Notice 26-014, issued on 24 July 2026, revises the tax treatment of employee stock options (ESOPs) granted by listed and unlisted Korean corporations, aiming to curb tax-motivated option exercises and ensure accurate valuation at exercise. The amendment mandates that the fair-market value at the time of option grant be objectively determined using a third-party appraisal, replacing the prior self-assessment model. Exercising employees must now report the spread between the exercise price and the appraised value as employment income, subject to comprehensive tax rates. The NTS also introduces a deferred-tax election allowing eligible start-up employees to recognize income over a five-year period, subject to strict eligibility criteria and prior notification to the tax authority. Non-compliance triggers immediate reassessment and interest charges at the official rate from the original filing date.
Key Takeaways
- Mandatory Third-Party Valuation: All stock-option grants must be documented with a certified valuer’s report within 30 days of grant, with the report retained for at least five years and produced upon NTS request.
- Deferred-Tax Election for Start-Ups: Qualified start-up employees may elect to defer taxation on the option spread for up to five years, provided that the company’s total issued capital does not exceed 50 billion KRW and the employee holds the shares for a minimum of three years post-exercise.
Disclaimer:This article is compiled and summarized based on publicly available information and is for general information and academic exchange purposes only. It does not constitute any form of formal tax advice, legal opinion, or basis for performance. For tax planning, please consult a qualified professional tax advisor or legal counsel.
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