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Tax code revision centers on supporting post-pandemic recovery

All News 14:00 July 22, 2020

By Kim Deok-hyun

SEJONG, July 22 (Yonhap) -- South Korea's finance ministry said Wednesday that it will revise its tax code in a way that helps businesses overcome pandemic pain and steers the nation towards an economic recovery once the crisis wanes.

"A revision of the tax code is aimed at preemptively coping with a post-coronavirus pandemic world, while helping overcome an economic crisis," Finance Minister Hong Nam-ki told reporters.

The government will also support firms seeking innovation-driven growth and extend tax benefits to low-income families, Hong said.

According to the ministry, the government plans to revise a tax credit on corporate investment in a way that will reduce tax burdens on firms.

Currently, companies are subject to the tax credit if they invest in such facilities as eco-friendly plants and research and development centers.

Under the revision, the requirement will be abolished, allowing companies to benefit from the tax credit if they invest in all business facilities, excluding lands, buildings and some vehicles.

The tax credit rate was set at 1 percent for big firms and up to 10 percent for small- and medium-sized firms.

To boost local consumption, the government will raise a cap on tax deduction on credit card use this year.

Finance Minister Hong Nam-ki announces the Korean-version New Deal project at the presidential office in Seoul on July 14, 2020. The project is designed to create 1.9 million jobs by 2025 by spending 160 trillion won (US$130 billion) while overcoming the COVID-19 pandemic and preparing for the post-coronavirus era. (Yonhap)

The credit card spending deduction program permits card holders to deduct 15 percent of their credit card charges of up to 3 million won (US$2,600) for those who earn 70 million won or less a year.

The cap will be temporarily raised to 3.3 million won, the ministry said.

Starting in 2023, the government will levy a new tax on consolidated gains from all financial investment.

However, the government retracted a plan to impose a tax on stock investment gains surpassing 20 million won from 2023, amid criticism that the plan would spook investment appetite.

So far, South Korea has levied a capital gains tax on major shareholders who own more than 1 billion won worth of stocks in a single company.

The government will gradually lower the stock transaction tax to 0.15 percent in 2023 from the current 0.25 percent, according to the ministry.

From Oct. 1, 2021, the government will impose a 20 percent tax on income from cryptocurrency transactions.

But the tax will be exempted unless capital gains from cryptocurrency trading exceed 2.5 million won per year, according to the ministry.

As part of an effort to boost the tax base and ensure fair taxation, the government will beef up its crackdown on offshore tax evasion, while strengthening regulations on reporting offshore property investment to the relevant authorities.

In order to boost job creation, or maintain quality jobs, the government will provide an array of tax incentives to companies in regions or cities hit by corporate restructuring.

The government will increase tax credits for smaller firms that hire more employees and provide larger tax benefits to companies making facility investments related to innovation-led growth.

The government will submit the tax revision bill to the National Assembly before Sept. 3, the ministry said.

kdh@yna.co.kr
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