Korean Tax Incentives for 2020: Korean Tax Law Updates

Because of increased tax liabilities of many companies in Korea and because of perceived deteriorating market conditions, the Korean government implemented programs that may assist some SMEs, and larger companies doing business in Korea. Numerous conditions apply for each of these incentive/abatement tax programs below. The following is, only, intended as a basic explanation of the programs that may be available to businesses operating in Korea.

Korean Tax

Tax Support for Investments in Korea

  1. Investments in facilities that “improve productivity” shall receive an increased tax credit for a period over two years. For large businesses, there shall be an increase from 1% to 2%; medium-sized businesses, from 3% to 5%; and small businesses, from 7% to 10%.
  2. Relaxed standards for family business inheritance tax deductions. After-care periods shall be reduced from ten years to seven years. For seven years, the business is required to maintain its present headcount or aggregate payroll.
  3. Expansion of the special provisions on taxation for factory relocation of small and medium sized businesses. For factory relocation to non-congested metropolitan areas or relocation to an industrial complex for a factory that has been operating for more than two years – five years of capital tax gains shall be deferred and paid in installments over five years.

Tax Support for Employment of Classes of Individuals

  1. Career-Interrupted Women. The Korean government is providing tax support to businesses that re-employ career-interrupted women. For two years, 30% of the labor costs shall be provided to the company in the form of a tax credit.
  2. Temporary Worker to Permanent Worker. For each transition from temporary employment to a regular employment of an employee, -KRW 10 million tax credit.
  3. Youth Employment. If an SME continues its subscription to the For Tomorrow Tax Credit from Young Tomorrow Tax Credit, there shall be a 50% tax exemption for small enterprises and 30% tax exemption for medium-sized enterprises in Korea.

Qualifications for Expenses and its Benefits

  1. Relaxed standards for bad debt tax credits. Bad debt tax credit period shall be extended to include loan payments and accounts receivables *(credit losses) bad debts * 10/110 within five years from the date of supply in order to reduce the tax burden on businesses.
  2. “Faithful Businesses.” Businesses that faithfully file tax reports shall receive a tax reduction for medical expenses and education expenses.
  3. Driving Records. Relaxed duty to keep driving records for vehicles used for business. A total of KRW 15 million (previously KRW 10 million) shall be accepted without driving records, separately from the purchase of the vehicle.

If you are interested in more information on the revised tax laws in Korea, we suggest setting up a call with IPG.  

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