Up to 5 Million KRW Acquisition Tax Exemption for Housing Purchase by Childbirth Households... 75% Property Tax Reduction for U-Turn Companies

Ministry of the Interior and Safety Announces '2023 Local Tax System Reform Plan'
Includes Support Measures for Disaster Fatalities and National Merit Recipients

The government will provide tax benefits for 'domestic return companies' (U-turn companies) and 'housing acquisition tax for households with childbirth' starting next year. It will also revise systems to support families of disaster-related fatalities. Through these measures, the government aims to promote 'regional economic leap' and 'residents' livelihood stability.'

The Ministry of the Interior and Safety held the 2nd Local Tax Development Committee meeting on the 17th and announced the '2023 Local Tax Revenue Related Law Amendment Bill.'

This amendment bill focuses on supporting regional businesses and residents' livelihood stability with the goal of 'economic growth and virtuous cycle of tax revenue.' It also includes provisions to strengthen taxpayer rights and improve taxpayer convenience, creating a taxpayer-friendly environment. However, considering recent local tax revenue conditions, the statutory target rates for local tax exemptions and reductions were observed. Additionally, measures to strengthen post-management of tax reductions to expand local tax revenue were reflected.

[Image source=Yonhap News]

The main contents of the amendment are as follows. First, to strengthen balanced regional development through expanded investment in local areas, a local tax reduction clause is newly established for startups and relocating companies (limited to relocations from the metropolitan area) within opportunity development zones. To stabilize the economic supply chain and revitalize the regional economy, a provision is newly established to reduce acquisition tax by 50% and property tax by 75% for U-turn companies returning from overseas to Korea. Furthermore, local governments are granted autonomy through ordinances to additionally reduce acquisition tax by 50 percentage points.

In addition, registrations and filings conducted by court request or ex officio by the registry office during bankruptcy or rehabilitation procedures are exempt from registration license tax without exception. Reflecting suggestions raised at corporate field meetings, installment payments within one month (two months for small and medium enterprises) are allowed for corporate local income tax exceeding 1 million KRW. The penalty rate applied to errors in corporate local income tax apportionment reports is reduced from the previous 20% to 10%.

Alongside this, to support eco-friendly technology, acquisition tax rates for eco-friendly ships using eco-friendly fuels such as LNG and electricity or employing pollution reduction facilities and other eco-friendly technologies are reduced by 1 to 2 percentage points.

In the 'livelihood stability support' section, acquisition tax will be fully exempted up to 5 million KRW when acquiring a house for the purpose of residing with children born.

Also, to alleviate property tax burdens for single-homeowners who are actual home users, the special tax rate for single homes with a publicly announced price of 900 million KRW or less, which lowers tax rates by 0.05 percentage points per tax base segment, will be extended.

The personal local income tax deduction and exemption system, which deducts or exempts 10% of income tax (national tax) deductions and exemptions to ease the economic burden of small individual business owners and workers and maintain stable consumption, will be extended for three years.

Moreover, tax reduction support for families of fatalities will be legalized upon declaration of special disaster areas. At the same time, tax reduction support for national veterans and veteran organizations will be extended, and a new provision will be established to reduce acquisition tax and automobile tax by 50% for vehicles owned by veterans and those eligible for veterans' compensation to guarantee their mobility rights.

In the 'creating a taxpayer-friendly environment' section, the threshold amount (principal tax) for exempting late payment surcharge tax (added monthly as interest on overdue tax) to reduce the burden on small taxpayers will be raised from 300,000 KRW to 400,000 KRW.

Additionally, to reduce the burden of payment for victims of jeonse fraud who win public auctions on their residences, a set-off system for purchase price is newly established, allowing payment of only the difference between the purchase price and the jeonse deposit.

This 'Local Tax Revenue Related Law Amendment Bill' will undergo a 31-day legislative notice period starting on the 18th to collect opinions from various sectors, followed by review by the Office of Legislation and the Cabinet meeting, and is scheduled to be submitted to the regular National Assembly session in October.

Minister of the Interior and Safety Lee Sang-min stated, “Despite difficult tax revenue conditions, we have prepared a local tax reform plan that actively supports regional businesses and the livelihood economy to establish a 'virtuous cycle structure of economic growth and tax revenue,'” adding, “We hope this amendment will invigorate the regional economy and greatly help stabilize the lives of residents struggling with high inflation and other difficulties.”

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