[The Korea Economic Daily] A Once-in-14-Years Overhaul: Comprehensive Restructuring of the Tax Regime Anticipated Following Mandatory Cancellation of Treasury Shares [Lee & Ko Tax Commentary]

On December 24, 2025, The Korea Economic Daily published an op-ed by Attorney Han Sol Leem of Lee & Ko.

In the article, titled “A Once-in-14-Years Overhaul: Comprehensive Restructuring of the Tax Regime Anticipated Following Mandatory Cancellation of Treasury Shares,” Attorney Leem explained that, upon the implementation of the third amendment to the Korean Commercial Act, the long-standing debate concerning the legal nature of treasury shares—specifically, whether treasury shares should be characterized as “assets” or as “capital”—is expected to be largely resolved. Attorney Leem further observed that the tax framework tied to that legal characterization is likewise expected to undergo a comprehensive restructuring.

Attorney Leem emphasized in particular that existing tax-planning strategies—under which controlling shareholders of unlisted corporations transferred treasury shares to the issuing company and applied a single capital gains tax rate of 27.5 percent in order to avoid the top marginal global/composite income tax rate of 49.5 percent—are expected to become, in practical terms, largely unavailable going forward.

At the same time, Attorney Leem cautioned that neither the proposed amendments to the Korean Commercial Act nor the related amendments to the tax laws have yet been enacted by the National Assembly. Attorney Leem therefore advised that corporations and shareholders should closely monitor legislative developments and, in light of their respective circumstances, proactively formulate appropriate treasury share utilization strategies and related tax planning measures in advance.