Capital Market Opinion (Ceased)
2014 Aug/19
Implications of the Introduction of the ISO Taxation System in Korea
August 19, 2014
PDF
- Summary
- Introducing the incentive stock option (ISO) system and dualizing the employee stock option (ESO) taxation system would help activate the Korean venture ecosystem and fuel sustainable economic growth. ISOs will have multiple positive effects in Korea. First, they will enable venture firms to utilize both non-qualified and qualified stock options to build an optimal compensation system that suits their business. Second, by reducing the tax burden of the employees, employees will not have to abruptly dispose the stocks acquired by the ISO plan to pay taxes. This will help prolong their holding period of the employer stocks, and thereby enhance the incentive effects on employees. Third, the ISOs will encourage the well-educated young talents to take the plunge into venture businesses which can be the new growth engine of the Korean economy. Given these benefits, expectations are high for a tax revision bill containing the ISO taxation, currently under discussion at the National Assembly, to pass the legislative process and be enacted into law.