Corporate Entertainment Expenses Steadily Decrease After Kim Young-ran Act Enforcement... 27% Drop in 3 Years

Asia Economy DB

[Asia Economy Reporter Kim Bo-kyung] Since the implementation of the 'Kim Young-ran Act,' which limits the amount of meal entertainment and gifts related to duties, corporate entertainment expenses have continued to decrease.

According to the National Tax Service on the 3rd, the total entertainment expenses of 4,125 large and medium-sized enterprises with revenue (sales) exceeding 100 billion KRW based on the 2019 corporate tax filings amounted to 2.6265 trillion KRW.

Although the number of corporations increased by 623 (17.8%) compared to three years ago in 2016, entertainment expenses decreased by 26.9%.

The Kim Young-ran Act (Act on the Prohibition of Improper Solicitation and Graft) has been in effect since July 2016. Accordingly, entertainment expenses reported from 2017 reflect the period after the Act's implementation, while those reported up to 2016 mainly reflect the period before enforcement.

The average entertainment expense per company steadily decreased from 872 million KRW in 2016 to 722 million KRW in 2017, 646 million KRW in 2018, and 637 million KRW in 2019.

The average entertainment expense per company among large corporations with revenue exceeding 500 billion KRW also decreased by 30.0%, from 2.488 billion KRW in 2016 to 1.8 billion KRW in 2019.

The average entertainment expense per company for all corporations filing corporate tax also decreased from 17 million KRW (2016 filings) to 14 million KRW (2019 filings).

A government official stated, "Although there are differences between the entertainment expense categories in tax law and corporate accounting standards, the decrease in corporate entertainment expenses since 2016 appears to be most significantly influenced by the implementation of the Kim Young-ran Act."

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