Government Eases Local Tax Burden to Help Closed Small Business Owners Restart Economic Activities

Allowing Installment Payment and Exemption of Penalty Interest on Personal Local Income Tax Arrears Upon Business Resumption or Employment
Partial Amendment to the Local Tax Special Cases Act Passed at Cabinet Meeting on the 13th

[Asia Economy Reporter Lim Cheol-young] The Ministry of the Interior and Safety announced on the 13th that it will implement a system allowing micro-business owners who have closed their businesses to pay their overdue personal local income tax in installments for up to five years and exempting additional charges to support their smooth economic recovery.

Through this amendment to the Local Tax Special Cases Restriction Act, which passed the Cabinet meeting, a special collection exemption for overdue personal local income tax on comprehensive income has also been newly established, further alleviating the burden on micro-business owners struggling due to COVID-19 and other difficulties. The government already applies special collection exemptions allowing installment payments and exemption of additional charges for overdue national taxes such as comprehensive income tax and value-added tax.

The newly established special collection exemption conditions for overdue personal local income tax are the same as those for comprehensive income tax and value-added tax. The average total business income for the three tax years immediately preceding, including the tax year of the final business closure date, must be less than 1.5 billion KRW. The person must have closed all businesses before December 31, 2020, and must have applied for business registration and started business between January 1, 2020, and December 31, 2023, continuing the business for at least one month, or be employed and working for at least three months.

Additionally, the combined amount of overdue comprehensive income tax (including the special rural tax) and value-added tax must be 50 million KRW or less. Furthermore, the person must meet all other conditions such as not having been punished under the Tax Offense Punishment Act or being under investigation for tax offenses to be eligible for the special collection exemption.

The Ministry of the Interior and Safety also arranged for taxpayers who have been approved for the national tax overdue collection exemption to receive local tax support in a one-stop manner without a separate application for convenience. Currently, when an application for collection exemption is received for national taxes, the National Tax Delinquency Settlement Committee reviews and decides on the application according to the National Tax Collection Act, and once the national tax overdue collection exemption is approved, the local tax overdue collection exemption is automatically applied.

Minister Jeon Hae-cheol said, “We hope that the establishment of this special collection exemption for overdue personal local income tax will help micro-business owners struggling due to COVID-19 and other difficulties to restart their economic activities,” and added, “We will continue to prepare support measures for regional economic revitalization through cooperation with related ministries and local governments.”

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