On January 6, the Ministry of SMEs and Startups (MSS) announced a comprehensive reform of the venture investment system for 2026. This serves as a follow-up to the "Top 4 Venture Powerhouse Strategy." The reform focuses on establishing a private-led venture and startup ecosystem by boldly easing regulations and strengthening tax incentives and institutional stability.

The following three points summarize the core changes of this reform:

1. Significant Deregulation: "Greater Freedom in Investment, More Flexibility in Operation"

• Extension of Investment Obligation Period: The period for venture capital firms to fulfill their investment obligations will be extended from 3 years to 5 years. This reduces the pressure for immediate results, allowing for more deliberate and long-term investment strategies. (Effective July 1, 2026)

• Abolition of Per-Fund Investment Mandates: The previous 20% investment obligation for each individual fund will be abolished. Instead, obligations will be managed based on the firm’s total assets under management (40% of the total), enabling more strategic fund operations. (Effective July 1, 2026)

• Lowering the Threshold for Private Fund of Funds (FOF): To stimulate private-led investment, the minimum formation size for private FOFs has been significantly reduced from KRW 100 billion to KRW 50 billion.

• Streamlined Foreign Capital Attraction: New provisions allow foreign investors to contribute directly in USD without separate currency exchange procedures, enhancing the ease of global investment.

2. Expanded Tax Incentives: "Strong Incentives for Private Capital Influx"

• Higher Corporate Tax Credits: For corporations investing in private FOFs, the tax credit rate for the incremental portion of the investment has been increased from 3% to 5%. (Effective as of January 1, 2026)

• Tax Benefits for SPC Investments: Venture investment trusts investing indirectly through Special Purpose Companies (SPCs) will now receive the same tax benefits as direct investments, ensuring greater diversity in investment structures.

3. Strengthening Ecosystem Foundations: "Stable Investment Environment and Support for Re-challenge"

• Extension of the "Fund of Funds" (MoTae Fund) Duration: The duration of the government’s Fund of Funds, previously set to expire in 2035, can now be extended in 10-year increments. This ensures continuous support for long-term sectors such as AI and Deep Tech.

• Expansion of Pension Fund Participation: The scope of statutory funds eligible for venture investment has been expanded to include all funds under the National Finance Act, opening the doors for large-scale institutional capital. (Effective July 1, 2026)

• Prohibition of Excessive Joint Liability: Investors are now prohibited from imposing excessive joint liability on third parties other than the target company. This move is expected to strengthen trust between founders and investors and facilitate "re-challenges" after business failures.

The keywords for this institutional reform are "Private-led Growth" and "Autonomy." In particular, the improved investment and exit conditions for Corporate Venture Capitals (CVCs) and the relaxed requirements for private FOFs are expected to act as a catalyst for large-scale growth capital to flow into the venture market.