Since unveiling the Corporate Value-up Program on February 26, 2024 (Link), the Financial Services Commission (“FSC”) is continuing its efforts to further expand the program, which includes plans to improve maximization of enterprise value by providing incentives to companies and investors. For example, the FSC has since announced initiatives, including the revision of the stewardship code to include the Corporate Value-up Program, and the development of the Korea Value-up index at a town hall meeting on March 14, 2024 (Link). The FSC has also organized a town hall meeting on April 2, 2024, to discuss accounting and dividend payout processes for the Corporate Value-up Program, where it announced incentives in the areas of tax accounting, corporate disclosures, and PR investments (Link).
In line with these ongoing efforts, the FSC announced on February 24, 2026, the introduction of a mandatory disclosure requirement for corporate value-up plans for companies eligible for special tax treatment on dividend income (“high dividend companies”) (Link).
As you may be aware, following the amendment to the Act on Restriction on Special Cases Concerning Taxation (the “Act”) (effective as of January 1, 2026), dividend income from stocks is now subject to separate taxation as detailed below.
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Act on Restriction on Special Cases Concerning Taxation Article 104-27 (Special Taxation on Dividend Income from Stocks of High Dividend Companies) (1) Where a resident holding shares in a domestic corporation that satisfies all of the following requirements (hereinafter referred to as a “high dividend company” in this Article) receives dividend income generated until the business year ending on December 31, 2028, from the said high dividend company, the amount prescribed by the Presidential Decree out of such dividend income (hereinafter referred to as “special dividend income” in this Article) shall not be included in the global income tax base under Article 14(2) of the Income Tax Act. 1. The corporation shall be a stock-listed corporation under the Financial Investment Services and Capital Markets Act (only applicable to corporations other than KONEX-listed corporations); provided, however, that investment companies under the Financial Investment Services and Capital Markets Act and similar corporations prescribed by Presidential Decree shall be excluded. 2. The dividend income generated in the immediately preceding business year shall not have decreased compared to the amount generated in the business year ending on December 31, 2024. 3. The corporation shall satisfy any one of the following items: a. The ratio (hereinafter referred to as the “dividend payout ratio” in this Article) of the amount prescribed by Presidential Decree as a dividend of profits under the Commercial Act and the Financial Investment Services and Capital Markets Act (hereinafter referred to as the “profit dividends”) to the net income for the period according to corporate accounting standards for the immediately preceding business year shall be 40/100 or more; b. The dividend payout ratio for the immediately preceding business year shall be 25/100 or more, and the profit dividends shall have increased by 10/100 or more compared to the dividend amount for the business year before the immediately preceding business year. (4) A high dividend company shall, after the closing of each business year, publicly disclose that it satisfies all the requirements under each subparagraph of paragraph (1) by the day following the date on which the resolution for the dividend of profits is passed at an ordinary general meeting of shareholders. (5) In the application of paragraphs (1) through (4), the methods for calculating the dividend payout ratio and the growth rate of profit dividends, the methods for public disclosure by high dividend companies and other necessary matters shall be prescribed by Presidential Decree. |
In this regard, a proposed amendment to the Enforcement Decree of the Act was approved at the State Council meeting on February 24, 2026, stipulating that high dividend companies must follow the rules concerning the disclosure of corporate value-up plans to fulfill their disclosure obligations (Article 104-24(8) of the Enforcement Decree of the Act). Under this provision, in order to be eligible for the special tax treatment, a high dividend company must disclose its value-up plan, including performance results demonstrating that it meets all requirements for such tax treatment, via the Korea Investor’s Network for Disclosure (“KIND”) system of the Korea Exchange by the day following the date on which the profit dividends were resolved at the annual general meeting of shareholders after the end of each business year.
Below is a sample template provided in the FSC press release for verifying eligibility for the special tax treatment. Given that this is the first year in which high dividend companies are required to disclose their corporate value-up plans, a simplified or “short-form” disclosure will be permitted. This allows high dividend companies to report only essential information, such as their ROE, dividend payout ratio targets, and Capital Expenditure (CAPEX) goals, on top of proof of eligibility for the dividend income tax incentives, rather than following the existing Guidelines for the Corporate Value-up Plan. To support disclosures by high dividend companies, the Korea Exchange plans to revise the corporate value-up plan disclosure template and the preparation guidelines. Furthermore, it will incorporate practical examples of simplified disclosures into the Guidelines for Corporate Value-up Plan for reference.
[Sample Template for Verification of Eligibility of High Dividend Companies]
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3. Whether the company is a high dividend company under Article 104-27 of the Act |
Classification |
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Dividend income (KRW) for the business year ending on December 31, 2024 |
KRW 10 billion |
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Dividend payout ratio (%) the immediately preceding business year (2025) |
30% |
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Profit dividends (KRW) for the immediately preceding business year (2025) |
KRW 12 billion |
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Profit dividends (KRW) for the business year before the immediately preceding business year (2024) |
KRW 10 billion |
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Growth rate of profit dividends for the immediately preceding business year compared to the business year before that (%) |
20% |
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According to the Guidelines for Corporate Value-Up Plan, the disclosure of the corporate value-up plan is originally a voluntary disclosure system where listed companies periodically (e.g., once a year) disclose their value-up plans established voluntarily through the KIND of the Korea Exchange.
However, under the aforementioned regulatory amendment, the disclosure of the corporate value-up plan becomes mandatory for high dividend companies seeking to apply for special taxation. Further, the filing deadline is strictly limited to the day following the approval of financial statements and the resolution of dividends at the annual general meeting of shareholders. Consequently, high dividend companies are advised to exercise diligence in preparing for their annual general meeting of shareholders to ensure that they do not overlook the corporate value-up plan disclosure. From an investor’s perspective, it is also necessary to monitor such market disclosures, as the number of such corporate value-up plan disclosures is expected to increase significantly in the market.
