NTS Overhauls Excluded Regions for Simplified Taxation After 26 Years... Tax Burden Eased for 40,000 Small Business Owners

544 Excluded Regions Released from Simplified Taxation

Focus on Traditional Markets and Shopping Complexes; Changes Effective from July

Eight Support Measures Including Moratorium on Tax Audits and Early Tax Refunds

The National Tax Service (NTS) has completely overhauled the criteria for excluding certain regions from simplified taxation for the first time in 26 years, which is expected to ease the tax burden on up to 40,000 small business owners nationwide.

On April 15, Commissioner Lim Kwanghyun of the NTS announced a total of eight tax administration support measures at a roundtable meeting on tax support for small business owners, including a comprehensive revision of the regions excluded from simplified taxation. This initiative aims to reduce the operational burden on small businesses struggling due to the prolonged Middle East conflict and high inflation.

The central change is a significant reduction in the scope of 'excluded regions,' which have restricted the application of simplified taxation. The simplified taxation system applies to sole proprietors with annual sales of less than 104 million won, featuring lower tax rates and a streamlined reporting process compared to standard taxpayers.

Until now, the NTS had designated certain areas such as traditional markets and shopping complexes as excluded regions to prevent abuse of the simplified taxation system through underreporting of sales. However, concerns have been raised that these criteria did not adequately reflect current economic realities, such as the economic downturn and declining consumption, resulting in even small business owners being unable to benefit from simplified taxation.

In response, the NTS conducted a comprehensive review of excluded regions based on factors such as foot traffic, business district size, vacancy rates, and sales levels. As a result, 544 out of a total of 1,176 excluded regions—equivalent to 46.3%—have been removed from the list.

By type, 98 out of 182 traditional markets (53.8%), 317 out of 728 shopping complexes and discount stores (43.5%), and 129 out of 266 hotels and department stores (48.5%) have been excluded from the restricted areas. In particular, to revitalize local commercial districts, the exclusion ratios for traditional markets and shopping complexes outside the capital region were notably high at 69.5% and 70.7%, respectively.

With this revision, up to 40,000 small business owners operating in the affected regions will be able to apply the simplified taxation system starting in July, which is expected to reduce their tax burden and simplify reporting procedures.

The NTS plans to send out notifications regarding the change in tax classification in May and implement the new standards from July. However, business owners who would benefit more from remaining as standard taxpayers can opt out of simplified taxation by the end of June.

In addition to revising the simplified taxation criteria, Commissioner Lim also shared other tax support measures at the meeting, including: a moratorium on tax audits for small business owners contributing to price stabilization; support for business owners affected by unsettled platform payments; extensions of value-added tax payment deadlines; and early payment of tax refunds.

Commissioner Lim stated, "We are strengthening tax support measures in consideration of the difficulties faced by ordinary people due to the situation in the Middle East and high inflation," adding, "We will continue to support the recovery of small business operations through tax administration focused on field realities."

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