Even If Only Part of a Company Moves to an Opportunity Development Zone, Business Succession Tax Deduction Applies

The government has eased the requirements so that companies inheriting family businesses can receive the family business inheritance tax deduction even if only the head office and main office move to an Opportunity Development Zone. The tax exemption conditions for vehicles purchased by multi-child households not living with their children will also be applied retroactively for one year.

The Ministry of Economy and Finance announced that the revised draft of the 2023 tax law amendment enforcement decree, which includes these changes, passed the Cabinet meeting on the 27th and is scheduled to be promulgated on the 29th. This is a partial revision made through inter-agency consultations to the enforcement decree amendment draft announced on the 23rd of last month.

First, the requirements for the family business inheritance tax deduction for companies located in Opportunity Development Zones were further relaxed through inter-agency consultations. An Opportunity Development Zone refers to an area where tax incentives and other support are provided as a package to attract large-scale investments to local regions.

Under the previous draft, the deduction was available only if ▲ all business sites inheriting the family business were relocated to the Opportunity Development Zone or ▲ the entire business was located in the Opportunity Development Zone. However, the revised draft allows the deduction if only the head office and main office of the inherited family business are relocated to or located in the Opportunity Development Zone. A condition was added that at least 50% of the total regular employees must work at business sites within the Opportunity Development Zone.

The conditional tax exemption requirements for vehicles purchased by multi-child households will also be applied retroactively. The amendment announced last month allowed tax exemption for vehicles purchased this year even if the household lives separately due to unavoidable reasons such as schooling or illness. The revised draft extends this exemption to vehicles exported after January 1 of last year, allowing refund applications. The individual consumption tax reduction for petroleum gas (LPG) used for hydrogen production will also be implemented earlier, starting next month instead of April.

The price standard for houses eligible for the housing pension interest expense deduction was raised from 900 million KRW to 1.2 billion KRW in last month’s amendment, and the application period for this deduction was also moved forward to “cases of year-end tax settlement or final comprehensive income tax return filed after January 1 of this year.” The Ministry of Economy and Finance explained that this reflects the fact that housing pension enrollment for houses with a publicly announced price of 1.2 billion KRW became possible from October last year.

While expanding the scope of VAT exemption for personal services, the original draft included worker dispatch and supply services, but the revised draft excludes “dispatch.” The measure to relax the minimum subscription period for the Soldiers’ Tomorrow Preparation Savings from six months to one month will be implemented from June 1. Regarding compensation amounts for losses during customs officers’ inspections of goods, the original standard was the amount claimed by the person who suffered the loss, but the revision changes the standard to a “reasonable amount considering both the purchase price and the amount claimed by the person who suffered the loss.”

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