'Geumtuse Yuye' Donghak Gaemi Wins Again... Taxes Changing from Next Year

Ruling and Opposition Parties Agree on Next Year's Budget and Supplementary Budget Bills
Financial Investment Income Tax Scheduled for January 1 Next Year Deferred for 2 Years
Securities Transaction Tax Reduced by 0.03%P from Next Year...Major Shareholder Capital Gains Tax Threshold Remains at 1 Billion Won

[Asia Economy Reporter Kim Young-won] The introduction of the financial investment income tax (금투세), which was scheduled to be implemented from January next year, has been postponed for two years. The criteria for major shareholders subject to capital gains tax on stocks remain unchanged at 1 billion KRW. This dramatic agreement was reached by the political circles just ten days before the implementation, amid strong backlash that the domestic stock market, already hit hard by global interest rate hikes, could shrink further if such taxes were imposed.

According to the National Assembly on the 23rd, Joo Ho-young, floor leader of the People Power Party, Park Hong-geun, floor leader of the Democratic Party of Korea, and Deputy Prime Minister for Economy Choo Kyung-ho held a press conference at the National Assembly the day before and announced an agreement including the next year's budget bill and related bills. The National Assembly reached a settlement 117 days after starting the review of the government's new year budget proposal.

[Image source=Yonhap News]

According to the agreement, corporate tax rates will be reduced by 1 percentage point for each existing tax base bracket. Initially, the government and ruling party pushed to lower the highest corporate tax rate (25%) by 3 percentage points, but after compromise over the mediation proposal by National Assembly Speaker Kim Jin-pyo for a '1 percentage point reduction,' the agreement was made to reduce 1 percentage point per tax bracket.

The financial investment income tax was postponed for two years through behind-the-scenes negotiations between the ruling and opposition parties, and the major shareholder threshold for capital gains tax on stocks (1 billion KRW) was maintained. The government and People Power Party had advocated raising the major shareholder threshold to 10 billion KRW, which is 9 billion KRW higher than the current standard. This compromise reflects the ruling party's position to postpone the financial investment income tax and the opposition party's demand to maintain the capital gains tax threshold. The securities transaction tax will be gradually reduced from the current 0.23% to 0.20% next year, 0.18% in 2024, and 0.15% in 2025.

The comprehensive real estate tax deduction amount will be raised to 900 million KRW (1.2 billion KRW for single-home households). Previously, the deduction standard was 600 million KRW for households with two or more homes and 1.1 billion KRW for single-home households. The tax rate will maintain the basic rate for up to two-home owners regardless of whether the area is designated as a regulated zone. For owners of three or more homes, progressive taxation of 2.0% to 5.0% will be applied on the tax base exceeding 1.2 billion KRW.

For the business succession deduction, the mid-sized enterprise sales standard will be raised from the current 400 billion KRW to 500 billion KRW, and the deduction limit will be increased to a maximum of 60 billion KRW. Companies with 10 to 20 years of operation will have a limit of 30 billion KRW, 20 to 30 years 40 billion KRW, and over 30 years 60 billion KRW.

The monthly rent tax credit rate will be increased to 17% for total annual income of 55 million KRW or less, and 15% for income between 55 million and 70 million KRW.

From January 1 next year, a special account for high school and lifelong education support will be introduced for three years on a temporary basis. It will be funded by an additional transfer of 200 billion KRW from the general account and an education tax revenue budget of 1.5 trillion KRW.

Meanwhile, the ruling and opposition parties have tentatively agreed to hold a plenary session at 6 p.m. on the same day to process the next year's budget bill and related bills.

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