Mastering Share Transfers in Korean Companies: A Comprehensive Guide for Expats
Navigating the complexities of share transfers in South Korea's corporate sector can be challenging, particularly for expatriates. This guide provides an instructive and friendly overview, aimed at demystifying the process and empowering expats with the knowledge to manage share transfers effectively in Korean corporations (주식회사) and limited liability companies (유한회사), and I'll explain mainly for the Non-Listed(비상장) company.
Understanding Your Role as a Shareholder
In Korea, understanding your role and liabilities as a shareholder is crucial. If you own more than 50% of a company, known as a 'major shareholder,' you could be liable for taxes if the company goes bankrupt. However, owning less than 50% typically frees you from such tax liabilities.
Shareholding Strategies in Korea
Many major shareholders in Korea, aware of the tax implications, often redistribute shares among family members or employees to show less than 50% ownership. It's important to note, however, that the Korean government is vigilant and tends to regard shares held by close relatives as still being under the major shareholder's control.
Legal Aspects of Share Transfers
When transferring shares, it's essential to be aware of any restrictions in your company's Articles of Incorporation. Some companies may require approval for share transfers at a general shareholders’ meeting or need consent from all shareholders especially in Limited Company(유한회사)
Tax Considerations in Share Transfers
Be mindful of the taxes involved in share transfers. In Korea, a share transaction tax of 0.35% is levied on the transfer value. Additionally, capital gains tax on the profit from the transfer must be accurately reported and paid to avoid legal repercussions. If the transaction is happened among family members, it could be assumed as a gift.
Minimizing Tax Risks in Share Transfers
Effective tax planning is key to minimizing risks in share transfers. Collaborate with an accountant to assess the share value accurately and draft a detailed contract, including a registered seal certificate (인감증명서) from the seller, to solidify your shareholder status and avoid future disputes.
Completing the Share Transfer Process
Finally, ensure the buyer's name is recorded on the shareholders’ list, a critical step in formalizing the transfer. The list, filed with the tax office and including the buyer's ARC number, confirms the transfer's legality. Be aware of the specific deadlines for filing share transfers, which differ from property sales.
For expatriates in Korea, understanding and navigating share transfers in corporations and limited liability companies is essential for successful investment management. By familiarizing yourself with the legal and tax nuances and seeking expert advice, you can confidently handle your corporate investments in Korea.
This guide aims to make complex financial and legal concepts in Korea approachable and understandable for expats. Equipped with this knowledge, you can navigate the Korean corporate scene with confidence and strategic acumen.
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