Korea Moves to Encourage Employee Ownership

Korea has long had laws that provide incentives for companies and employees to buy shares in their companies, but a recent article in the Korea Times notes that the government recently announced a much expanded set of programs. Currently, just 0.6% of Korean companies offer these plans, and employees own 1.3% of traded shares. Under the new laws, employees can buy stock and take a tax deduction for the expense. If they hold the shares six years or more, they will be exempt from income tax on the gains. Purchases can be made in monthly installments and are deductible up to about $3,800 per year. Companies can also get a tax deduction for use profits to fund an employee ownership plan.

Last, the government will set up a hedge opportunity for employees, details of which have not yet been announced. Some European companies use these programs, however, and they provide that employees can borrow money to buy shares and repay the loan in a specified number of shares, rather than cash, retaining the shares not used. If there are not enough shares, they are not responsible to pay.