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Overview of South Korea's 2019 Tax Revision Bill Published

South Korea's Ministry of Economy and Finance has issued an English-language release providing an overview of the 2019 Tax Revision Bill. The measures of the Bill are focused on boosting the economy and supporting industrial innovation, pursuing inclusiveness and fairness, and broadening the tax base and improving the tax system. Most of the key measures for companies relate to boosting the economy and supporting industrial innovation, and include the following as provided in the release:

Promote investment

  • Expand the facility investment tax reduction temporarily for one year if the investment is made to improve productivity:  From 1% to 2% (large conglomerates), from 3% to 5% (medium-sized companies), and from 7% to 10% (SMEs);
  • Extend the tax reduction for manufacturing facility investment and safety facility investment by two years, as well as expand industries eligible for the tax reduction:  Include pharmaceutical and logistics industries if they invest in high-tech equipment and facilities, and for safety investment tax reduction, expand it to energy pipelines, LPG facilities, and all equipment and facilities if the investment is aimed at improving safety;
  • Extend the 50% accelerated depreciation by six months to 30 June 2020, and expand it to investments made to improve productivity and save energy in addition to the investments made to foster innovation, such as R&D facilities investment and new growth engine facilities investment;
  • Extend the corporate tax reduction for startups doing business in restructuring-affected areas to provide a further 50% reduction for two years in addition to the 100% reduction that currently provided for five years;
  • Expand the corporate investment tax reduction to 5% for SMEs and 3% for medium-sized leading enterprises if they are doing business in regulation-free zones;
  • Ease requirements for corporate inheritance tax incentives: Obligations accompanying the tax incentive, such as staying in the same business and retaining employment for 10 years, to be changed to 7 years, and changes in business to be allowed within a broader category;
  • Expand the installment tax payment and grace period given to capital gains made due to moving manufacturing facilities from a two-year installment with a two-year grace period to a five-year installment with a five-year grace period;
  • Expand the tax deduction for losses incurred in the previous year from 60% of the earnings for the year to 100%; and
  • Increase the allowed deduction of maintenance costs from KRW 3 million to KRW 6 million.

Support industrial innovation

  • Expand the R&D tax reduction for new growth engines and source technologies to biobetters, systems-on-the-chip, and other technologies that will lead innovation-driven growth;
  • Extend the tax reduction carry-over to the next 10 years, which is given to R&D investment in new growth engines and source technologies;
  • Provide R&D tax reduction to foreign research institutes for projects commissioned by Korean companies;
  • Expand the capital gains tax exemption given to venture capital from the sales of old stocks to the sales of new stocks; and
  • Provide a 50% income tax cut for five years to Korean talents returning from overseas.

The 2019 Tax Revision Bill is to be finalized and submitted to the National Assembly on 3 September 2019.

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