[2024 Economic Policy] Complete Set of Policy '3-Pack'... Many Are 'Temporary' and 'Legislative Tasks'

A notable aspect of the 2024 Economic Policy Direction announced by the government on the 4th is the '3-Support Set' containing various support measures. Many of these 3-support sets aim to boost domestic demand by supporting consumption and investment, as well as assisting small business owners. However, since many supports are 'temporary,' there are limitations to fundamental assistance, and several legislative tasks require the consent of the opposition-majority National Assembly, making it uncertain whether the effects will be timely.

Temporary Acquisition Tax Reduction When Purchasing Multi-Family Housing Occupied by Tenants

The government has prepared a '3-Support Set for Multi-Family Housing' to strengthen protection for tenants of multi-unit and multi-family housing with high reverse lease risks. First, when purchasing small and low-priced housing currently occupied by tenants, acquisition tax will be temporarily reduced by up to 2 million KRW for one year, and the status of non-homeowner will be recognized during subscription. The target is housing under 60㎡ priced at 300 million KRW (200 million KRW in provincial areas), excluding apartments, with conditions of residence for over one year and first-time homebuyer status. This is also subject to legislation under the Local Tax Special Cases Restriction Act. Second, registered rental business operators with three or more units can transfer housing priced at 300 million KRW (200 million KRW in provincial areas) or less to LH. Third, LH will purchase more than 10,000 units of old and multi-family housing.

Small Business Owners Earning Less Than 30 Million KRW Annually Receive 200,000 KRW Electricity Bill Reduction

There is also a '3-Support Set to Cheer on Small Business Owners' to alleviate the electricity cost burden caused by prolonged high inflation and high interest rates. For 1.26 million small business owners with annual sales under 30 million KRW, an electricity bill reduction of 200,000 KRW per business will be supported, totaling approximately 252 billion KRW. Additionally, through 2 trillion KRW worth of win-win financing from banks, interest payments exceeding 4% for one year will be refunded up to 3 million KRW per borrower, and the secondary financial sector will also provide interest refunds worth 300 billion KRW. In total, 2.3 trillion KRW in refunds will be made, along with the execution of up to 9 trillion KRW in low-interest refinancing loans. The simplified VAT taxpayer threshold (currently 80 million KRW) will also be raised.

70% Temporary Reduction of Individual Consumption Tax on Old Cars... Additional Subsidies for Electric Vehicles

A 3-Support Set for Eco-Friendly Consumption has also been prepared. When replacing old cars, the individual consumption tax will be temporarily reduced by 70%, and support payments for scrapping 5th-grade diesel vehicles will be extended through this year. For electric passenger cars, purchase subsidies will be increased by up to 1 million KRW in proportion to industry price reductions. The budget for supporting the distribution of high-efficiency devices will be significantly increased from 80.6 billion KRW last year to 149.8 billion KRW this year, supporting vulnerable groups and small business owners in replacing LED lighting or old heating and cooling devices. However, the temporary reduction of individual consumption tax requires amendment of the Restriction of Special Taxation Act.

Up to 20% Additional Deduction for Extra Spending... 80% Income Deduction for Traditional Markets

There is also a 3-Support Set for Domestic Demand Vitalization in the First Half of the Year to activate domestic tourism and consumption. If card usage this year increases by more than 5% compared to the previous year, an additional 10% income deduction will be introduced on the increased amount up to 1 million KRW, and especially for card usage increases in the first half of the year, a 20% income deduction will be applied. The income deduction for traditional markets in the first half will be raised from 40% to 80%. However, all of these require legislation. Additionally, the number of accommodation coupons will be increased from 90,000 to 450,000, and worker vacation support will be expanded from 90,000 to 150,000 people to promote tourism.

One-Year Extension of Temporary Investment Tax Credit and 100% Exemption of Development Charges

A 'Temporary Investment Activation 3-Package' has also been prepared to revitalize facility investment. However, as the package name already includes 'temporary,' all are legislative tasks. First, the temporary investment tax credit, reintroduced last year after 12 years, will be extended by one year. Applying this system, the general technology tax credit rate for new growth and original technologies will increase from 1% to 3% for large corporations and from 10% to 12% for SMEs, while the tax credit rate for new growth and original technologies will increase from 3% to 6% for large corporations and from 12% to 18% for SMEs.

Additionally, the deduction rate for increased expenditures on general research and development (R&D) will be raised by 10 percentage points. This is the first time this system is implemented, designed to promote corporate R&D investment. For example, if a large corporation A invests 500 billion KRW annually in general R&D and invests an additional 40 billion KRW this year for a total of 540 billion KRW, the tax credit rate on the increased investment will rise from the existing 25% to 35% (50% to 60% for SMEs), resulting in a total tax credit of 14 billion KRW. This is an increase of 3.2 billion KRW compared to the existing credit amount (10.8 billion KRW). The last item in the temporary package is to prevent the contraction of local construction by temporarily exempting 100% of development charges and 50% of school site charges in non-metropolitan areas this year.

Considered One-Homeowner Even When Acquiring a Second Home in Depopulated Areas

To prevent population decline due to local extinction, the government has prepared a '3-Package for Reviving Depopulated Areas'. If an existing one-homeowner acquires one additional house in a depopulated area, they will be regarded as a one-homeowner and receive incentives related to property tax, holding tax, and capital gains tax. This allows a person owning one household in the metropolitan area to purchase a house in a depopulated area as a so-called 'second home.' Additionally, to expand tourism resources, the current designation criteria for tourist complexes, which is 500,000㎡ or more, will be relaxed to 50,000?300,000㎡. The plan is to create multiple 'mini tourist complexes' to revitalize tourism. Both require legislative processes. To support foreigner inflow, the number of regions participating in the region-specialized visa (F-2-R) will be expanded from the current 28 locations, and the current quota of 1,500 people will also be increased.

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