"New Deal Fund" 5% Return with Exceptional Tax Benefits... "Like Jaehyeong Savings"

[Image source=Yonhap News]

[Asia Economy Reporter Park Cheol-eung] A bill containing unprecedented benefits, such as imposing only a 5% tax on the profits of funds related to the Korean New Deal promoted by the government and ruling party, has been proposed. Since it is virtually the party line of the Democratic Party of Korea, which holds an overwhelming number of seats, its passage through the National Assembly is highly likely.

On the 13th, Democratic Party lawmaker Lee Kwang-jae announced that he had taken the lead in proposing an amendment to the Restriction of Special Taxation Act with such content. Among the 176 members of the Democratic Party, 49, accounting for about 30%, were listed as sponsors. Lee serves as the head of the Digital New Deal subcommittee of the K-New Deal Committee within the Democratic Party, and last month, he proposed the creation of a New Deal fund at the Korean New Deal National Report Conference held at the Blue House, which was accepted.

The amendment includes provisions to establish a special separate taxation system that applies a 5% tax on profits from fund investments up to 300 million KRW in social infrastructure projects such as the Korean New Deal, and applies the withholding tax rate on profits for investments exceeding 300 million KRW.

For example, if an investment of 300 million KRW generates a profit of 12 million KRW, under the highest comprehensive income tax rate of 42% (for taxable income exceeding 500 million KRW), one would have to pay about 5 million KRW in taxes. However, in the case of the New Deal fund, a low-rate separate taxation of 5% applies, so only 600,000 KRW needs to be paid.

Lawmaker Lee said, “Like the past savings-type tax benefits, I want to create an opportunity for the public to make a profit plus alpha (α) with minimal investment and to prepare a lump sum more stably,” adding, “In the process of promoting the Korean New Deal, we will seek ways to increase the income of the people and reduce costs in jobs, education, healthcare, transportation, and culture.”

He continued, “With financial assets totaling 1,800 trillion KRW, idle funds of 1,000 trillion KRW, the KOSPI hovering around 2,000, and an ultra-low interest rate era of ‘money stagnation,’” emphasizing, “The success of the Korean New Deal will directly benefit the people, and we must create a virtuous cycle structure that invests in core technologies necessary for infrastructure construction and fosters the growth of related industries.”

Earlier, the government announced in this year’s tax law revision that it would provide a dividend income separate taxation benefit (14% withholding tax) up to 100 million KRW for investors in public infrastructure funds related to the Korean New Deal, but the ruling party plans to significantly increase the tax benefits beyond the government’s proposal.

The investment targets may include digital sectors such as data dams, data centers, digital education content, 5th generation mobile communication (5G), digitalization of social overhead capital (SOC), as well as renewable energy power generation projects such as wind and solar power under the Green New Deal.

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