COVID-19 Special Disaster Area SMEs... Up to 200 Million Tax Reduction

Daegu, Gyeongsan, Bonghwa, Cheongdo
Income Tax or Corporate Tax Reduction
60% for Small Enterprises, 30% for Medium Enterprises
Up to 200 Million KRW Reduction
Resolution of Enforcement Decree of Restriction of Special Taxation Act
Effective from the 14th of This Month

[Asia Economy Reporter Kim Daeseop] The Ministry of SMEs and Startups announced on the 8th that tax support for small and medium-sized enterprises (SMEs) struggling due to the spread of the novel coronavirus infection (COVID-19) will be fully implemented.

This tax support was finalized following the approval of the 'Enforcement Decree of the Restriction of Special Taxation Act,' which contains detailed provisions on the revised tax support system for early overcoming of COVID-19, at the Cabinet meeting the previous day.

Accordingly, most SMEs located in the COVID-19 special disaster areas (Daegu, Gyeongsan, Bonghwa, Cheongdo) will receive income tax or corporate tax reductions. The reduction rate is about 60% for small enterprises and 30% for medium enterprises. Tax reductions of up to 200 million KRW are possible.

However, SMEs engaged in five industries?real estate rental and supply, gambling facility management and operation, professional services such as law and accounting, blockchain-based and cryptocurrency trading and brokerage, and finance and insurance (excluding insurance solicitors)?are excluded from the tax support.

With this tax support, real estate rental business operators who have reduced commercial rent for tenants can deduct 50% of the rent reduction amount from income tax or corporate tax. This applies only if the tenant has continuously rented the same commercial building since before January 31, 2020, and the tenant is a small business meeting certain conditions.

Industries such as manufacturing of unhealthy video game machines like gambling games, certain real estate businesses, and gambling facility management and operation are excluded from the tax support. Also excluded are cases where rent was increased above the original lease contract after rent reduction until the end of 2020.

Additionally, for general individual business owners with annual sales (excluding VAT) of 80 million KRW or less, excluding those engaged in real estate rental and sales or entertainment bar businesses, VAT payment will be reduced to the level of simplified taxpayers. The VAT exemption threshold for simplified taxpayers will be raised from 30 million KRW to 48 million KRW in annual sales.

Furthermore, companies expanding domestic business sites by increasing the total floor area of factories or workplaces when returning or relocating domestic operations from overseas will also receive tax benefits (50-100% reduction in income or corporate tax for 5 to 7 years).

This enforcement decree is scheduled to take effect on the 14th of this month. A Ministry of SMEs and Startups official stated, "More detailed information and application methods regarding this tax support can be obtained through the National Tax Service Customer Satisfaction Center or the Korea Tax Association Tax Consultation Center."