[Yoon Administration Tax Law] Choo Kyung-ho "Income tax reduced by 800,000 KRW per person... Tax law amendment bill total tax revenue decreases by 13.1 trillion KRW"

[Asia Economy Sejong=Reporter Kim Hyewon] Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho stated on the 21st, "Through the income tax reform, it is expected that the income tax burden per person will be reduced by up to 800,000 won."

Deputy Prime Minister Choo said in the announcement of the '2022 Tax Reform Plan' on the same day, "We focused on adjusting the tax burden on citizens who are struggling due to high inflation and other factors."

The first economic team of the Yoon Seok-yeol administration presented two major pillars for this year's tax reform: 'enhancing economic vitality' and 'stabilizing people’s livelihoods.'

Deputy Prime Minister Choo emphasized, "We will adjust the level of the national tax burden through structural reform of the tax system that aligns with tax principles and global standards, laying the foundation for overcoming crises and upgrading growth paths," adding, "We aim to establish a virtuous cycle structure between growth and tax revenue."

Regarding the restructuring of the corporate tax system, Deputy Prime Minister Choo said, "We will simplify the current four-step corporate tax base brackets and lower the top tax rate from 25% to 22%. For small and medium-sized enterprises (SMEs) and mid-sized companies, we will set a separate special tax rate of 10% and raise the tax base bracket from the current 200 million won to 500 million won to ease the corporate tax burden."

He also explained, "To promote corporate dividends and induce the inflow of retained earnings of overseas companies into the domestic market, we will significantly expand the scope of double taxation adjustments on dividends from domestic and foreign subsidiaries. The investment and win-win cooperation promotion tax system will sunset at the end of this year, and we will actively improve regulatory tax systems that restrict corporate autonomy, such as rationalizing the scope of taxation on internal transactions."

From the tax perspective to create jobs and investments in companies, the currently separately operated five employment support systems will be unified into a single integrated employment tax credit. The limitation period for the special tax rate application on foreign workers will be abolished to strengthen incentives for attracting excellent foreign talent to Korea. Tax support for facility investments in national strategic technologies such as semiconductors will be greatly expanded, and requirements for new or expanded domestic business sites for companies returning from overseas will be relaxed. Additionally, Deputy Prime Minister Choo added, "We will significantly raise the non-taxable limit for venture company stock options from the current 50 million won to 200 million won to strengthen support for venture companies in securing excellent talent."

He also mentioned easing difficulties related to business succession. Deputy Prime Minister Choo said, "We will greatly expand the scope and deduction limits of the business succession inheritance deduction, and for SMEs, we will introduce a system to defer payment of inheritance and gift taxes upon business succession, allowing companies to focus on management without tax burdens for an extended period until the deferral period."

Measures to reduce the tax burden on low- and middle-income earners, as mentioned by President Yoon Seok-yeol, were also presented. Deputy Prime Minister Choo stated, "We raised the lower two income tax base brackets to generally reduce the tax burden, but for those with total annual salary exceeding 120 million won, the reduction in tax burden is somewhat moderated through a reduction in earned income tax credits. The non-taxable limit for meal expenses, an essential cost for workers, will be raised from 100,000 won to 200,000 won per month to ease living expenses." He also said that the asset requirements for the earned income tax credit will be relaxed and the maximum payment amount will be increased by 10%.

To alleviate living expenses for low- and middle-income households, he said, "We will promote easing housing cost burdens such as raising the monthly rent tax credit rate, strengthen education expense support such as tax credits for entrance examination fees, and reduce transportation costs by raising the income deduction rate for public transportation usage in the second half of this year." He continued, "To strengthen the function of securing retirement income, we will raise the contribution limit for pension savings and retirement pension tax credits by 2 million won and significantly ease the burden of retirement income tax."

Real estate tax systems will also be significantly revised. Deputy Prime Minister Choo explained, "We will shift the comprehensive real estate tax rate system from differential taxation based on the number of houses to a value-based system, generally lowering tax rates by tax base brackets. The basic deduction amount will be raised from the current 600 million won to 900 million won, and for single-household owners, from 1.1 billion won to 1.2 billion won."

He also said, "To address tax avoidance issues by multinational corporations due to digitalization of the economy, we plan to implement domestic legislation on the global minimum tax, which was prepared through worldwide agreement, starting in 2024."

Additionally, the government will raise the duty-free allowance for travelers’ personal effects upon re-entry from the current 600 dollars per person to 800 dollars, and to facilitate tax payment for SMEs, the standard tax amount exempt from mid-term prepayment obligations will be raised from 300,000 won to 500,000 won.

Deputy Prime Minister Choo concluded, "This tax reform plan is expected to result in a tax revenue decrease of about 13.1 trillion won from the national tax revenue perspective, which is about 3% of total national tax revenue and falls within the usual national tax increase range of 5%."

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