Tax Incentive Plan for Creation of Ecosystem for Private Venture Investment
■ Tax Incentive Plan for Creation of Ecosystem for Private Venture Investment
The Ministry of Strategy and Finance (“MoSF”) released a tax incentive plan related to private venture investment on November 4, 2022. These tax incentives would support the creation of private venture funds of funds (“FoFs”) at each stage of 1) Investment – 2) Operation – 3) Withdrawal.
The MoSF announced that it intends to complete the legislation of the tax incentive plan by early 2023.
l Tax credit for domestic corporations (including foreign-invested corporations) who invest in venture companies, etc., through private FoFs
|
Investment target |
Current |
Proposed |
|
General venture funds |
Actual investment amount in venture companies x 5% |
(Same) |
|
Private FoFs |
- |
Actual investment amount in venture companies1 x 5% + Increase in investment amount2 x 3% |
*1) Max (Actual investment amount in venture companies, investment amount in FoFs x 60%).
*2) Investment amount in venture companies in the relevant year – Average investment amount in venture companies over the previous three years.
l Tax credit for domestic corporations who invest in private FoFs through contributions to funds for mutually beneficial cooperation
|
Purpose of contribution |
Current |
Proposed |
|
Funding for mutually beneficial cooperation |
Investment amount x 10% |
(Same) |
|
Funding for investment in FoFs |
- |
Investment amount x 10% |
l Taxable income deduction for individual investors who invest in funds
|
Investment target |
Current |
Proposed |
|
General venture funds |
Investment amount x 10% |
(Same) |
|
Private FoFs |
- |
Investment amount x 10% |
l Value-added tax exemption for asset management and operation services provided by private FoF operators
|
Service provider |
Current |
Proposed |
|
|
Governmental FoFs |
Provider: Korea Venture Investment Corp. |
O |
(Same) |
|
General venture fund |
Provider: Single-handed operator |
||
|
Private FoFs |
Provider: Single-handed operator |
- |
O3 |
|
Provider: Joint operator |
|||
*3) In case of a joint operator, VAT exemption is available only for the investment portion.
l Non-taxation of capital gains from shares of start-ups and venture companies acquired by individuals or private FoF operators through investment in private FoFs
|
Investment target |
Investor |
Current |
Proposed |
|
Venture funds |
Individuals or private FoF operators |
O |
(Same) |
|
Asset managers, securities companies |
X |
||
|
Private FoFs |
Individuals or private FoF operators |
- |
O |
|
Asset managers, securities companies |
- |
O4 |
*4) Asset managers or securities companies that additionally participate as joint operators with venture capital companies and new technology financial business operators.
l Non-taxation for capital gains from shares of venture companies invested by qualified private equity funds through their venture funds
|
Qualified funds5 |
Current |
Proposed |
|
Investment in venture companies through private equity funds |
O |
(Same) |
|
Investment in venture companies through venture funds |
X |
O |
*5) Private equity funds that meet certain requirements (i.e., settlement of accounts, distribution, etc., at least a year).