The Korean Ministry of Economy and Finance plans to submit the following Korean Tax reform proposal to the
National Assembly and seeks approval before the 2nd of September 2022.
The Korean Tax Reform Plan consists of changes with an emphasis on three goals of the new administration:
- Strengthen the economy;
- To stabilize people’s livelihood;
- To create a taxpayer-friendly country.
Tax Incentives for foreign professionals working in Korea
The Korean Government intends to extend a 50% cut to income taxes for highly skilled foreign engineers to 10 years from the current criteria of 5 years. This is to attract a more talented workforce from abroad and encourage them to stay longer in the country amidst growing concerns about a rapid population decline and brain drain. This is a warmly welcomed sign that the present administration shall consider foreign employees and companies a vital part of the growing Korean economy.
The reform proposal plans to offer a flat income tax rate of 19% for foreigners who work in Korea while extending the length of time to avail of this benefit.
Corporate Income, Individual property tax cuts in Korea
The Government readdressed its plan to lower the maximum income tax rate for businesses to the OECD average of 22% from the original 25% to facilitate corporate investment and create more jobs. Korean Companies that bring their manufacturing plants back home shall, also, receive broader incentives than in prior years.
Those with one home shall be exempt from the comprehensive real estate tax if their house does not exceed 1.2 billion won in value, up from the current 1.1 billion won. The comprehensive real estate tax will be levied on those with homes or this amount or for those with multiple houses.
Extend the deadline for Korean inheritance tax
The new reform aims to protect SMEs owned and managed by generations of families from shutting down due to heavy taxes. We see this issue, often, in our estate practice. The heir/successor shall receive a grace period on inheritance tax payments if they meet a certain threshold criteria. We shall write about this in a follow-up post.
Postponement of Korean taxation on crypto asset investments
There are plans, within the Tax Law revisions, to impose taxes on investment gains from financial products and crypto assets from January 2023.
Overhaul of Korean income tax brackets
To help middle and lower-income households, the Korean government plans to amend taxable income brackets that date back to 15 years. These are widely considered outdated and do not reflect real household income.
Duty-free shopping limit in Korean raised
The Korean government shall raise the limit on the duty-free allowance for inbound travelers to $800 per person from the current $600 to boost the pandemic-hit tourism industry.
IPG Legal shall be updating readers regularly on Amendments to Korean Tax Law, please check our blog to keep yourself updated. To schedule a consultation with a lawyer in Korea, please: Schedule a Call with a Korean
- The Korean Tax Law Reform Proposal of 2022
- Korean Tax Law Amendments for Individuals for 2021
- Korean Tax Law Amendment Press Release by Korean Government
- Korean Real Estate Acquisition Taxes for Purchase of Real Estate in Korea
- Tax Breaks for Korean Landlords: Real Estate Taxation Basics
- Korean National Tax Service Tax Law News Release to Foreign Corporate Taxpayers: Korean Tax Law Updates
- Korean Corporate Tax Law Amendments for FY 2021
- Korean Tax Risk of Foreign Corporation Deemed “Actual Business Management Locale” within Korea: Korea Tax Law Basics
- Can a Foreign Company be Deemed a Domestic Company for Tax Purposes and Taxed on Worldwide Income?
- Steps to Set up a Business in South Korea