National Tax Service Provides 1:1 Customized Tax Consulting for Family Business Succession SMEs

[Asia Economy Sejong=Reporter Kim Hyewon] The National Tax Service (NTS) will provide one-on-one customized tax consulting for small and medium-sized enterprises (SMEs) pursuing business succession for the first time.

The NTS announced on the 23rd that it will accept applications for tax consulting on SME business succession through Hometax or local tax offices from July 1 to August 1.

Eligible applicants are SMEs whose CEOs have continuously served for more than five years or those undergoing post-management after business succession.

With the aging of the entrepreneurial generation and the approaching retirement period, business succession has emerged as an important concern for SME managers. However, support systems for business succession, such as the business inheritance deduction, require meticulous preparation with long-term plans of over 10 years and fulfillment of pre- and post-conditions, leading many companies to seek consulting or information provision.

The business succession tax consulting is a one-on-one customized tax support service provided by establishing business succession tax support teams at each local tax office to offer consulting tailored to each company's situation. Regular consulting is provided at least once, along with occasional consulting upon request. Consulting support is provided for one year from the date of selection, with the possibility of a one-year extension upon request.

Through the consulting, the NTS plans to diagnose the pre- and post-conditions for tax benefits related to business succession through face-to-face consultations and on-site visits for companies preparing for business succession, and inform them of additional preparations needed. For companies that have already succeeded the business, guidance on points to be careful about for compliance will be provided.

If consulting target companies request advice on eligibility for the business inheritance deduction or reasons for additional taxation due to violations of post-management, opinions will be provided within four weeks, and written inquiries will be handled with top priority.

The NTS plans to prioritize selection among applicant companies such as exemplary taxpayers, companies with many tax points accumulated through tax payments, companies with a large number of employees in the previous fiscal year, companies with large amounts applied for business inheritance or succession tax special cases, and companies recommended by the Korea Federation of SMEs and the Korea Chamber of Commerce and Industry, and notify the first selection results on August 31.

Park Jaehyung, Director of the Asset Taxation Bureau at the NTS, said, "There have been about 100 inquiries regarding the interpretation of tax laws related to business succession deductions over the past three years, and 97 companies have been subject to additional taxation for failing to meet post-management requirements in the last five years," adding, "There are many detailed matters to prepare for business succession, and it is difficult to prepare in a short period, so the NTS intends to provide prior guidance and support." He continued, "In 2020, the number of decisions on business inheritance deductions was 106, and the number of decisions on business succession gift tax special cases was 220. We will promote the system more so that even more people can utilize it."

Under tax law, support systems for business succession include the business inheritance deduction and the business succession gift tax special case. The business inheritance deduction reduces inheritance tax burden by deducting up to 50 billion KRW when a small or medium-sized enterprise operated by the decedent for more than 10 years is succeeded by the heir. The business succession gift tax special case applies a lower tax rate of 10-20% up to 10 billion KRW when the business owner gifts business shares in advance for succession, and later settles by combining the amount with the inheritance tax base at the time of inheritance.

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