Korea: Tax relief includes reduced rates, temporary increased deductions (COVID-19)

Korea: Tax relief includes reduced rates

South Korean authorities in March 2020 approved tax relief in an effort to address the impact of the coronavirus (COVID-19) pandemic.


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The tax relief measures include:

  • Tax credits for rental property owners that lowered the rental fee of a commercial building (RSTA §96-3)—if a landlord renting a commercial building reduces the rental fee owed by a small business tenant for the period from January to June 2020, 50% of the rental-fee reduction will be deductible (for tax purposes) from the landlord's income and corporate taxes.
  • Income and corporate tax reductions for small and medium-sized enterprises (SMEs) in “special disaster areas” (Daegu, Gyeongsan, Bonghwa and Cheongdo) (RSTA §99-11)—income and corporate tax on income generated by SMEs in the special disaster areas due to damage by infectious diseases will be reduced by a certain percentage (subject to a ceiling of KRW 200 million in total tax reduction):
    • 60% for small-sized enterprises
    • 30% for medium-sized enterprises
  • Expanded scope of tax support for overseas companies that return to Korea (RSTA §104-24)—income and corporate tax reductions are available with regard to an expansion of existing domestic operations, while overseas operations are shut down or downsized, to support the return of overseas companies to Korea; the rate of tax reductions are:
    • 100% for first five or three years
    • 50% for an additional two years
  • A value added tax (VAT) reduction for small self-employed business (RSTA §108-4)—the VAT imputed in 2020 for small self-employed businesses with annual sales of KRW 80 million (excluding VAT) or less will be reduced to the level of “simplified taxpayers.”
  • VAT exemption for “simplified taxpayers” (RSTA §108-5)—the base amount of the VAT exemption for simplified taxpayers will be temporarily increased to KRW 48 million, from KRW 30 million, in 2020.
  • Temporary reduction of individual consumption tax on car purchases (RSTA §109-4)—70% of the individual consumption tax will be reduced for cars removed from manufacturing sites or declared as imports, for the period from March to June 2020.
  • Temporary increase in the income tax deduction rate for credit card purchases or other expenses (RSTA §126-2 ②)—the income tax deduction rate for the amount paid by credit card or other expenses for the period from March to June 2020 will be increased (from 15% to approximately 40% to 30% to approximately 80%).
  • Temporary increase to the amount of limitation relating to entertainment expenses (RSTA §136 ④⑤)—the limitation amount of entertainment expenses will be increased to:
    • 0.35% of revenue, when revenue is not more than KRW 10 billion
    • 0.25% of revenue, when revenue is over KRW 10 billion but not more than KRW 50 billion
    • 0.06% of revenue, when revenue is over KRW 50 billion

For more information, contact a KPMG tax professional in South Korea:

Oh Sang-Bum | sangbumoh@kr.kpmg.com

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