Prevent the 'C Shock'... Government Mobilizes All Available Resources Including Taxation, Customs Clearance, and Finance (Comprehensive)

Corporate Tax Payment Deadline Extended by 9 Months... Tax Audits Postponed or Suspended

Support for Small Business Interest Reduction, Living Expenses, and Paid Leave Costs Set at MERS Level

[Image source=Yonhap News]

[Asia Economy Reporters Kwangho Lee, Minyoung Kim, Sehee Jang, and Dala Won] On the 5th, the Democratic Party of Korea, the government, and the Blue House held a party-government-Blue House council at the National Assembly to discuss measures including the provision of 3.4 trillion won in contingency funds to prevent the spread of the novel coronavirus infection (Wuhan pneumonia). This is interpreted as preparation for the possibility that the current situation may prolong. If the novel coronavirus situation is not resolved early, it will inevitably have a negative impact on consumer sentiment and domestic demand, increasing the burden on the Korean economy. On the same day, the government emphasized that it would mobilize all available resources such as tax administration, customs clearance, and finance in case the novel coronavirus situation continues long-term. This is a follow-up measure after President Moon Jae-in ordered at the Cabinet meeting the previous day, "Prepare multifaceted countermeasures to minimize the shock and damage to our economy, even in the worst-case scenario of a prolonged situation. We must tackle the novel coronavirus with extraordinary determination."

◆ Corporate tax and VAT payment deadlines extended by 9 months = On the same day, Hong Ik-pyo, the chief spokesperson of the Democratic Party, said in a briefing immediately after the party-government-Blue House council, "The government is currently utilizing the budget secured for the infectious disease, and the available contingency funds amount to a total of 3.4 trillion won, including 2 trillion won in earmarked contingency funds and 1.4 trillion won in general contingency funds," adding, "We plan to use them promptly and appropriately." This is larger than the previously announced 2 trillion won earmarked contingency fund support, emphasizing that the party-government-Blue House recognizes the seriousness of the current situation.

After the council, at the Economic Ministers' Meeting and Economic Vitality Measures Meeting chaired by Deputy Prime Minister and Minister of Economy and Finance Hong Nam-ki, the 'Support measures related to tax administration and customs clearance for the novel coronavirus situation' were announced. Deputy Prime Minister Hong stated, "We will mobilize all available policy tools to prevent the spread of this situation, achieve early resolution without casualties, and maintain momentum for domestic economic recovery, responding with full force."

The government will support taxpayers such as self-employed individuals facing difficulties due to the novel coronavirus by extending reporting and payment deadlines, deferring collection, postponing tax audits, and suspending enforcement actions. The reporting and payment deadlines for corporate tax (March) and value-added tax (April) will be extended by up to 9 months, and if the situation continues, the deadline for comprehensive income tax (May) reporting and payment will also be extended. Additionally, for small and medium-sized enterprises exporting to China that have national tax refunds, payments will be expedited as much as possible. Enforcement of collection actions will be deferred for up to one year. Furthermore, tax audits on affected taxpayers will be suspended in principle until the situation stabilizes. In particular, the National Tax Service headquarters, seven regional tax offices nationwide, and 125 tax offices will establish a 'Novel Coronavirus Tax Administration Support Task Force' to systematically support affected taxpayers.

The Korea Customs Service will support companies experiencing disruptions in raw and subsidiary material supply and exports due to factory closures in China by allowing submission of payment plans with extensions and installment payments for up to one year without collateral. Also, customs refund applications submitted by affected companies will be converted to electronic documents (P/L) and refunds will be decided and paid on the day of application. Customs investigations will also be deferred until the end of the damage regulation period. Additionally, to block the overseas export of masks and hand sanitizers, simplified export procedures will be converted to formal export procedures to strengthen export customs clearance management.

◆ Interest reduction support for small business owners under consideration = The Ministry of Economy and Finance and the Ministry of SMEs and Startups are also considering interest reduction support for small business owners. This is a strong measure not seen during the 2003 Severe Acute Respiratory Syndrome (SARS) or the 2015 Middle East Respiratory Syndrome (MERS) outbreaks. However, during the Gangwon wildfire damage, a 0.5% interest reduction was supported only for small business owners. A government official said, "Discussions among related ministries on interest reduction support measures have been completed," adding, "The Ministry of Economy and Finance will make an official announcement soon." He further stated, "We plan to announce after analyzing the extent of the impact and the factors causing it." Previously, the Ministry of SMEs and Startups decided to provide 20 billion won in management stabilization funds to small business owners and supply 100 billion won in special guarantees through regional credit guarantee institutions with a 0.2 percentage point reduction in guarantee fees.

In addition, living expenses support for those under self-quarantine is being finalized at the level provided during MERS. The Ministry of Health and Welfare plans to provide differentiated payments based on income level and household type, with paid leave compensation set at a maximum of 130,000 won. During MERS in 2018, households under quarantine with a monthly income of 3.09 million won or less for a family of four, property under 135 million won in metropolitan areas, and financial assets under 5 million won were supported according to household size: 1 person (409,000 won), 2 persons (696,500 won), 3 persons (901,100 won), and 4 persons (1,105,600 won). Paid leave compensation was provided at a daily wage limit of 130,000 won per individual based on daily wage standards.

This content was produced with the assistance of AI translation services.