[2024 Economic Policy] Get 20% Income Tax Deduction Benefit When You Use Cards More in the First Half of This Year

2024 Economic Policy Direction
Accelerating Recovery of Domestic Demand and Exports

If card usage this year increases by more than 5% compared to last year, the increase will be eligible for an additional 10% income deduction. In particular, a 20% income deduction will be applied in the first half of this year. This measure aims to promote consumption recovery through tax support.

The government jointly announced the '2024 Economic Policy Direction' including these details on the 4th.

The government expects the economic recovery centered on semiconductors and exports to expand this year, but is concerned about consumption slowdown and sluggish construction due to prolonged high inflation and high interest rates. The high inflation and high interest rate situation is likely to restrict consumption capacity such as real income, intensifying difficulties mainly for small business owners and local economies. Accordingly, the government decided to support consumption recovery focused on vulnerable sectors through tax and fiscal incentives.

First, if card usage in 2024 increases by more than 5% compared to the previous year, an additional 10% income deduction will be introduced on the increased amount up to a limit of 1 million KRW. Especially in the first half of the year, when consumption is expected to be sluggish, an income deduction of up to 20% on the increase in card usage will be applied. Income deduction refers to deducting a certain amount from taxable income, unlike tax credits which directly reduce the tax amount payable by the taxpayer.

A '3-piece eco-friendly consumption support package' will also be promoted. To encourage replacement of old vehicles, the individual consumption tax will be temporarily reduced by 70%, and for electric vehicles, additional purchase subsidies will be provided in proportion to industry price reductions. The subsidy level is being considered up to about 1 million KRW.

Expansion of Group Tourism Visa Fee Exemption...Targeting 20 Million Foreign Tourists

The government aims to achieve 20 million inbound tourists this year by improving visa systems and expanding travel service support.

The exemption of visa fees for group tours from China will be extended until the end of this year, and the exemption target will be expanded to all group tour visa issuing countries including China, Vietnam, the Philippines, Indonesia, India, and Cambodia.

A foreign tourist is taking photos in Myeongdong, Jung-gu, Seoul. Photo by Jinhyung Kang aymsdream@

Additionally, the types of accommodation eligible for foreigner VAT refunds, currently limited to tourist hotels, will be expanded to include medical tourism, family, and small hotels, and refunds will also be supported when using intermediary platforms such as online travel agencies (OTA) and travel agencies.

Considering the sluggish duty-free store business since the COVID-19 period, a plan to reduce license fees for 2023 sales will also be reviewed. The maximum discount rate for the 'Korea Duty-Free Festa' held in May this year will be increased from 20% to 30%, and the event period extended from 31 days to 40 days.

Record High Trade Finance Supply to Achieve $700 Billion Export Target

The government will supply a record high 355 trillion KRW in trade finance to support achieving $700 billion in exports and $57 billion in overseas orders in 2024. This is an increase of 10 trillion KRW compared to last year.

Also, the provision of exclusive shipping space for small and medium enterprises and support for long-term transport contract signing will be extended until the end of this year, with allocation focused on shipper demand in logistics-challenged regions. In the first half of this year, eight large container ships from national shipping companies will be newly deployed, with a total of 12 ships for the entire year.

Export containers are being loaded onto a ship at Busan North Port. Photo by Jinhyung Kang aymsdream@

To enhance K-Food Plus export competitiveness, the government will foster specialized agricultural and food organizations and establish specialized logistics systems. Following the smart farm pilot greenhouses in Australia in 2022 and Saudi Arabia in 2023, an additional facility will be established this year.

Support measures for achieving $57 billion in overseas orders in infrastructure, defense, and nuclear power sectors were also announced. Based on the expansion of the Export-Import Bank's statutory capital and investment, the government is considering establishing a 'super-large order special program' to provide full support for overseas orders. In particular, defense technology will be designated as a new growth and core technology to support order expansion. When designated as new growth and core technology, the tax credit rate increases from 3% to 6% for large corporations and from 12% to 18% for small and medium enterprises.

Special Support in Three Major Areas: Tax, Finance, and Difficulty Resolution

The government will provide special support in three major areas?tax, finance, and difficulty resolution?to promote early investment rebound. First, the temporary investment tax credit for facility investment will be extended by one year, and the tax credit rate for increased R&D investment will be raised by 10 percentage points each.

Financial support will supply a record 52 trillion KRW in facility investment funds. Preferential interest rates of up to 1.3 percentage points will be provided for advanced fields such as semiconductors, secondary batteries, future cars, and robots; green fields such as supply chain stability, renewable energy, and carbon reduction; and facility investments by export-oriented small and medium enterprises and mid-sized companies.

Support for attracting the largest-ever foreign investment and promoting corporate return will also be strengthened. The capacity of 'Invest Korea,' the dedicated organization supporting 35 billion USD of foreign investment maintenance this year, will be enhanced, and strategic attraction efforts will be made through selection and discovery of the top 100 companies. The foreign investment cash support budget will be quadrupled from 50 billion KRW to 200 billion KRW.

To encourage the return of companies that have moved overseas, the subsidy support for returning companies will be increased from 57 billion KRW to 100 billion KRW, and the support limit for returning companies in national and advanced strategic technology sectors will be raised to 20 billion KRW in the metropolitan area and 40 billion KRW in non-metropolitan areas.

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