The government has decided not to include tax exemptions or tax deferral benefits for restricted stock units (RSUs) in next year's tax revision bill, set to be announced next month. According to the Seoul Economic Daily on the 29th, the Ministry of Economy and Finance received a research report it commissioned from the Korea Development Institute (KDI) concluding that "tax exemptions and tax deferral for RSUs are necessary." However, the ministry settled on excluding them, citing that "tax support such as exemptions and installment payments is already in place for stock options." Large corporations as well as venture firms and startups had pleaded for tax benefits on RSUs to be used as a catalyst for attracting talent, but the government turned a blind eye.
RSUs are shares granted to employees free of charge once specific conditions, such as length of service or performance, are met. It is a compensation system that can be used by firms with high growth potential but limited internal cash, such as venture firms and startups. Because it allows companies to attract talent using future growth as collateral, RSUs have been adopted not only by Silicon Valley venture firms and startups in the United States but also by Big Tech companies such as Google and Microsoft. In Korea, however, despite establishing a legal basis through the 2024 revision of the Venture Business Act, RSUs have failed to spread because, unlike stock options, they receive no tax benefits. KDI pointed out that "a structure in which taxes must be paid at the point of receiving stock compensation is a factor that makes both companies and employees avoid it."
The race for supremacy in artificial intelligence (AI) and semiconductors hinges on securing cutting-edge technology talent. In that respect, the government's decision not to grant tax benefits to RSUs, a powerful tool for attracting talent, is a misstep. Can the government preach growth and innovation while ignoring the compensation system to support it? Competing nations such as Germany and France, which have introduced tax deferral and dedicated incentives respectively to ease tax burdens, are competitively expanding RSU tax benefits and pouring all their efforts into the contest for talent.
The government must reconsider its policy of excluding RSUs from tax benefits, even now. Top talent inevitably moves to where there is exceptional treatment and guaranteed compensation. With the outflow of core science and engineering talent overseas intensifying, RSU tax benefits are not a choice but a necessity. Even if Samsung Electronics and SK hynix invest hundreds of trillions of won to build advanced plants in regional areas, it will be difficult to attract core talent without exceptional compensation.
