2024 Tax Revision Framework

The government has drawn up the 2024 tax revision bill, focusing on the following directions.

- Gain economic dynamism by promoting investment, employment, regional development and stimulating the capital market.

- Restore people’s livelihoods stability by easing financial burdens of marriage, childbirth, child-rearing and supporting low- and middle- income households and small businesses.

- Build a rational tax scheme by alleviating tax burdens and enhance tax system efficiency.

- Establish a taxpayer-friendly environment by improving taxpayers’ convenience and protecting their rights and interests.

The 2024 tax revision aims to boost economic dynamism and support people’s livelihoods stability. To this end, the four key strategies are to be carried out as follows.

1. Boost Economic Dynamism

1-1. Promote Investment, employment, and regional development         

1) Extend the applicable period for R&D tax credits and integrated investment tax credits for national strategic technologies by 3 years until December 31, 2027.

2) Raise the tax deduction rate for the increased amount of the integrated investment tax credits.

- National strategic technologies: 4% → 10%

- General and new growth/fundamental technologies: 3% → 10%

3) Adjust the size criteria for middle-market enterprises to be three times that of small and medium sized enterprises (SMEs) in sales.

4) Extend the grace period for receiving tax benefits available to SMEs from 3 years to 5 years.

5) Introduce the gradual reduction structure of tax credit rates for national strategic technologies, new growth/fundamental technologies R&D and integrated investment tax credits.

          6) Expand the scope of R&D tax credit eligibility.                

          7) Shorten the depreciation period for R&D machinery and equipment from 5 years to 3 years.

8) Reform integrated investment tax credits for employment

          9) Relax the eligibility requirements for tax credits on overseas resource development investments.

         10) Extend the applicable period for tax reduction for reshoring companies by 3 years until December 31, 2027.

         11) Introduce special provisions on taxation for housing in areas with declining populations and unsold houses after completion.

  1-2. Enhance corporate competitiveness

        1) Improve the business succession and inheritance system.

           - Broaden the eligibility for family business inheritance tax deductions and increase the deduction limits for outstanding ①Corporate Value-up businesses^*, ②Scale-up businesses, and ③businesses that are newly established or relocated in the opportunity and development zones (ODZ).

             (Eligibility) SMEs and middle-market enterprises with annual sales below 500 billion won → All SMEs and middle-market enterprises

             (Deduction limit) the tax deduction limit will be doubled for outstanding ①Corporate Value-up and ②Scale-up companies.

           ③Start-ups and relocating businesses in ODZ will be eligible for unlimited family business inheritance tax deductions.

            ^* Companies that publically announce a ‘Corporate Value Enhancement Plan’ and have a shareholder return ratio relative to net income over a five-year period (2025-2029) that is at least 120% of the industry average.

        2) Abolish the 20% premium taxation on shares held by largest shareholders.           

        3) Extend the applicable period for a special provision concerning corporate tax base on shipping companies by 5 years until December 31, 2029.

        4) Introduce a special provision concerning individual consumption tax refund on liquefied petroleum gas (LPG) butane used in hydrogen production.

        5) Introduce a special provision on taxation for the acquisition of multiple voting shares by venture companies.

        6) Extend the applicable period for a special provision on taxation for the profits from the exercise of stock options granted by venture companies by 3 years until December 31, 2027.

        7) Rationalize the requirements for eligible spin-off related to treasury stock.

1-3. Stimulate the capital market

        1) Launch a tax scheme to promote shareholder returns (temporary for three years).

             - Corporate tax credit: Introduce a corporate tax credit for listed companies that have increased shareholder returns.

              (Requirements) KOSPI and KOSDAQ-listed companies that voluntarily disclose their value-up plans and have increased shareholder returns through dividends and share buybacks.

              (Deductible amount) The amount of increase in shareholder returns exceeding 5% of the average amount of the previous 3 years.

              (Deductible rate): 5% (deductible limit: 1% of the total shareholder return amount for the current year)                                         

              (Applicable period): Shareholder returns for the business years January 1, 2025 – December 31, 2027

        - Separate taxation on dividend Income: For listed companies that have increased shareholder returns, a portion of cash dividends received by individual shareholders will be subject to separate taxation.

        2) Abolish the financial investment income tax and maintain the current capital gains tax system.

        3) Increase taxation support for individual savings accounts (ISAs).

           - Expand the annual savings limit from 20 million won to 40 million won.

           - Expand the tax-exempt limit from 2 million won to 5 million won.

           - Launch a new type of ISAs for domestic investment.

        4) Set up tax classification regulations for investment profits from fractional investment products.

