Last Quarter of Last Year Small Business Loss Compensation... 900,000 Companies Paid 2.2 Trillion Won

Loss Compensation Deliberation Committee Approves Payment Plan for Q4 2021

Kang Sung-cheon, Vice Minister of the Ministry of SMEs and Startups, is announcing the results of the 10th Loss Compensation Deliberation Committee meeting held on the 2nd at Junggi Maru of the Ministry of SMEs and Startups in Sejong City.

[Asia Economy Reporter Kim Cheol-hyun] The Ministry of SMEs and Startups (Minister Kwon Chil-seung, hereinafter referred to as the Ministry) announced on the 2nd that it held the 10th Loss Compensation Deliberation Committee meeting, approved the payment plan for the 4th quarter of 2021 loss compensation, and will start accepting online applications from the 3rd.

The 4th quarter loss compensation is expected to be paid to about 900,000 companies totaling 2.2 trillion KRW. The compensation targets are 900,000 small businesses and small merchants that complied with assembly bans, business hour restrictions, and facility capacity limits from October 1 to December 31, 2021, and experienced a decrease in sales. The government expanded the compensation targets to include businesses that complied with facility capacity restrictions by revising the Enforcement Decree of the Small Business Act on February 7. Accordingly, 150,000 businesses such as lodging facilities, beauty salons, and wedding halls that implemented seat spacing and occupancy limits per area were added to the compensation targets.

Following the supplementary budget allocation and the committee’s resolution, the compensation rate was raised from 80% to 90%, and the quarterly minimum amount was increased from 100,000 KRW to 500,000 KRW. The easing of quarantine measures due to phased daily recovery from November to early December was also comprehensively reflected.

Using administrative data from the National Tax Service and local governments, the rapid compensation system pre-calculates compensation amounts and pays quickly upon application without requiring additional documents. The scale of rapid compensation is estimated at 810,000 companies and 2 trillion KRW. This corresponds to 90% of the total 900,000 companies eligible for 4th quarter loss compensation and 91% of the total compensation amount. This is a significant increase compared to the 77% rapid compensation rate in the 3rd quarter. This is analyzed as a result of simplifying the compensation formula by actively using regional and facility averages to minimize delays caused by difficulties in pre-calculating compensation amounts. However, about 360,000 companies among the rapid compensation targets will receive amounts after deducting the 5 million KRW advance payment made in January.

By industry, the number of rapid compensation target companies is highest in restaurants and cafes with 500,000 companies (61.5%), followed by beauty salons with 111,000 companies (13.7%), and academies with 52,000 companies (6.4%). The average compensation amount by industry was highest in entertainment facilities at 6.99 million KRW. This is attributed to the significant losses caused by business hour restrictions, as entertainment facilities tend to generate sales concentrated in late hours.

By business size, 460,000 micro-businesses with annual sales under 80 million KRW, subject to simplified taxation, account for more than half of the rapid compensation targets. Businesses with annual sales between 150 million KRW and 1 billion KRW make up about 26.4% of the total. Regarding compensation amounts, 230,000 companies receiving between 1 million KRW and 5 million KRW account for 28.4% of the total. 92,000 companies (11.3%) receive more than 5 million KRW, and about 400 companies (0.05%) receive the maximum amount of 100 million KRW. Companies receiving the minimum amount of 500,000 KRW number 370,000 (45.4%).

The 810,000 companies eligible for rapid compensation can easily apply for compensation online through a dedicated website starting from the 3rd. For the first five days, a five-day rotation system based on the last digit of the business registration number will be operated, and notification messages will be sent to eligible small business owners by day of the week. From the 3rd to the 18th, compensation payments will be made four times daily, and applications submitted by 4 PM will receive compensation on the same day. If a notification message is not received, applicants can check their eligibility for rapid compensation on the website. Offline applications will be available from the 10th for small business owners who have difficulty applying online. They can visit dedicated loss compensation counters set up at nearby city, county, or district offices, where an odd-even system based on the last digit of the business registration number will be operated.

Small business owners who are not included in the rapid compensation targets or who do not agree with the rapid compensation amount can apply for verification requests and verification compensation online from the 10th and offline from the 15th. Appeals can be made within 30 days from the date of notification of the verification compensation or verification request results.

The Ministry stated that the additional advance payment for 1st quarter 2022 loss compensation, implemented on the 28th of last month, and the 2nd round of quarantine support funds, implemented on the 23rd, are being executed without issues. Advance payment of loss compensation is a system that provides a certain amount proactively before calculating the actual loss compensation amount. The 1st quarter additional advance payment targets 280,000 companies, including those that complied with facility capacity restrictions and were not included in the January advance payment. As of noon on the 2nd, 43,000 companies applied, and 28,000 companies received 69.9 billion KRW. The 2nd round of quarantine support funds was implemented just two days after the supplementary budget passed, quickly supporting 3.22 million companies with 9.5 trillion KRW. Payments have also started for simplified taxpayers added during the National Assembly discussions, and support for businesses with annual sales between 1 billion KRW and 3 billion KRW is planned to begin on the 4th.

Deputy Minister Kang Sung-chun of the Ministry said, "We are concentrating all our efforts to support small business owners struggling due to the prolonged COVID-19 pandemic as quickly as possible," and added, "In addition to the 2nd round of quarantine support funds and the 1st quarter 2022 loss compensation advance payment, we will do our best to ensure that the 4th quarter 2021 loss compensation is also received promptly."