Even if venture corporations acquire multiple voting shares, they will be able to defer capital gains tax payment until after the conversion to common shares following the company's stock market listing.
The Ministry of Small and Medium Enterprises and Startups noted on the 27th that a tax exemption related to the acquisition of multiple voting shares by venture corporations has been established. This follows the decision made by the State Council on the 'Partial Amendment Bill on the Restriction of Tax Exemption' on the 24th.
The multiple voting shares system, which grants up to 10 votes per share, was established in November of last year to support venture corporations in attracting large-scale investments without the worry of equity dilution.
If a founder contributes common shares they hold to the venture corporation as a non-cash asset to acquire multiple voting shares, this will be regarded as the transfer of an asset, and capital gains tax must be paid.
The newly established tax exemption aims to defer the capital gains tax payment until after the conversion of multiple voting shares into common shares when there is a significant change in the founder's financial situation.
With this special measure, founders will be able to pay taxes after practical changes occur, such as the stock market listing of venture corporations when multiple voting shares are converted into common shares or in cases of inheritance or transfer of multiple voting shares.
This exemption applies to contributions made in kind starting from January 1 of next year.