By Jung Seok-jun, The Herald Business
People Power Party lawmaker Choi Hyeong-du, Reform Party lawmaker Lee Jun-seok and Democratic Party of Korea lawmaker Hwang Jeong-a jointly introduced a bill July 2 to create a special income tax payment regime for restricted stock units (RSUs). The measure aims to help companies in national strategic technology sectors — including semiconductors, AI and biotech — secure top talent.
"Global tech companies in the United States and elsewhere use RSUs as a primary compensation tool for attracting key talent, but Korean companies cannot make active use of them because of a system that requires employees to pay taxes before they have received any cash," Choi said. "This amendment is not about expanding tax exemptions. It is about easing an excessive upfront tax burden to establish the minimum institutional framework that matches the global competitive environment."
The government's 2026 tax reform package did not include any RSU tax relief measures. The Korea Development Institute (KDI) had, however, recommended through a government-commissioned study that a tax exemption or deferred taxation regime for RSUs be introduced to strengthen competitiveness in strategic technology sectors. Industry groups have consistently called for RSU tax support as an urgent step toward securing globally competitive talent.
Under the current Restriction of Special Taxation Act, venture company stock options already benefit from a range of tax incentives — including an annual tax exemption on exercise gains of up to 200 million won ($129,000), a five-year installment payment option for income tax, and a special capital gains tax regime.
RSUs, which tie employee compensation to a company's long-term performance, have no equivalent tax support. Companies in national strategic technology sectors struggle to operate performance-based compensation systems on a par with global peers.
The most significant structural obstacle is the "dry income" problem: employees receiving RSU shares must pay income tax at the time of vesting even though they have not yet received any cash. As a result, talented workers avoid accepting RSUs out of concern over the tax burden, and companies are equally reluctant to make full use of the scheme.
The core of the proposed amendment is a new special income tax payment provision covering RSUs granted by companies whose primary business involves research and development or commercialization of national strategic technologies.
Specifically, employees would pay 20 percent of the calculated income tax liability when filing their comprehensive income tax return, with the remaining 80 percent spread equally over the following four years. Tax payments would be staggered over up to five years in effect. The measure is expected to ease the burden of paying taxes before any cash is received and to support the establishment of a long-term, performance-centered compensation culture.
"The government has emphasized fostering advanced industries and attracting regional investment, yet has not adequately built the tax foundation needed to secure the key talent that makes it possible," Choi said. "The competitiveness of advanced industries today depends not on how many factories are built, but on how many outstanding researchers and AI specialists can be brought on board."
"The competitiveness of national strategic technologies in AI, semiconductors and biotech ultimately comes down to people," he added. "The National Assembly will fill the gap left by the government's tax reform package through legislation, boosting South Korea's talent competitiveness in advanced industries and giving companies the support they need to actively adopt long-term, performance-based compensation systems."
mp1256@heraldcorp.com
