It has been confirmed that Lee & Ko, which is providing legal advice to Toss Securities regarding the stock exchange related to the U.S. Nasdaq-listed company Rocket Lab, recently requested a legal interpretation from the National Tax Service.
Last month, Toss Securities considered the stock exchange due to Rocket Lab's transition to a holding company as a transaction and handled the stocks held by investors through a computerized selling and buying method. This has led to some investors being unexpectedly subject to capital gains tax, resulting in controversy.
According to the financial investment industry on the 2nd, Lee & Ko notified that on the 30th of last month, it requested a legal interpretation regarding the resumption of listing of Rocket Lab from the National Tax Service on behalf of the securities firms involved. These securities firms are currently withholding Rocket Lab's rights until the legal interpretation results are released.
Rocket Lab USA, a U.S. private aerospace company, announced on May 8 of this year (local time) that it would reorganize into a holding company, and on the 23rd of the same month, it became a subsidiary of the holding company Rocket Lab Corporation. During this process, the existing common shares of Rocket Lab USA that were being traded were delisted and reallocated as shares of Rocket Lab Corporation. The ticker symbol remains RKLB.
The U.S. does not impose taxes on stock exchanges resulting from corporate restructuring. However, domestic securities firms process stock exchanges by selling the old shares and buying new ones through a computerized method. In this process, if there is a difference between the average price and the transaction price, a capital gains tax is incurred. In the case of Rocket Lab, the closing price on the exchange date, May 23, at $25.42 becomes the transaction price.
Generally, securities firms seek legal advice from law firms to determine whether the stock exchange related to the transition to a holding company is a transfer or a simple exchange. It is known that most domestic securities firms, including Toss Securities, Mirae Asset Securities, Samsung Securities, NH Investment & Securities, and Kiwoom Securities, are taking advice from Lee & Ko. Lee & Ko has judged this change of rights as a 'transfer transaction,' and the advised securities firms processed it based on this as a capital gains taxable method.
However, some investors raised issues regarding Toss Securities, which handled Rocket Lab's resumption of listing, noting that "the company traded customer stocks arbitrarily, resulting in revenue exceeding 2.5 million won, leading to excessive taxes."
Investors also pointed out that the methods of handling rights differed among securities firms. Korea Investment & Securities, KB Securities, Hana Securities, Kakao Pay Securities, and others considered this change of rights a simple stock exchange, maintaining the existing average price and transaction price. In this case, no capital gains tax is incurred.
In both methods, the total amount of capital gains tax incurred when selling stocks in the future will be the same. This is because if the transaction was first processed as a transfer in the resumption process, it is similar to having partially paid the tax on the profit generated based on the $25.42.
However, some investors who have invested within the tax-exempt range are bound to perceive unexpected taxes being incurred. This is why Toss Securities is criticized for insufficient communication with investors during the rights handling process. Although Toss Securities explained the possibility of capital gains tax due to Rocket Lab's resumption of listing in a notice on its website on May 24, it did not include guidance on the possibility of taxes in a text message sent to investors on the 27th of the same month.
As the controversy intensified, securities firms that are still processing the matter decided to complete the tax handling related to the change of rights based on the legal interpretation result requested by Lee & Ko from the National Tax Service. Kiwoom Securities, which has already completed the handling of rights, announced on its website on the 29th of last month that it processed the change of rights for Rocket Lab as a 'transfer,' and Toss Securities is expected to finalize the processing based on the interpretation result from the National Tax Service.
The legal interpretation result from the National Tax Service is expected to be released as early as this week. A source from a large securities firm said, "As there are constant complaints, it seems that Lee & Ko has asked the National Tax Service for a legal interpretation to prevent future legal issues," adding, "Securities firms receiving advice are anticipating the interpretation to be released in early June, and whether to handle it as a transfer or differently."
The legal interpretation result from this National Tax Service is regarded as important as it could serve as a reference point for how taxes will be imposed in the future during overseas stock rights changes. In response, a source from Lee & Ko stated, "In principle, we cannot respond to inquiries about individual appointments or advice content," and added, "It is also difficult to confirm the issues related to the legal interpretation inquiry to the National Tax Service."