Q1 Small Business Loss Compensation: 3.5 Trillion KRW Paid to 940,000 Companies

94 Million Businesses Comply with Operating Hour Restrictions
Including Medium-Sized Enterprises with Annual Sales Under 3 Billion Won

The Corona Victims Self-Employed Federation (Coja Federation), consisting of 14 self-employed organizations including the Korea Federation of Foodservice Industry, is holding a head-shaving ceremony at the "Government Condemnation Gwanghwamun Rally" on February 15 at the Gwanghwamun Citizen Open Square in Seoul.

[Asia Economy Reporter Donghyun Choi] In the first quarter of this year, compensation for losses amounting to 3.5 trillion KRW will be paid to 940,000 small business owners who complied with government quarantine measures such as restrictions on business hours and facility occupancy limits.

The Ministry of SMEs and Startups announced on the 28th that it held the 20th Loss Compensation Deliberation Committee meeting and approved the "2022 1st Quarter Loss Compensation Payment Plan." The recipients of the first quarter loss compensation are 940,000 small business owners, small enterprises, and medium-sized enterprises with annual sales under 3 billion KRW who experienced a decrease in sales while complying with restrictions on business hours and facility occupancy from January 1 to March 31 this year. The total compensation amount is 3.5 trillion KRW.

With the additional supplementary budget of 1.6 trillion KRW for loss compensation approved on the 30th of last month, the scope of compensation has expanded from small business owners and small enterprises to include medium-sized enterprises with annual sales under 3 billion KRW starting from the first quarter of this year. The adjustment rate was increased from 90% to 100%, and the quarterly minimum amount rose from 500,000 KRW to 1 million KRW. Due to these changes, the number of recipients for the first quarter loss compensation increased by about 40,000 compared to the fourth quarter of last year.

The Ministry of SMEs and Startups will implement "Quick Compensation" to ensure rapid payment of the loss compensation. Quick Compensation pre-calculates the compensation amount using administrative data from the National Tax Service and local governments, allowing for fast payment upon application without submitting additional documents. The Ministry estimates that 89% (840,000 businesses) of the total recipients qualify for Quick Compensation based on their business start dates and other factors.

Among the 630,000 businesses whose compensation amounts have been finalized under Quick Compensation, the industry distribution shows that restaurants and cafes account for the largest share at 60.9%. This is followed by beauty salons (16.6%), indoor sports facilities (5.8%), and academies (4.7%). Their average compensation amount was approximately 3.92 million KRW. Entertainment facilities, which suffered significant losses due to restrictions on business hours as their sales are concentrated during late hours, received the highest average compensation of 7.2 million KRW.

By business size, more than half (58.3%) of the compensation recipients were micro-businesses with annual sales under 80 million KRW, which are subject to simplified taxation. Businesses with annual sales between 150 million KRW and under 1 billion KRW (small enterprises in food and lodging industries) accounted for 25.2%.

Regarding the distribution of compensation amounts, the largest group (30.8%) received between 1 million KRW and 5 million KRW. Businesses receiving more than 5 million KRW accounted for 17.4%, while only 0.2% received the maximum compensation amount of 100 million KRW.

The 630,000 businesses with finalized amounts under Quick Compensation can apply for compensation online through a dedicated website starting at 9 a.m. on the 30th. For the first 10 days, applications will be accepted based on a five-day rotation system according to the last digit of the business registration number, and notification messages will be sent to eligible applicants by day of the week. Even if a business owner does not receive a text message, they can check their eligibility for Quick Compensation on the dedicated website. Compensation payments will be made four times daily until July 15, and applications submitted by 4 p.m. will be paid on the same day. Offline applications will be available from July 11 for small business owners who have difficulty applying online. They can visit the nearest city, county, or district office in their business location, where a parity-based system will be operated for the first 10 days based on the last digit of the business registration number.

Small business owners who are not included in the Quick Compensation target or who disagree with the Quick Compensation amount can request a review and apply for confirmation compensation online starting July 5. Offline applications will also be available from July 11.

Cho Juhyun, Vice Minister of the Ministry of SMEs and Startups, stated, "To fully compensate for the damages caused by COVID-19 quarantine measures, we have expanded the scope and level of compensation compared to the fourth quarter of last year. We will expedite the disbursement to help small business owners recover to pre-COVID-19 conditions."

Meanwhile, this loss compensation is different from the loss support fund (quarantine support fund) paid to 3.71 million small business owners and self-employed individuals starting from the 30th of last month. The loss support fund is a one-time grant with varying criteria each time and provides the same amount regardless of the sales decline range. In contrast, the quarterly loss compensation is legally defined and compensates different amounts proportional to the damage scale. It is possible to receive both loss compensation and loss support fund simultaneously.

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