[Changes from the Second Half of the Year] Tax Cuts for Small Business Owners... Crackdown on Voice Phishing and Child Sexual Crimes (Comprehensive)

Ministry of Economy and Finance Publishes 'Changes from the Second Half of 2020' Booklet on the 29th
30% Reduction in Individual Consumption Tax on Passenger Car Purchases Extended Until Year-End
Increased Loan Limits for Worker Living Stabilization Funds and Application of Industrial Accident Insurance to 5 Special Occupations
Crackdown on Voice Phishing and Child Sexual Crimes
Automatic Renewal if Lease Termination Notice Not Given 2 Months in Advance

[Sejong=Asia Economy Reporter Kim Hyunjung] Starting from the second half of this year, the government will actively implement tax reductions for small business owners and others to provide relief from damages caused by the novel coronavirus infection (COVID-19). The individual consumption tax on passenger cars will be temporarily reduced by 30% until the end of the year to stimulate consumption, and penalties for emerging crimes such as the production and distribution of child sexual exploitation materials and voice phishing, which have been controversial, will be strengthened. Revisions to systems and regulations that have high public impact, such as automatic renewal of lease contracts, prevention of pension safety accidents, and expanded support for families with newborns, will also be made.

The Ministry of Economy and Finance published a booklet titled "Changes Starting from the Second Half of 2020" on the 29th. The booklet contains 153 institutional and regulatory changes from 30 government ministries that will take effect from the second half of this year.

◆ Focus on COVID-19 relief... Tax reductions implemented = First, tax reduction benefits will be implemented to provide relief from various damages caused by the COVID-19 situation. Value-added tax (VAT) payable by individual business owners with annual sales of 80 million KRW or less (excluding VAT) will be reduced to the level of simplified taxpayers until the end of the year. Real estate rental businesses and entertainment establishments are excluded. It is expected that 1.16 million individual business owners will benefit from this tax relief, and the government is projected to bear a tax revenue loss of about 700 billion KRW.

To stimulate consumption, the individual consumption tax imposed on passenger car purchases will be temporarily reduced until the end of the year. However, the reduction rate has been lowered from 70% to 30%. Normally, the individual consumption tax on passenger cars is 5% of the vehicle's price. For example, purchasing a car priced at 100 million KRW would require paying 5 million KRW as individual consumption tax.

The loan limit for workers' living stabilization funds will increase from the current 20 million KRW to 30 million KRW. The workers' living stabilization fund loan system provides low-interest loans to low-income workers and special-type workers. Support is available for eight types of expenses including medical expenses, funeral costs, wedding expenses, income reduction living expenses, and small living expenses. Additionally, from August 1, five special-type workers (special contract workers) in occupations such as door-to-door salespersons, visiting instructors, rental product inspectors, home appliance installers, and freight truck owners will be mandatorily covered by industrial accident insurance. From December 10, artists will also be able to enroll in employment insurance and receive unemployment benefits and maternity benefits.

◆ Crackdown on voice phishing and child sexual crimes = From August 20, penalties for the transfer and lending of bank accounts used as channels for voice phishing will be increased from imprisonment of 3 years and a fine of 20 million KRW to imprisonment of 5 years and a fine of 30 million KRW. Furthermore, electronic financial transactions by individuals with prior voice phishing convictions will be restricted to prevent repeated damages by the same offenders.

Penalties for sexual crimes against children and adolescents, which have been controversial due to the recent "Nth Room" case, will also be strengthened. From November 20, children and adolescents involved in prostitution will be classified not as "target children and adolescents" but as "victimized children and adolescents," and will receive legal protection through the Victimized Children and Adolescents Support Center. The disclosure and notification of sex offender information will be expanded from "sexual violence offenders against children and adolescents" to "sex offenders," allowing the disclosure and notification of information on those who have engaged in prostitution or crimes involving child and adolescent sexual exploitation materials. Additionally, measures to prevent children's traffic accidents will be strengthened by expanding the scope of application for children's school buses and mandating the preparation of safe driving records.

◆ Public-impact reforms such as lease contract renewal and pension accident prevention = The period for rejecting the implicit renewal of housing lease contracts will be changed from 6 to 1 months before contract expiration to 6 to 2 months before expiration, effective December 10. If the landlord does not notify the tenant of contract termination or rent increase two months before the contract expires, the lease contract will be considered automatically renewed.

To prevent carbon monoxide (CO) poisoning accidents like the 2018 Gangneung pension accident, the "Liquefied Petroleum Gas Safety Management and Business Act" will be enforced from August 5, mandating the installation of carbon monoxide alarms when boilers are installed. Along with this, guesthouse operators must submit gas and electrical safety inspection certificates to local governments annually. Penalties for illegal import and export of waste will also be strengthened. If waste is illegally exported, a fine up to three times the profit gained from the disposal and the cost of restoration must be imposed. If no profit was gained or it is difficult to calculate, a fine of up to 1 billion KRW will be imposed.

According to the health insurance coverage enhancement plan, health insurance will be applied to eye and chest ultrasounds in the second half of this year. In addition, the income eligibility for maternal and newborn health management services, which provide visits by health managers to support nutrition management, exercise, and newborn care for families with newborns, will be expanded from 100% to 120% of the median income. It is estimated that an additional 23,000 mothers will receive support.

◆ Increase in military disability and death insurance payments = Since June 11, the Military Accident Compensation Act has been enforced, strengthening the state's responsibility for injuries, illnesses, and deaths during military service. The compensation for general disability of soldiers has been increased from the current individual standard monthly income (approximately 2.26 million KRW in 2020) to the average monthly income of all public officials (approximately 5.39 million KRW in 2020). For death compensation, the amount for deaths in action has been raised from 57.7 times to 60 times the average monthly income of all public officials; special duty death insurance from 44.2 times to 45 times; and general death insurance from 23.4 times the individual standard monthly income to 24 times the average monthly income of all public officials. The payment rate for survivor pensions has been unified at 43%, and a survivor addition system has been newly established, which adds 5% per survivor up to a maximum of 20%. This has been in effect since December 10 last year.

Severely ill and incurable patients who developed conditions during military service can also receive discounted medical treatment at veterans' entrusted hospitals. When the Enforcement Decree of the Act on Support for Veterans is revised on September 25, discounted medical treatment will be available at six veterans' hospitals nationwide and 322 veterans' entrusted hospitals. The enlistment dates and units for active-duty soldiers for the following year, which were previously announced in December, will now be notified six months in advance starting from July. This change addresses concerns that recruits enlisting in January and February had insufficient time to prepare and faced difficulties managing academic or employment schedules.

The pension division system, which divides military pensions for spouses divorced from soldiers, will also be implemented. The retirement pension amount corresponding to the actual marriage period during military service (excluding periods of separation or desertion) will be equally divided and paid. Eligibility applies if the actual marriage period during service is five years or more and the couple is divorced. This applies to divorces occurring after June 11 this year. Residents in noise-affected areas near military airfields or shooting ranges will also be able to receive compensation for noise damage. Previously, there was no compensation system for noise damage, and residents had to resort to lawsuits and court rulings. However, since noise impact surveys for compensation will be needed until the second half of next year, compensation payments will begin in 2022.