萬國法律事務所

The Ministry of Finance announced on April 25, 2012 that companies issuing restricted stocks in the primary market will not be subject to securities transaction tax, because such a conduct does not constitute trading of securities.

While the recently amended Company Act granted companies the right to issue restricted stocks to employees; however, because it is uncertain whether such a conduct will be subject to securities transaction tax, only one company plans to submit a proposal for the issuance of restricted stocks at its Shareholders’ meeting on April 25. In response to the tax concerns, the Ministry of Finance made the above announcement.

While the announcement made by the Ministry of Finance may have resolved the tax issue, there are still other restrictions that may affect companies’ willingness to issue restricted stocks. For example, according to Article 60-6 of the Regulations Governing the Offering and Issuance of Securities by Securities Issuers, the amount of restricted stocks issued to a single employee may not exceed 10% of the total amount issued. Due to this requirement, a company must issue restricted stocks to 10 or more employees at the same time. Also, after acquiring the stocks via meeting the company’s’ conditions, if the said employee transfers such stocks, the employee will be subject to securities transaction tax. In addition, if the employee does not acquire such stocks because it did not meet the company’s conditions, at the time of the termination of the employment agreement, the employee must pay the securities transaction tax when the company buys back the said stocks.