Tax Qualified Mergers in Korea: Amended 80% Rule for Triangle Mergers

Up until a recent amendment to the Korean Commercial Code and tax law, in order to qualify for a “tax qualified merger,” at least 80% of the paid consideration must be paid in the stocks of the surviving company to the shareholders of the company being acquired. This law, thus, precludes the ability to receive this tax benefit in triangle merger situations.

A triangle merger is, in short, when a subsidiary owned by the acquiring company (surviving company) merges with the seller.

A recent amendment provides an exception for triangle mergers. The exception will be available from April of 2012.