New Stock Tax Rules in Effect

Shareholders owning significant equity stakes in corporations will be filing larger returns this month as changes to capital gains tax go into effect.

The National Tax Service said Thursday that large shareholders who sell stock, regardless of the number of shares, would be required to report the transfers on their capital gains tax returns, which are due May 31.

The tax agency said a shareholder owning the smaller of a 3 percent interest in a company or 10 billion won ($7.7 million) worth of shares based on the market value will be considered a "major" shareholder for capital gains tax purposes.

A major shareholder that disposes of an equity stake within one year of acquiring it will be assessed a progressive rate depending on the amount of the gain from the transfer. The rates range from 20 percent to 40 percent.

Before the changes, major shareholders were defined as those who held more than a 5 percent interest, and transfers of less than a 1 percent stake over a three year period were excluded from filing requirements. A flat rate of 20 percent had been assessed for sales within one year of purchase.

Also beginning this year, the taxpayer, not the tax agency, will compute tax payable on the return. Additional tax payments due will be charged 0.05 percent daily on the amount, compared with a flat 10 percent last year.

Taxpayers who sold real estate properties for less than the government's appraised value can report the actual sales price only up until the May 31 filing deadline, after which they will have to use the official value.

Capital gains from transfers of golf club memberships will be computed from the actual sales price, instead of the government's standardized value, from this year.

The tax agency also said that its new tax database system that went into operation in August, integrating the real estate registration system, will improve assessment and collection activities.

The capital gains tax applies to transactions that occurred during calendar year 2000.

by Kim Young-sae