           - Considering the characteristics of fractional investment products, profits from these products will be taxed as dividend income, similar to the current taxation of funds.

        5) Rationalize the scope of distributable earnings for real estate investment companies.

        6) Extend the applicable period for separate taxation of interest income from government bonds for individual investors by 3 years until December 31, 2027.

        7) Rationalize the method for calculating profits from funds (collective investment organizations).

          - The calculation of fund profits will include trading or valuation gains from domestic-listed foreign stock ETFs and ETNs.

2. Restore People’s Livelihoods Stability  

  2-1. Support for marriage, childbirth and child-rearing

      1) Provide a tax credit of up to 1 million won to the newly-married upon registration of marriage (500 thousand won for each).

      2) Expand the eligibility of tax support for housing subscription savings accounts.

      3) Extend the applicable period of levying capital gains tax and comprehensive real estate holding tax based on a single property standard from 5 to 10 years in case that a married couple with each possessing a property has become a two-property household upon marriage.

      4) Fully exempt corporate childbirth support payments from taxation.

      5) Increase the child tax credit amount for children and grandchildren aged 8 to 20.

        (Deductible amount): 15/20/30 → 25/30/40 (first/second/third child, ten thousand won)

2-2. Ease financial burden on low- and middle-income households

      1) Expand the application of income tax deductions for swimming pool and fitness center facility fees paid with credit cards.

      2) Raise the tax deduction limit for hometown donations under the Hometown Love Donation Scheme.

      3) Increase the income threshold for earned income tax credit (EITC) eligibility for dual-income households (38 million won → 44 million won per year).

      4) Relax the conditions for tax exemption clawback on Youth Leap Accounts[1] in case of early withdrawal.

      5) Improve the tax credit scheme related to performance-based bonuses for SMEs sharing performance results.

          - Extend the applicable period for corporate tax deductions and income tax reductions by 3 years while reducing corporate tax deduction rate from 15% to 10%.

      6) Extend the applicable period for the reduction of income tax amount on performance compensation funds for core personnel by 3 years, along with a relaxation of the eligibility requirements.

      7) Expand the scope of career-interrupted individuals who are subject to tax support upon employment.

      8) Extend the applicable period for individual consumption tax reductions on eco-friendly vehicles by 2 years and adjust the tax reduction limit on hybrid cars (1 million won → 700 thousand won).

      9) Extend the applicable period for a special provision concerning the transfer income tax for public rental housing by 2 years until December 31, 2026.

      10) Extend the applicable period for a special provision on taxation for the land transfers to public housing construction developers by 3 years until December 31, 2027.

      11) Exclude land lease housing units from the calculation of comprehensive real estate tax.

2-3. Support small business owners and SMEs

     1) Strengthen tax support for the Yellow Umbrella[2] by raising the upper limit of income tax deduction amount.

   2) Extend the applicable period for tax deductions for landlords who reduce commercial rent.

     3) Introduce a special provision concerning the installment taxation on income from the disposal of construction machinery.

     4) Expand the agricultural equipment eligible for value-added tax (VAT) refunds.

     5) Extend the applicable period for a special provision concerning the collection of overdue taxes from small business owners.

     6) Expand liquor tax reductions for traditional alcoholic beverages.

     7) Improve regulations related to alcoholic beverages.

3. Build a Rational Tax Scheme

  3-1. Alleviate tax burdens and enhance tax system efficiency

      1) Alleviate the burden of inheritance and gift taxes.

        - Reduce the highest rates for inheritance and gift taxes to 40% and expand the lower tax brackets.

        - Increase the inheritance tax exemption amount for children from 50 million won per person to 500 million won.

      2) Postpone the implementation of taxation on virtual assets by 2 years until 2027.

      3) Rebuild the method for determining the acquisition value of virtual assets.

      4) Calculate interim corporate tax prepayments for publicly disclosed corporate groups based on the corporate tax rates set during the repayment period of the given business year.

        5) Adjust the tax brackets and minimum corporate tax rate for small corporations subject to faithful reporting verification.

        6) Establish tax-exemption criteria for earnings from employee discounts.

          - Discounts on company’s products and services provided to employees will be tax-exempt up to 20% of the market value or 2.4 million won per year.

        7) Rationalize post-management for tax deductions on medical/education/monthly rent for faithful taxpayers.

        8) Rationalize the criteria for excluding excessive interest payments from deductible expenses.

        9) Extend the validity period for the Traffic, Energy, and Environment Tax Act by 3 years until December 31, 2027.

