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Changes to tax exemption on the sale of securities by individuals in 2014

Another major change brought by the Senate’s legislative measure for individuals is the extension of the minimum holding period for the exemption on income from the sale of securities.

Under current laws, income from the sale of securities received by individuals is, subject to certain conditions, tax-exempt after a 6-month holding period. However, the amendment extends this minimum holding period for tax exemption to 3 years between acquisition and transfer. If the minimum holding period is not satisfied, the income from sold shares will be subject to tax. However, under the transitional provisions, the new rules will only apply to securities acquired after 1 January 2014. The existing minimum holding period of 6 months will apply to securities acquired by the end of 2013.

The good news is that the legislative measure concurrently abrogates the existing condition that the tax exemption only applies to persons with a total direct participation in a company’s registered capital or voting rights not exceeding 5% in a period of 24 months before the sale of the securities. From 2014, the tax exemption after the 3-year holding period will apply to all persons regardless of the size of the participation. Other conditions, such as assets not included in corporate assets and future sale within 3 years, remain effective.

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