The recent decision by South Korea's Financial Services Commission mandates that companies eligible for special tax treatment due to high dividends must announce their corporate value enhancement plans each year after their annual shareholder meetings. This regulation stems from an amendment to the Tax Special Cases Restriction Act, which aims to encourage dividend increases and foster a dividend-focused investment culture in the country. By introducing a special tax rate that is lower than the standard financial income comprehensive taxation rate, the government hopes to stimulate corporate investment in shareholder returns.

Starting from the next business year, companies wishing to benefit from this tax incentive will need to publicly disclose their corporate value enhancement plans by the day following their approved dividends at the annual meeting. This disclosure will require companies to include performance indicators that illustrate their fulfillment of tax incentive criteria, such as payout ratios and dividend amounts, as well as their long-term strategies for increasing corporate value. The obligation for transparency is expected to provide investors with a clearer framework to assess the companies' commitments to enhancing shareholder value.

The Financial Services Commission states that this regulation seeks to ensure that companies committed to returning value to shareholders are adequately recognized in the market, leading to better access to funding and reinvestment opportunities. By creating a virtuous cycle between companies, investors, and the market, the regulation aims to strengthen South Korea's capital market, enhancing overall economic growth by aligning corporate fortunes with stakeholder interests.