3-2. Rebuild tax exemption and tax reduction systems

   1) Adjust the VAT deduction rate for credit card usage.

       - Reduce the tax deduction rate for businesses with sales exceeding 500 million won from 1.3% to 0.65%.

   2) Reduce the electronic filing tax deduction.

       - Abolish the electronic filing tax deduction for individual income tax, corporate tax, and VAT.

       - Lower the upper limit of electronic filing tax deduction amount for tax agents and tax advisory firms.

    3) Extend the applicable period for tax deductions on tax associations by 3 years and adjust the deduction rate. 

    4) Rationalize the tax reduction system for start-ups.

   - Extend the tax reduction applicable period by 3 years until December 31, 2027, with a rise in the reduction rate when employment increases.

   - Reduce the tax reduction rate for metropolitan areas outside of the over-concentration control zones.

   - Terminate the preferential tax reduction rate for new growth service industries to improve fairness among sectors.

         5) Rebuild the taxation system for supporting corporate relocation.

   - The tax reduction for relocation will only apply to factories moving out of the metropolitan over-concentration control zones.

         6) Rationalize the scope of SMEs.

   - Exclude real estate leasing corporations from the scope of SMEs and middle-market enterprises, and also exclude “small corporations subject to faithful reporting verification” from the scope of SMEs.

         7) Exclude rental assets of leasing businesses from the target of integrated investment tax deductions.

        8) Lower the limit of reward amount for reporting refusals or failures to issue cash receipts from 500 thousand won to 250,000 won per purchase.

        9) Terminate 7 tax incentives that either achieve their policy objectives or have low utilization rates, among the 29 tax incentives expiring at the end of 2024.

3-3. Improve tax transparency

  1) Introduce a special provision allowing duty-free stores to directly pay the VAT on commission fees for attracting customers[3].

  2) Extend the applicable period for tax deductions related to the issuance of electronic tax invoices or electronic invoices by 3 years until December 31, 2027.

  3) Set up a new system for verifying faithful customs declarations and the monthly final declaration.

  4) Establish grounds for imposing VAT on tax evasion business at anytime.

  5) Increase tax penalties for rigging businesses under another person’s name.                           

  6) Apply a uniform withholding tax rate of 20% to the business income of foreign professional athletes, irrespective of the contract duration.

  7) Expand the scope of assets eligible for deferral of transfer income tax to include shares received as gifts within 1 year prior to the transfer date.

        8) Expand the scope of residents to include individuals who have resided for 183 days or more continuously from the previous year(currently, 183 days of the current year).

        9) Strengthen the obligation to submit tax-related documentation for virtual assets.

            - Add virtual asset transaction details to the tax reporting requirements submitted to the Commissioner of Customs.

        10) Establish grounds for implementing the automatic information exchange system for cryptocurrency assets.                                              

        11) Add 4 industries to the list of sectors required to issue cash receipts.

        12) Impose traffic, energy, and environment taxes on individuals or entities that sell fuel without proper documentation.

        13) Rationalize the scope of tax liability succession for death insurance proceeds.

        14) Expand the scope of contributors who bear secondary tax liabilities.

        15) Extend the period for imposing taxes to 7-year on undeclared customs imports.

        16) Raise the tax penalty rate for non-compliance with customs reporting requirements in cases of fraudulent activities from 40% to 60%.

4. Establish a Taxpayer-Friendly Environment

4-1. Improve taxpayers’ convenience

        1) Promote the issuance of electronic donation receipts.

        2) Improve the customs clearance system for overseas direct purchases.

        3) Provide withholding tax exemption for foreign private equity funds (in addition to the current public equity funds) for their interest income.

        4) Raise the threshold for unclaimed tax refund amounts that automatically offset against the national tax for the given taxpayer to be paid (100 thousand won → 200 thousand won).

        5) Improve the preliminary examination system for FTA customs regulations.

        6) Expand the scope of applicants eligible for post-application of conventional tariff agreements.

  4-2. Protect taxpayers’ rights and interests

        1) Rationalize the reporting requirements for overseas financial accounts.

            - Expand the scope of taxpayers who are subject to the exemption from the reporting obligations for overseas financial accounts and lower the upper limit of fines for the breach of reporting obligations.

     2) Allow claims for reassessment of tax deduction amounts.

     3) Establish a special provision concerning the period of tax imposition exclusion for carry-forward tax credits.

     4) Extend the advance notice period for tax audits (15 days → 20 days advance notice).

     5) Expand the eligibility for a special provision concerning taxpayers in special disaster areas, including extended payment deadlines and deferred payment notices.

Please refer to the attached files.