Increase the tax year to 2028
to induce a virtuous cycle of private venture funds
The People’s Power of Ahn Cheol Soo proposed a bill to extend the tax benefit of delaying the payment of capital gains tax by two years if venture company shareholders reinvest the funds recovered by selling stocks in other venture companies.
Representative Ahn announced on the 9th that he has proposed a partial amendment to the Restriction of Special Taxation Act, which includes such information. The amendment will extend the tax deferral benefit of capital gains tax, which ends at the end of this year, by two years until the end of 2028. In the bill, 10 members of the People’s Power, including Ahn, were named.
The current law delays the payment of capital gains tax if a shareholder of a venture company that meets certain requirements sells stocks and invests more than 50% of the sale price back in venture companies. You do not have to pay taxes until you dispose of stocks or equity shares acquired through reinvestment.
The system was designed to allow funds recovered from venture investments to flow back into the venture market. The move is aimed at creating a virtuous cycle in which private investment funds are reinvested in new venture companies. However, under the current law, tax benefits are expected to end on December 31.
Lawmaker Ahn saw the need to maintain the system as the role of private investment funds is important in venture companies in the early stages of growth. If the tax benefits disappear, the incentive for investors to invest the recovered funds back into venture companies may decrease. The revision focused on boosting private venture investment and expanding the foundation for innovative growth by maintaining tax deferral benefits for two more years.
“It is important to create a virtuous cycle structure in which funds recovered from venture investments lead to new innovative companies,” lawmaker Ahn said. “Through this amendment, we will ensure that venture companies with high growth potential can secure the necessary funds stably.” “We will continue to improve the system to promote private venture investment and support the growth of innovative companies in the future,” he stressed.
