2026 Legislative Changes Affecting Venture Businesses

Overview of Amended Legislation

Laws and tax regulations affecting venture enterprises are amended annually to reflect market realities. The following is a summary of major changes taking effect from late 2025 through 2026, from the perspective of both companies and investors.

1. Amendments Relating to Stock Options (STTCL Article 16-2)

Expansion of Tax-Exempt Threshold

Before Amendment (through 2024): - Tax-exempt threshold for venture enterprise stock option exercise gains: KRW 50 million per year

After Amendment (from 2025): - Tax-exempt threshold: Maintained at KRW 50 million per year (discussions ongoing for expansion in certain deep tech sectors) - AI, semiconductor, bio, and other national core technology sectors: Discussions underway on raising the tax-exempt threshold to KRW 100 million per year - Cumulative tax-exempt threshold: KRW 200 million (unchanged)

Expanded Eligible Recipients for Stock Options

Key 2025 Amendments: - Simplified procedures for granting stock options to external collaborators (freelancers, open-source contributors, etc.) - Clarification of permitted scope for granting stock options to technical advisors and researchers at collaborative research institutions - Extension of stock option exercise period: Extended from 10 years to 15 years from the grant date (amendment to the Enforcement Decree of the Venture Business Act)

Previously, only the issuance of new shares or delivery of treasury shares was permitted for stock option exercise. The legal basis for phantom stock (differential settlement) and market price-based settlement has now been clarified.

Practical Impact: - Early-stage startups with limited cash liquidity can design more flexible compensation structures - The scope for recognizing market comparison value (rather than net asset value per share) in non-listed share valuationBusiness Valuation
The process of determining the economic value of a business in monetary terms using methods like DCF and multiples.1 related guides has expanded

2. Changes to Venture Enterprise Certification Requirements

Raised Investment Amount Threshold

Before Amendment: - Venture Investment Type: Qualified investment institution investment amount of KRW 50 million or more (or 10% or more of paid-in capital)

After Amendment (effective second half of 2025): - Venture Investment Type threshold: Qualified investment amount of KRW 100 million or more (or 10% or more of paid-in capital) - Rationale: The KRW 50 million threshold had become a formality due to investment inflation; shifting focus toward qualitatively stronger venture enterprises

Expanded Recognition of R&D Expenditure

Technology Innovation Type (R&D Type) Amendments: - Increased recognition ratio of software development costs as R&D expenditure: from 50% to 70% - Clarification of recognition of AI model training data construction costs as R&D expenditure - Expanded recognition of cloud infrastructure costs attributable to research purposes as R&D expenditure

Extension of Certification Validity Period

Amendment Details: - Under review: Extension from the current 2 years to 3 years (planned amendment to the Enforcement Decree of the Venture Business Act) - Rationale: Reducing administrative burden of annual renewal; enabling growing mid-stage companies to continuously enjoy benefits

Introduction of Automatic Certification Renewal (Planned)

Planned introduction of automatic renewal without resubmission of documents for companies that meet the conditions
Automatic verification of eligibility through database linkage with certification bodies such as the Korea Technology Finance Corporation and Korea SMEs and Startups Agency

3. Adjustments to the Venture Investment Income DeductionIncome Tax Deduction
Tax deduction system for venture enterprise investment: 100% for up to 30M KRW, 70% for 30-50M KRW, 30% for over 50M KRW.1 related guides System (STTCL Article 16)

Discussion on Deduction Rate Adjustment

In the 2025 tax law amendment discussions, proposals to adjust deduction rates for ultra-high-income earners were raised, but it was concluded that the existing deduction rate structure would be maintained.

Current Maintained Deduction Rates: - Up to KRW 30 million: 100% - KRW 30–50 million: 70% - Above KRW 50 million: 30%

However, changes planned from 2026: - Simplified deduction application: One-click processing of venture investment income deduction applications via mobile Hometax - AI-based deduction verification system: NTS AI automatically pre-reviews eligibility for income deduction - Strengthened false deduction prevention: Real-time data linkage between investment confirmation issuance bodies and the National Tax Service (NTS)

Expansion of Individual Investment Association Investment Targets

Scheduled for 2026: - Companies within 10 years of establishment included in mandatory investment targets (previously 7 years) - Investments in social enterprises and social ventures permitted in mandatory investment ratio calculation - Companies with leading technology, if unlisted, permitted for investment without age restriction (subject to individual review)

4. Changes to Corporate Tax ReductionCorporate Tax Reduction
Venture-certified enterprises receive a 50% reduction in corporate (or income) tax for 5 years from the initial certification date.1 related guides (STTCL Article 6)

Tax Reduction for Startup SMEs

Current (2025): - Corporate tax reduction for 5 years after establishment - Startups outside the Seoul metropolitan restricted growth zone: 100% reduction (5 years) - Startups within the Seoul metropolitan restricted growth zone: 50% reduction (5 years)

2026 Changes: - AI, semiconductor, secondary battery, and bio-sector startups: 75% reduction even for startups within the Seoul metropolitan zone (up from 50%) - Strengthened local startup preference: Startups outside the Seoul metropolitan zone + national core technology sectors: 100% reduction for 7 years (up from 5 years) - Rationale: Fostering regional innovation ecosystems and attracting core technology industries

Application of Minimum Tax Rate

Provisions to prevent taxation below the minimum tax rate (floor rate) after reductions have been partially adjusted. Introduction of a minimum tax exemption provision for startups in advanced technology sectors is under discussion.

