[Yoon Administration Tax Law] Excise Tax Exemption up to 3 Million Won for Passenger Cars Purchased by Families with Three or More Children

[Asia Economy Sejong=Reporter Kim Hyewon] The government has decided to exempt individual consumption tax on the purchase of passenger cars for multi-child families with three or more children. The exemption period for individual consumption tax on eco-friendly vehicles such as hybrids, electric cars, and hydrogen cars will also be extended by two years.

On the 21st, the government announced the "2022 Tax Reform Plan" containing these details.

To expand support for multi-child families raising three or more children under 18, the individual consumption tax on passenger car purchases will be exempted up to a limit of 3 million KRW.

Additionally, value-added tax on infant diapers and formula will be permanently exempted to reduce childcare costs, and university entrance exam fees and the College Scholastic Ability Test (CSAT) fees will be added to the education expense tax credit (15%) to lower education expenses.

Strengthening Income Deduction Support for Credit Card and Other Usage Amounts

To alleviate housing cost burdens, the tax credit rate on monthly rent paid by non-homeowner household heads will be raised from a maximum of 12% to 15%, and the income deduction limit for principal and interest repayment on housing lease funds (jeonse deposit or monthly rent deposit) will be expanded from 3 million KRW to 4 million KRW annually. To ease university students' housing costs, the deadline for signing agreements on Happy Dormitories, which are exempt from value-added tax, will be extended by three years.

Also, the application period for income deductions of 15-40% on credit card and other usage exceeding 25% of total salary will be extended by three years, and support will be strengthened by integrating the limits for additional deduction items. In the second half of this year, the income deduction rate for public transportation usage will be increased from 40% to 80%. Movie ticket fees will be added to the deduction targets for book and performance expenses (30% deduction rate).

To expand the distribution of eco-friendly vehicles, the individual consumption tax exemption period for purchasing hybrids, electric cars, and hydrogen cars will be extended by two years. The exemption limits are 1 million KRW for hybrids, 3 million KRW for electric cars, and 4 million KRW for hydrogen cars, respectively.