Article 40 (Tax Concessions on Asset Transfer by Shareholders, etc.)

Where a domestic corporation gratuitously receives an asset from a shareholder or contributor (hereinafter referred to as "shareholder, etc." in this Article) by December 31, 2026, fulfilling all of the following requirements, the amount of the asset's value (limited to the amount exceeding the deficit prescribed by Presidential Decree) shall not be included in gross income for 3 business years after the end of the business year in which the asset was received, and an amount not less than the amount divided equally over the subsequent 3 business years shall be included in gross income when calculating the taxable income for that business year. <Amended by Act No. 10405, Dec. 27, 2010, Act No. 11603, Jan. 1, 2013, Act No. 13779, Dec. 15, 2015, Act No. 15223, Dec. 19, 2017, Act No. 16120, Dec. 24, 2018, Act No. 18655, Dec. 28, 2021, Act No. 20004, Dec. 31, 2023> 1. The asset donation by the shareholder, etc. and the repayment of the corporation's debt are made in accordance with a financial structure improvement plan (limited to one approved by a person prescribed by Presidential Decree; hereinafter referred to as "financial structure improvement plan" in this Article) 2. The financial structure improvement plan shall include provisions for the corporation to use the entire amount of the proceeds from the transfer of the asset for the repayment of debt to financial creditors (hereinafter referred to as "financial creditors" in this Article and Article 44) within a period prescribed by Presidential Decree, between the date of receipt of the asset (in the case of money) and December 31, 2026, and between the date of transfer of the asset (in the case of non-monetary assets, the date prescribed by Presidential Decree) and December 31, 2026 (in the case of unavoidable reasons prescribed by Presidential Decree, it means the repayment of debt in full by the day after the reason ceases to exist).

Where a shareholder, etc. donates an asset to a corporation pursuant to paragraph ①, and transfers an asset owned and donates the proceeds from the transfer to the corporation by December 31, 2026, the capital gains from the transfer of such asset equivalent to the donated amount prescribed by Presidential Decree (hereinafter referred to as "amount equivalent to capital gains" in this Article) may be reduced from capital gains tax or may not be included in gross income according to the following methods. <Amended by Act No. 10405, Dec. 27, 2010, Act No. 11603, Jan. 1, 2013, Act No. 13779, Dec. 15, 2015, Act No. 16120, Dec. 24, 2018, Act No. 18655, Dec. 28, 2021, Act No. 20004, Dec. 31, 2023, Act No. 20573, Dec. 31, 2024> 1. Resident: Method of reducing the tax amount equivalent to 100 percent of the amount equivalent to capital gains from capital gains tax. 2. Domestic corporation: Method of not including the amount equivalent to capital gains in gross income when calculating the taxable income for that business year.

The tax amount payable by the corporation pursuant to paragraph ④ shall include an amount equivalent to interest calculated in accordance with Presidential Decree, and such tax amount shall be deemed the tax amount to be paid pursuant to Article 64 of the Corporate Tax Act. Provided, That this shall not apply in the case of subparagraph 3 of paragraph ④, provided for unavoidable reasons.

A person who has approved a financial structure improvement plan pursuant to paragraph ①(1) shall submit the contents of the financial structure improvement plan and the implementation performance thereof annually to the head of the tax office having jurisdiction over the tax return office in the manner prescribed by Presidential Decree.