Angel investment is a type of investment made by individuals in return for shares in the company. (image: Kobiz Media / Korea Bizwire)
SEOUL, Nov. 24 (Korea Bizwire) — The government will increase the tax exemption privileges to angel investment, the investment made by groups of individual investors to start-up firms. The subcommittee on taxation under the strategy & finance committee, National Assembly, was reported on November 21 to have approved the tax privilege restriction law that includes that clause.
Meanwhile, other agendas such as tax increase on dividend income and on earned income were postponed to next week as members of two opposing parties were unable to reach a conclusion. One of the most important agendas for the day’s subcommittee discussion was raising the tax deduction limit of angel investment so that the investors are encouraged to invest more.
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Angel investment is a type ofinvestment made by individuals in return for shares in the company. Currently the government allows income deductions for the amount of investment to individuals who invest in small enterprises within three years after establishment.
In the case of indirect angel investment through a venture capital cooperative, up to 10 percent of investment amount is allowed for tax deductions. For direct investors, about 30-50 percent of deduction rates are applicable depending on investment amount.
According to the new revision, the current tax deduction ratio of 50 percent for investment below 50 million won and 30 percent over the amount of 50 million won will be changed to a 100-percent deduction for investment below 15 million won, with all other conditions remaining the same.
In addition, the phase-out date would be extended by three more years to December 31, 2017. The lawmakers were in agreement that the present income tax deduction scheme is not sufficient to encourage angel investors to invest in start-up firms.
By Sean Chung (schung10@koreabizwire.com)
