The government said on the 3rd it will increase tax burdens on corporations suspected of deliberately pushing down share prices to reduce inheritance and gift taxes. For listed shares, inheritance and gift taxes are calculated based on the average price over the two months before and after the time of inheritance or gift. Because higher share prices mean higher taxes, controlling shareholders have an incentive to drive down prices ahead of an inheritance or gift.
The Ministry of Finance and Economy announced the 2026 tax reform plan on the day, centered on applying a new inheritance and gift tax calculation method starting Apr. 1 next year only when share-price suppression is suspected. There are two conditions to presume that a specific corporation artificially lowered its share price. ▲ Low price-to-book ratio (PBR) condition (over the past six years, the PBR is in the bottom 25% by industry, 10% for KOSDAQ) ▲ Other condition (there is conduct in the past year that could negatively affect corporate value, and the appraised value based on market price in the past three years has fallen at least 30% from market price).
Meeting either of the two conditions is enough to presume the share price was artificially lowered. In this process, the taxpayer may object, saying the price was not intentionally pushed down. The ministry said it will establish an evaluation review committee at the National Tax Service as the body to make a final judgment on price suppression.
Under the government plan, if the low PBR condition is met, inheritance and gift taxes will be imposed based on the largest value among ▲ current valuation method*1.3 ▲ the closing price appraised over the past 6 months ▲ 1 year ▲ 2 years ▲ 3 years ▲ 4 years ▲ 5 years ▲ 6 years ▲ 6 years and 6 months. This means there will be at least a 30% premium over the current valuation method. If the other condition is met, inheritance and gift taxes will be imposed based on the largest value among ▲ the average closing price over the past 6 months ▲ 1 year ▲ 2 years ▲ 3 years. For inheritances or gifts by the largest shareholder, the existing 20% premium will be maintained.
The tax law will also clarify that treasury shares are capital in nature. This follows the Commercial Act's amendment in Mar., which determined that treasury shares—previously a mix of capital and asset characteristics—are capital. Accordingly, when a corporation disposes of its own shares, which had been treated as an asset transaction and taxed on capital gains, it will now be recognized as a capital transaction and be tax-exempt.