[2024 Tax Revision] Securing 1.2 Trillion Won in Revenue by Reducing Tax-Exempt Benefits

Reduction of 'Credit Card VAT' Tax Credit for Sole Proprietors
If Sales Exceed 500 Million Won, Credit Rate Drops from 1.3% to 0.65%
New 500 Million Won Limit Established for Tax Reduction of Startup SMEs

The government will reduce various tax exemption and reduction programs. It plans to adjust the credit card value-added tax (VAT) credit rate and reduce the electronic filing tax credit. Through these measures, an additional tax revenue of about 1.2 trillion won is expected to be collected.

On the 25th, the Ministry of Economy and Finance held the Tax System Development Committee and announced the "2024 Tax Law Amendment" containing these details. Considering the fiscal situation, the government decided to partially reduce the scope of tax exemption or tax reduction benefits.

The VAT credit rate for credit card usage will be lowered. Currently, individual business owners with sales under 1 billion won can deduct 1.3% of the payment amount from their VAT payable if they issue a credit card sales slip or cash receipt. Although this system was introduced to encourage credit card use, considering its generalization, the credit rate for businesses with sales exceeding 500 million won has been halved to 0.65%. The credit rate of 1% applied after 2027 will also be reduced to 0.5% for businesses exceeding 500 million won in sales.

The electronic filing tax credit limit will be reduced or partially abolished. The government has provided tax credit benefits for electronic filing depending on the category. For comprehensive income tax, capital gains tax, and corporate tax, a tax credit of 20,000 won per case was given, and for VAT, 10,000 won per case. However, since the electronic filing rate has reached 99% and is effectively established for comprehensive income tax, corporate tax, and VAT, the electronic filing tax credit for these will be abolished. The electronic filing tax credit limit for tax agents will be reduced from 3 million won to 2 million won, and for tax firms, from 7.5 million won to 5 million won.

The tax reduction system for startup small and medium enterprises (SMEs) will introduce a new limit of 500 million won to prevent tax benefits from concentrating on specific companies. The tax reduction is applied for six years, but the starting point is the first year income is generated, not the first year of startup. As a result, some companies in certain industries receive excessive tax benefits. However, recognizing the need for startup support, the system operation period has been extended to 2027, and the reduction rate has been increased from 50% to 100% of the employment growth rate.

For startups in the metropolitan area, the reduction rate will be further lowered. Since the metropolitan area is grouped as a wide-area unit due to improved transportation, a differential treatment from other regions is deemed necessary. Therefore, in metropolitan areas outside the overconcentration control zone, the reduction rate will be reduced from 50% to 25% for general cases and from 100% to 75% for youth and livelihood types. Additionally, considering fairness among industries, the three-year additional 25 percentage point preferential reduction rate previously granted only to new growth service industries has been terminated.

When taxpayers who are difficult to track form cooperatives to pay taxes, 5% of workers' income tax was deducted, but this will be lowered to 3%. Previously, business operators received the same benefit, but it will no longer apply going forward.

The cash receipt reporting reward has been abused, so the per-case limit has been reduced from 500,000 won to 250,000 won, and the annual limit per person has been cut from 2 million won to 1 million won.

Meanwhile, among the 29 tax special cases ending this year, seven cases that have achieved policy goals or had low utilization will be terminated.

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