President Lee Jae-myung on July 15 urged faster legislative action on inheritance and gift tax reform targeting companies with price-to-book ratios (PBR) below 0.8x, according to Herald Economy. As of July 15, 1,291 out of 2,718 listed companies on KOSPI and KOSDAQ—representing 47.5% of all Korean stocks—traded below the 0.8x PBR threshold, data from Korea Exchange showed. The proposed reform aims to eliminate incentives for controlling shareholders to suppress stock prices during succession planning. Under current law, inherited stocks are valued based on average prices over a four-month period surrounding the inheritance date, creating motivation to keep share prices low. The government plans to announce detailed tax reform measures by the end of this month.
Government Targets 1,291 Low-PBR Korean Stocks for Tax Reform
Korea Exchange data as of July 15 identified 1,291 companies trading below 0.8x PBR out of 2,718 total listed firms. PBR is calculated by dividing market capitalization by net assets. A PBR of 0.8x means the market values the company at 20% below its book value. The government's forthcoming tax reform package will address valuation methods for inherited shares in these low-PBR companies. Bills currently pending in the National Assembly use the 0.8x PBR threshold as a key criterion for triggering special inheritance tax treatment.
Analysts Screen 14 Companies Meeting ROE and Cash Flow Criteria
Shinhan Investment Securities researcher Lee Jung-bin applied additional filters beyond the 0.8x PBR threshold to identify likely beneficiaries. Using criteria of PBR below 0.8x, return on equity (ROE) above 10%, and market capitalization exceeding 500 billion won, the analysis identified 14 companies: Korea Electric Power, KCC, Korean Re, Youngone Holdings, SK Gas, Daou Technology, Dongwon Industries, Daewoong, Cuckoo Holdings, District Heating Corporation, Daou Data, Soulbrain Holdings, Hyundai Green Food, and F&F Holdings. Lee stated that companies in steel, chemicals, and retail sectors face fundamental discount pressures from weak business conditions and low profitability, limiting revaluation potential from regulatory changes alone.
National Assembly Bills Propose PBR-Based Inheritance Tax Changes
Democratic Party Representative Lee So-young's bill proposes taxing inherited shares of companies with PBR below 0.8x based on asset value and earnings value rather than market price. Separate bills by Representatives Kim Hyun-jung and Ahn Do-geol would mandate corporate value enhancement plan disclosures for companies maintaining low PBR levels over extended periods. Law firm Sejong advised listed companies to monitor legislative developments while managing PBR and ROE levels, and to prepare corporate value enhancement plans including dividend policies, share buybacks, and investor relations activities.
President Lee Directs Financial Regulators to Accelerate Legislation
During a July 15 briefing at the Blue House Yeongbingwan, President Lee told the Financial Services Commission that legislation to prevent stock price suppression is delayed. He stated, "Obtain cooperation by any means necessary and accelerate the process. Normalizing and advancing capital markets is critically important national policy." The government's 2026 second-half economic growth strategy includes reforming listed stock valuation methods for inheritance and gift tax purposes. Current law evaluates inherited stocks using average prices from two months before to two months after the inheritance date—a four-month total period—creating incentives for controlling shareholders to maintain low share prices ahead of succession events.
FAQ
What is the 0.8x PBR threshold in Korea's proposed inheritance tax reform?
The 0.8x price-to-book ratio threshold identifies companies whose market capitalization is 20% below their net asset value. Bills pending in Korea's National Assembly use this metric to trigger special inheritance tax treatment, with 1,291 out of 2,718 Korean listed companies falling below this level as of July 15.
Which Korean stocks meet the analyst screening criteria for tax reform benefits?
Shinhan Investment Securities identified 14 companies meeting criteria of PBR below 0.8x, ROE above 10%, and market cap exceeding 500 billion won: Korea Electric Power, KCC, Korean Re, Youngone Holdings, SK Gas, Daou Technology, Dongwon Industries, Daewoong, Cuckoo Holdings, District Heating Corporation, Daou Data, Soulbrain Holdings, Hyundai Green Food, and F&F Holdings.
How does current Korean inheritance tax law evaluate listed stocks?
Current law values inherited stocks based on the average share price during a four-month period: two months before and two months after the inheritance date. This creates incentives for controlling shareholders to suppress stock prices during succession planning to reduce tax liability.
