[2020 Tax Law] Tax Credit for Hiring Elderly Workers... Promoting Employment of Career-Interrupted Women and Regular Workers

Asia Economy DB=Photo by Hyunmin Kim kimhyun81@

[Asia Economy Reporter Kim Bo-kyung] The government is extending and expanding various tax benefits related to jobs to overcome the employment crisis caused by the novel coronavirus infection (COVID-19) situation.

On the 22nd, the government reviewed and approved the "2020 Tax Law Amendment" containing these details at the Tax System Development Deliberation Committee chaired by Deputy Prime Minister and Minister of Economy and Finance Hong Nam-ki.

First, the application period for the earned income increase tax credit will be extended by two years from the end of this year to the end of 2022. The earned income increase tax credit is a system that provides tax credits of 20% for small and medium enterprises, 10% for mid-sized companies, and 5% for large corporations that raise wages more than the three-year average wage increase rate.

To support employment of the elderly, the government will add "workers aged 60 and over" to the preferential tax credit targets of the employment increase tax credit. The employment increase tax credit is a system that provides tax credits up to 4 million KRW per person for large corporations and 12 million KRW for small and medium enterprises to companies that have increased the number of regular employees compared to the previous year.

So far, preferential tax credits have been given to regular employees such as youth, disabled persons, and national merit recipients. If the elderly are added to the preferential credit targets, it is expected that the tax credit amount will increase by 3.5 to 4.3 million KRW each time a company hires one elderly person. The credit period is two years for large corporations and three years for small and medium-sized and mid-sized companies.

The application period for the tax credit for small and mid-sized companies that rehire career-interrupted women will also be extended by two years until the end of 2022. For two years after reemployment, small and medium enterprises will receive a tax credit of 30% of labor costs, and mid-sized companies 15%. This applies to cases where the employee had earned income for more than one year before retirement, retired due to marriage, pregnancy, childbirth, childcare, or children's education, and was re-employed in the same industry within 3 to 15 years after retirement.

Small and mid-sized companies that convert non-regular workers as of the end of June this year to regular workers by December 31 next year will also receive tax credits. Small and medium enterprises will receive 10 million KRW per converted person, and mid-sized companies 7 million KRW per person.

In addition, tax credits will support pre-employment of university students through industry-academia cooperation. The scope of personnel development expenses eligible for research and development (R&D) tax credits will include on-site training allowances for university students.

The existing personnel development expenses eligible for tax credits, such as consigned training costs and vocational ability development training costs, will now include "on-site training allowances paid to university students who have signed pre-employment contracts with excellent companies for industry-academia linked human resource development." Specific criteria for target companies will be decided later through consultation with the Ministry of Education and others.