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Issues Regarding Employee Stock Ownership Plan(ESOP) Assocation


IssuesRegarding Employee Stock Ownership Plan(ESOP) Assocation


Writtendate: 2017.11.09

Writtenby: Geonhee Park

Translatedby: Jooyeon Han




1.Taxation Issues


(1)Taxationissue if stock held by major shareholder is contributed to ESOP Associationfree of charge.

→ In caseESOP Association grants the shares from major shareholder free of charge, thegift tax is not levied pursuant to the provisions of Article 46-4 ofInheritance and Gift Tax



PropertyTax Division -68, 2011.02.10. Property Tax Division -68, 2011.02.10.


As forthe value of the property granted by the Employee Stock Ownership Associationin accordance with the EmployeeBasic Welfare Act, the gift tax is not taxed inaccordance with Article 46 (4) of the inheritance tax and the Gift Tax Act.





(2)Taxation issue when a member is assigned to Ownership stock after ashareholder's contribution.

→Incase the Association member’s treasury stock is acquired through majorstockholder’s contribution, below amount shall be exempted and excessive amountwill be subject to income tax(withholding tax).




(3) Taxationissue when withdrawing after major shareholder’s contribution


→Whenmember withdrew treasury share, the withdrawn amount is deemed to be incometax(withholding) and it is subjected to taxation.

*Min(Acquisitionstock price, Market Price at the time of withdrawal)

**Withdrawalrefers to the change of ownership from ESOP Association to employee.

***Followedby Article 88-4,6 of Special Tax Treatment Control Act, withdrawn amount can beexempted depending on the holding period of withdrawn shares.





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