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S. Korea Exempts Institutional Investors from Arbitrage Transactions Taxes on KOSDAQ
Promoting KOSDAQ Market
S. Korea Exempts Institutional Investors from Arbitrage Transactions Taxes on KOSDAQ
  • By Yoon Yung Sil
  • January 12, 2018, 01:15
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The Korean government has lowered the requirements for initial public offering (IPO) in order to revitalize the nation’s second-tier KOSDAQ market.
The Korean government has lowered the requirements for initial public offering (IPO) in order to revitalize the nation’s second-tier KOSDAQ market.

 

As the government has lowered the requirements for initial public offering (IPO) in order to revitalize the nation’s second-tier KOSDAQ market, nearly 2,800 unlisted companies will be able to raise funds from the capital market. This is highly likely to have a positive effect on the KOSDAQ IPO market, which is expected to exceed 10 trillion won (US$9.33 billion) through it is the figure considering all the latent factors from deregulation, this year.

The Financial Services Commission (FSC), Ministry of Strategy and Finance (MOSF), Ministry of Health and Welfare (MOHFW) and Fair Trade Commission (FTC) jointly announced a “measure to vitalize the KOSDAQ market for capital market innovation” on January 11. The measure has been prepared mainly by the FSC from the second half of last year since the ministries believed the invigoration of the KOSDAQ is the axis of innovative growth.

The government not only has come up with inducements, including tax benefits to institutional investors, including the National Pension Service (NTS), and individual investors but also has made an every effort to relax listing requirements to attract promising companies to the KOSDAQ. It has decided to abolish the requirements for continuing business profits and capital impairment and set up independent listing requirements that allow companies to go public when they meet the requirement for a pre-tax profit, market capitalization and equity capital. In addition, the measure includes an exemption of lead managers’ put-back option, which has been an obstacle to the listing of loss-makers, or so-called Tesla model, so far.

When the requirements for IPO is lowered, the number of potential listing companies is forecast increase 2,792, or 62.7 percent, from the current 4,454 to 7,246, according to the government. Notably, the big KOSDAQ IPO market can be immediately opened within this year because the government doesn’t have to revise the law or make the new one but amend listing regulations alone in its bid to ease listing regulations.

Particularly, the government rose tax reduction rates on small and mid-size companies’ R&D for new growth engines through the revision of tax laws and its economic policy from the current 30 percent to 40 percent last year. It also enabled technology companies specially listed on the KOSDAQ to get a loan of policy funds. Therefore, the government believes that the KOSDAQ IPO market will become a hit as it is the actual lead IPO manager on the market.