Review of 2-Year Extension for 40% Tax Credit on Duty-Free Agricultural Products for Food and Feed Companies

Ministry of Agriculture, Food and Rural Affairs Announces Tax and Financial Support Measures in 'Second Half Economic Policy Direction'
Responding to Rising International Grain Prices... "Hope to Alleviate Price Burden"

[Image source=AFP Yonhap News]

[Sejong=Asia Economy Reporter Moon Chaeseok] The government announced that it plans to review a proposal to extend for two years until 2023 the policy of raising the tax credit rate for duty-free agricultural products for food and feed companies from 30% to around 40%. This measure was prepared amid concerns that the 'table price' would soar due to the rise in international grain prices.

On the 28th, the Ministry of Agriculture, Food and Rural Affairs stated that it will control prices through tax and financial support for feed and food companies. First, it will review extending the special application period for raising the tax credit rate for deemed input tax on duty-free agricultural products for feed and food companies from 30% of sales to 40%. The current expiration is scheduled for the end of this year, but they intend to extend it until 2023.

Deemed input tax refers to a system that deducts a certain percentage of the purchase cost as input tax when purchasing raw materials such as agricultural, livestock, and fishery products exempt from value-added tax. Corporate businesses are eligible for up to 30%, but 40% was applied only until this year. Individual businesses have rates of 45-55%, and restaurants have 50-65%, and these are also under review for extension.

Financial support for raw material purchase funds for food manufacturing companies, which amounts to 124 billion won this year, will be strengthened. Support measures currently in place include improving international grain import procedures, applying tariff quotas on edible corn, and lowering interest rates on raw material purchase funds for feed, food manufacturing, and dining-out companies (reduced by 0.7 percentage points in two phases).

On the 24th, the public-private 'International Grain Supply and Demand Countermeasures Committee' was held to check trends in the international grain market and discuss mid- to long-term measures to respond to price increases. It was assessed that the international prices of wheat, soybeans, and corn are higher than usual, and uncertainties remain regarding crop conditions in major countries such as the U.S. and South America.

An official from the Ministry of Agriculture, Food and Rural Affairs said, "We hope that this tax and financial support measure will serve as an opportunity to somewhat reduce the domestic price burden caused by the rise in international grain prices," adding, "We will continuously review short-term measures to ease price increase burdens and mid- to long-term plans to stabilize the supply of major grains while listening to industry opinions."

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