Ruling Party and Government to Restore Corporate Tax Rate to 25% and Lower Major Shareholder Threshold to 1 Billion Won

Ruling Party and Government Discuss Next Year's Tax Reform Plan on July 29
Opinions Divided Over Introduction of Separate Taxation for Dividend Income

On July 29, the government and the Democratic Party of Korea agreed to raise the top corporate tax rate to 25%, returning it to the 2022 level. They also decided to push for stricter criteria for defining a 'major shareholder' subject to stock transfer income tax, lowering the threshold from 5 billion won to 1 billion won.

On the 29th, a closed-door meeting between the ruling party and the government regarding the tax reform plan is being held at the National Assembly Members' Office Building. 2025.7.29 Photo by Kim Hyunmin

On July 29, the Democratic Party and the Ministry of Economy and Finance held a party-government consultative meeting at the National Assembly in Yeouido to discuss next year's tax reform plan. The main topics included: ▲introduction of separate taxation for dividend income ▲raising the top corporate tax rate (from the current 24% to 25%) ▲tightening the major shareholder requirements for stock transfer tax (from the current 5 billion won to 1 billion won). After the meeting, Democratic Party lawmaker Jung Taeho, who serves as the ruling party's secretary on the Strategy and Finance Committee, told reporters, "We received a report from the government on next year's tax reform plan, and it appears that the plan will be finalized at the Tax Policy Deliberation Committee meeting on the 31st."

It is reported that there was active discussion regarding the introduction of separate taxation for dividend income. The government's proposal for separate taxation of dividend income was based on a bill submitted by Democratic Party lawmaker Lee Soyoung, aiming to increase the low dividend payout ratio of Korean corporations, with adjustments made to the tax rates and taxation conditions. According to Lee's proposal, dividend income received from listed companies with a dividend payout ratio of 35% or higher would be taxed separately from comprehensive income: ▲14.0% for amounts up to 20 million won ▲20% for amounts between 20 million and 300 million won ▲25% for amounts exceeding 300 million won.

Jung stated, "Those in favor argued that the measure is necessary to vitalize the capital market and that benefits should also be provided for those with dividend income below 20 million won. On the other hand, opponents pointed out that a similar policy was implemented during the Park Geun-hye administration, but it did not have a significant effect on boosting dividends, and questioned whether this is a tax cut for the wealthy."

Debate within the ruling party regarding the separate taxation of dividend income has been ongoing. On July 25, Jin Sungjoon, the Democratic Party's Policy Committee Chair, cited statistics (as of 2023) on his Facebook page showing that the top 0.1% receive 45.9% of all dividend income, arguing, "We need to closely examine the reality that dividend income is concentrated among a tiny minority." On the same day, Lee countered, "These statistics include 'dividends from unlisted companies,' which are unrelated to the current discussion." She added, "The fact is, if corporate dividends increase, all citizens, including retail investors, benefit. If Korea's dividend payout ratio rises, the largest beneficiaries will be pension funds such as the National Pension Service."

Lee Hyungil, First Vice Minister of Strategy and Finance, is speaking at the party-government meeting on the tax reform plan held at the National Assembly Members' Office Building on the 29th. 2025.7.29 Photo by Kim Hyunmin

On the same day, Lee also spoke as a lecturer at the Democratic Party's economic research group 'Economy is the Democratic Party,' stating, "Some suggest penalizing companies with a low dividend payout ratio, but in a capitalist society, that is difficult to argue for." She emphasized, "The two most important conditions when drafting the bill were minimizing tax revenue loss and providing incentives to increase dividends."

The Democratic Party plans to continue discussions by forming a Special Committee on Tax System Reform. The committee will be chaired by lawmaker Kim Youngjin, with Jung serving as secretary. Heo Young, the Democratic Party's Deputy Chief of Policy, added, "We will form the committee mainly with members of the Strategy and Finance Committee, and the party will work closely with the government to fine-tune the tax law and budget and prepare additional measures as needed."

Meanwhile, regarding the government's plan to raise the top corporate tax rate and tighten the major shareholder criteria for stock transfer tax, the Democratic Party stated that this is "a normalization to previous levels." When asked about the amount of tax increase or decrease resulting from the tax reform plan, Jung replied, "I do not remember the exact number, but it is about 7.5 trillion won."

This content was produced with the assistance of AI translation services.