, and is expected to come into effect on July 1, 2018.

TAGS: Finance | tax | Korea, South | tax reform

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