Second Home, Card Income Deduction, R&D Deduction... Policies to Watch

The government’s ‘2024 Economic Policy Directions’ include various ‘3-package’ support measures aimed at revitalizing consumption and investment, supporting domestic demand, and addressing the population crisis.

Notably, there is the ‘Population Declining Area Revival 3-Pack.’ It includes provisions to activate ‘second homes’ by allowing existing single-homeowners who newly acquire one house in population-declining areas to still be considered single-homeowners and receive tax benefits. The criteria for designating tourist complexes have been relaxed from over 500,000㎡ to between 50,000 and 300,000㎡ to create multiple ‘mini tourist complexes,’ and the expansion of region-specific visas (F-R-2) to attract foreigners is also included.

There is also the ‘Domestic Demand Revitalization 3-Pack’ to boost 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, with a 20% income deduction specifically for the increase in the first half of the year. The income deduction for traditional markets in the first half of the year will be raised from 40% to 80%, and accommodation coupons will increase from 90,000 to 450,000.

To promote eco-friendly consumption, a ‘Eco-Friendly Consumption Support 3-Pack’ has been prepared, including a temporary 70% reduction in individual consumption tax when replacing old vehicles, additional subsidies for electric passenger car purchases proportional to industry price reductions, and a significant increase in the budget for high-efficiency equipment distribution support from 80.6 billion KRW last year to 149.8 billion KRW this year.

An ‘Investment Activation Temporary Support 3-Pack’ has been prepared to promote facility investment. The core measure is raising the deduction rate by 10 percentage points on increased R&D expenditures in general fields. The temporary investment tax credit, reintroduced last year after 12 years, will be extended for one year, and non-capital region development charges will be temporarily reduced by 100%, and school site charges by 50%.

For small business owners with annual sales under 30 million KRW, the ‘Small Business Support 3-Pack’ includes support of 200,000 KRW in electricity bills for 1.26 million people. 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, totaling 2.3 trillion KRW in interest refunds, and the criteria for simplified VAT taxpayers will be raised.

To prevent reverse jeonse difficulties, a ‘Multi-family and Multi-unit Housing Support 3-Pack’ has also been prepared. If tenants purchase small, low-priced houses they currently reside in, acquisition tax will be temporarily reduced, and their status as non-homeowners will be recognized when applying for housing subscriptions. Registered rental business operators with three or more units can transfer houses priced at 300 million KRW (200 million KRW in local areas) or less to the Korea Land and Housing Corporation (LH), and LH will purchase more than 10,000 multi-family and multi-unit houses.

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