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South Korea Proposes Tax Measures to Counter ‘Pandemic Slump’

Posted on Jan. 7, 2021

As part of a COVID-19 relief plan, South Korea’s government said it will propose tax incentives including additional deductions for credit card spending, enhanced deductions for commercial rentals, and expanded job creation tax benefits.

On January 6 the Ministry of Economy and Finance (MOEF) said the proposals are updates to its 2020 tax revision plan, which was announced in July 2020. “Changes have been made, as the economy needs a boost to get out of the pandemic slump, [and] there should be measures to ensure a more inclusive economy,” the MOEF said.

Among the new proposals are a measure to allow an extra 10 percent income tax deduction of up to KRW 1 million (around $920) for credit card spending. The incentive would kick in only if a taxpayer’s purchases exceed the previous year’s total by 5 percent or more.

Another proposal would increase commercial property owners' tax reduction from 50 percent to 70 percent of the amount of any rent cut.

The government said it also wants the National Assembly to temporarily expand the job creation tax incentive to companies that failed to retain jobs in 2020. The MOEF said the tax break would be available to companies that increase employment from 2019 levels.

The MOEF said the new proposals will be submitted to the National Assembly by the end of the month.

The government also listed a series of measures that it described as its “2020 revision to enforcement decrees.” Included in the list is an expansion of the corporate investment tax deduction to “almost all businesses” except for rental property businesses and clubs. Twenty-five new technologies would be added to the facilities investment tax deduction for new technology commercialization.

Other measures include a higher (but unspecified) tax deduction ceiling for corporate discretionary and advertising expenses, the inclusion of expenses for patent rights research and analysis in the research and development deduction for small and medium-size enterprises, and an expanded new technology R&D tax reduction.

The MOEF said the revisions also include an increase in the simplified VAT ceiling to revenues of up to KRW 80 million, compared to KRW 48 million currently. The government didn’t say whether the revisions to enforcement decrees require legislative approval.

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