168.4 Billion Won Consumer Coupons Released... Facility Investment Tax Credit Consolidated from 10 to 1

Complete Overhaul of Facility Investment Tax Credit System... Consolidated from 9 to 1
Additional Tax Benefits for Companies with Investment Growth Over the Previous 3-Year Average
Increased Income Deduction Limits for Credit and Debit Card Usage
Support for 'Contactless Marketing One-Stop Service' Including Online Content Production

[Asia Economy Reporter Jang Sehee] As investment and consumption contracted due to the novel coronavirus infection (COVID-19), the government has announced a large-scale economic stimulus plan. Companies that increase their investment compared to the average of the previous three years will be eligible for additional tax credits. In addition, consumption discount coupons worth 168.4 billion KRW will be provided across eight sectors including accommodation, tourism, performances, and movies. On the 26th, the 'Korea Together Sale' will be held, involving large, medium, and small distribution companies, traditional markets, and small business owners.

The '2020 Second Half Economic Policy Direction' announced by the government on the 1st includes these consumption stimulation policies.

◆Additional tax benefits for companies that increase investment... 'Credit rate' to be disclosed in the July tax reform= The government plans to strengthen tax incentives to encourage corporate investment. The facility investment tax credit system will be completely revamped to actively promote investment in the second half of the year. Nine tax credits, including those for productivity improvement facility investment, safety facility investment, environmental conservation facility investment, worker welfare facility investment, and pharmaceutical quality control facility investment, will be abolished and integrated with investment tax credits for small and medium enterprises.

Bang Gi-seon, Deputy Minister of Strategy and Finance, said, "We will completely reform the investment tax credit as a way to enhance investment incentives in the second half of the year," adding, "We will also extend the carryover credit period to further expand investment in the second half." Accordingly, companies that increase investment compared to the average of the previous three years will receive additional credits on the increased amount. The additional credit rate will be included in the tax reform plan to be announced in July.

The government will also discover and promote additional large-scale corporate investment projects worth 12 trillion KRW. By resolving investment difficulties and simplifying administrative procedures, it plans to identify corporate investment projects worth 6.2 trillion KRW centered on logistics facilities. These include the Yangjae Urban High-tech Logistics Complex (5.7 trillion KRW), Gwangju e-commerce logistics center construction (200 billion KRW), Miryang export food production factory construction (200 billion KRW), and Yeosu LNG storage facility expansion for import/export (100 billion KRW). Furthermore, the remaining portion of the public institution investment target of 60.5 trillion KRW for this year will be promptly executed. Additionally, 5 trillion KRW in policy finance will be concentrated in the second half to promote new facility investments.

◆Full effort to revitalize consumption... Increased income deduction limits for credit and debit card usage= The government plans to stimulate consumption worth 900 billion KRW by providing discount consumption coupons worth 168.4 billion KRW across eight major sectors. The eight sectors include accommodation, tourism, performances, movies, exhibitions, sports, and dining out. The government will provide 30,000 to 40,000 KRW accommodation discount coupons to 1 million people when booking through online accommodation sites. For movies, discount coupons of 6,000 KRW per person (targeting 1.47 million people) will be provided. Additionally, 300,000 KRW will be reimbursed to 400,000 people who purchase monthly passes for indoor sports facilities.

Policies that received favorable responses, such as issuing local love gift certificates, reducing individual consumption tax on automobiles, and rebates for high-efficiency home appliances, will also be expanded. The issuance scale of local love gift certificates will be increased from 60 trillion KRW to 90 trillion KRW. The individual consumption tax reduction benefit for automobiles, which is scheduled to end at the end of next month, will be temporarily revived until the end of this year, but the reduction rate will be lowered from the existing 70% to 30%.

The income deduction limit for credit and debit card usage will be raised. The annual card usage deduction limit is 3 million KRW for total salary under 70 million KRW, 2.5 million KRW for 70 million to 120 million KRW, and 2 million KRW for over 120 million KRW. The range of additional limit increases will be included in the tax law amendment to be announced in July.

Moreover, the government has designated the period from the 20th of this month to July 19th as a special travel week. During this period, ▲ four one-way KTX tickets (10,000 people) ▲ unlimited express bus rides for four days (10,000 people) ▲ passenger ship weekday 50% and weekend 20% discount tickets will be provided. Along with this, the government will prepare a comprehensive plan to revitalize island tourism to establish infrastructure for the core marine tourism industry. A pilot project for 'hopping tours,' which involve traveling between islands and experiencing various activities on the sea and islands, will be promoted.

◆Supporting export recovery... One-stop service support for non-face-to-face marketing= The government plans to support online content production using B2B platforms such as KOTRA, Korea International Trade Association, and Small and Medium Business Corporation.

Furthermore, video consultations will be expanded to 89 domestic and 12 overseas locations. The support target for sales agency projects linking domestic promising products to global online platforms will also be expanded from 1,500 to 2,500 companies. To resolve logistics difficulties, the logistics support project, which jointly aggregates online export volumes and subsidizes a certain portion (30% of freight) of international logistics costs, will be expanded to 1,683 companies.