5. Expansion of Innovation Startup Commercialization Funding

Expansion of TIPS Support Scale

2026 TIPS Budget: - Total support scale: Approximately KRW 300 billion (15% increase from the previous year) - Maximum R&D support per team: Increased from KRW 500 million to KRW 700 million (AI and deep tech sectors) - Global TIPS: Additional KRW 200 million for teams entering overseas markets

New Global TIPS Program (Second Half of 2025): - TIPS linkage available when overseas investors (global VC) invest KRW 50 million or more - Includes English, Japanese, and Chinese IR support programs

Restructuring of Pre-Startup Package

Maximum support amount raised from KRW 100 million to KRW 150 million
Support scope expanded to include non-technology sectors (culture, service, distribution)
AI-based business model validation tools mandatorily provided

6. Improvements to KOSDAQ Listing System

Relaxed Requirements for Technology Growth Company Fast-Track

2026 Amendments: - Technology evaluation: Grade A relaxed to BBB or above (AI, bio, aerospace sectors) - Administrative stock designation moratorium for post-listing loss-making companies: Extended from 3 years to 5 years

Fast-Track (Expedited Review)

AI, semiconductor, and secondary battery sector preliminary listing review: Shortened from 6 months to 3 months
New preferential return-listing process for global unicorns (50% or more overseas revenue) seeking KOSDAQ listing

7. Tax Improvements for Venture Enterprise M&A

Acquisition Tax ReductionAcquisition Tax Reduction
75% reduction in acquisition tax when venture enterprises acquire real estate for direct use.1 related guides for M&A

New in 2026: - 50% acquisition tax reduction when a domestic venture enterprise acquires another domestic venture enterprise - Objective: Activating the startup-to-startup M&A ecosystem

Succession of Post-M&A R&D Tax Credits

Unused R&D tax credit balance of an acquired company may now be succeeded by the acquirer (previously not permitted)
Condition: At least 80% of the acquired company's executives and employees must be retained for 1 year or more

Response Strategies for Companies and Investors

Founders and Companies

Revise stock option structure: Update existing stock option plans in line with changes to tax-exempt thresholds and exercise periods
Reassess venture certification type: If maintaining the Venture Investment Type becomes difficult due to the raised investment threshold, consider transitioning to the R&D Type
Leverage expanded R&D expenditure recognition: Reflect the expanded recognition of software development costs and AI training data costs in accounting and tax filings
Utilize regional startup benefits: Review additional tax benefits for startups in regional clusters (Daejeon, Busan, Daegu) outside of Pangyo and Gangnam
Global TIPS linkage: After attracting overseas investment, apply for Global TIPS to secure additional R&D funding

Investors

Utilize simplified deduction application: One-click deduction application via mobile Hometax available from 2026
Confirm additional tax-exempt benefits for deep tech investments: Verify additional tax-exempt thresholds for stock option investments in AI, semiconductors, etc.
Utilize M&A tax benefits: Review opportunities for 50% acquisition tax reduction in venture-to-venture M&A
Leverage expanded individual investment association targets: Diversify portfolio as mandatory investment targets expand to companies within 10 years of establishment

Summary of Key Legislative Amendment Schedule

Amendment	Effective Date	Relevant Legislation
Stock option exercise period extended to 15 years	Second half of 2025	Venture Business Act Enforcement Decree
Venture Investment Type threshold raised to KRW 100 million	Second half of 2025	Venture Business Act Enforcement Decree
Software R&D expenditure recognition at 70%	2025	STTCL Enforcement Decree
Corporate tax reduction at 75% for core technology sectors	2026	STTCL Article 6
TIPS support raised to KRW 700 million	2026	Ministry of SMEs and Startups Notice
KOSDAQ technology evaluation criteria relaxed	2026	KOSDAQ Listing Regulations
M&A acquisition tax reduction of 50%	2026	Local Tax Special Treatment Act
Venture certification 3-year validity period	Planned 2026	Venture Business Act Enforcement Decree

Conclusion

The years 2025 and 2026 are a period of numerous positive legislative and regulatory changes for the Korean venture ecosystem. In particular, the extension of the stock option exercise period, enhanced tax benefits for deep tech sectors, and measures to activate the M&A ecosystem provide tangible opportunities for both startups and investors.

Since legislative amendments can involve complex details and varying effective dates, always verify the latest regulations with tax and legal professionals before making important decisions (investment agreements, stock option grants, corporate tax filing, etc.). It is also important to regularly monitor official announcements from the Ministry of SMEs and Startups (msme.go.kr) and the National Tax Service (nts.go.kr).