Venture Companies Excluded from Retained Earnings Tax...SMEs Say "Double Taxation Is Inappropriate"

On the 29th, Vice Minister of Finance Chairs Meeting on 'Taxation System for Personal Similar Corporations'

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[Asia Economy Reporter Jang Sehee] The Ministry of Economy and Finance has decided to exclude costs related to investment or research and development (R&D) from the retained earnings tax base through an amendment to the enforcement decree of the retained earnings tax, and also to exclude venture companies from the scope of application. Taxes will be imposed on excess retained earnings if special related parties such as the largest individual shareholder or family hold more than 80% of the shares.

On the 29th, Kim Yong-beom, the 1st Vice Minister of the Ministry of Economy and Finance, said at an economic organization meeting related to the 'Taxation System for Personal Similar Corporations' held at the Korea Chamber of Commerce and Industry, "We emphasize that while promoting the introduction of the personal similar corporation taxation system, it will be designed so as not to hinder the growth of normal corporations."

The Ministry of Economy and Finance announced that through the amendment of the enforcement decree, "Active business corporations whose income from interest and dividend income, rent, royalties, and disposal income of real estate, stocks, bonds, etc., which are not directly related to their core business, does not account for a large proportion of total income, and who have spent or reserved amounts for investment, debt repayment, employment, or R&D during the current or next two years, will be excluded from taxable retained earnings."

Additionally, corporations such as venture companies that require policy support or are subject to other laws and systems will be excluded from the scope of application.

Vice Minister Kim added, "Through this meeting, we listened to various suggestions from economic organizations regarding the 'Personal Similar Corporation Taxation System,' including unavoidable retention cases. We will carefully review the proposals made today and actively reflect any necessary improvements."

In this regard, the small and medium-sized enterprise sector emphasizes that imposing taxes on internal reserves from next year would result in double taxation along with corporate tax, and that without reserves, investment capacity would decline.

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