Amendment to Enforcement Decree of Tax Law Passed at Cabinet Meeting
Partial Revisions Including Farming Period
3.57% Increase in Liquor and Beer Excise Tax Maintained
[Asia Economy Sejong=Reporter Joo Sang-don] The required farming service period for heirs to qualify for the 'Farming Inheritance Deduction,' a system that deducts property value from the taxable amount of inheritance tax when agricultural, forestry, and fishery workers inherit farming assets, has been adjusted from the originally announced 10 years to 8 years. However, the increase rate of liquor tax on beer and Takju remains at 3.57%, as announced last month.
The government announced that it partially revised the enforcement ordinances of 21 tax laws, including the Restriction of Special Taxation Act, Corporate Tax Act, and Comprehensive Real Estate Tax Act, reflecting these changes, and passed them at the Cabinet meeting on the 21st. The revised enforcement ordinances are scheduled to be promulgated next week.
As a follow-up measure to the tax reform plan passed by the National Assembly at the end of last year, the government announced the related enforcement ordinance amendments in January this year. The previously announced amendments to the Inheritance and Gift Tax Act enforcement ordinance included expanding the farming inheritance deduction limit from 2 billion KRW to 3 billion KRW and strengthening the farming service period from 2 years to 10 years. However, after inter-ministerial consultations, the farming service period was revised to 8 years. Accordingly, heirs must have been continuously engaged in direct farming for 8 years prior to the inheritance commencement date to receive the farming inheritance deduction up to the 3 billion KRW limit.
Through the ordinance revision, the scope of tax exemption for interest and dividend income from the newly established Youth Leap Account will also be expanded. This is to diversify investment assets in support of youth asset formation. Accordingly, taxable special treatment assets will be expanded to include company bonds issued by domestic corporations, government bonds, and local government bonds, in addition to deposits, funds, and listed stocks.
The scope of the education tax base will be maintained as is. Initially, it was planned to add commissions received by banks and others for performing insurance agency work to the income range of financial and insurance businesses, but reflecting inter-ministerial consultations, only income such as discount fees, trust fees, rental fees, derivative transactions, and net profits from foreign exchange trading will be considered as income, as before.
The tax rate on beer and Takju will be increased by 3.57% as originally announced. Previously, the rate was simply adjusted by the previous year's rate plus the consumer price inflation rate, but considering tax fairness with other liquors, changes in shipment prices, and price stability of alcoholic beverages, it will now be flexibly adjusted within 70% to 130% of the consumer price inflation rate. The government decided to apply only 70% of last year's consumer price inflation rate to raise prices. Beer will increase by 30.5 KRW per liter to 885.7 KRW, and Takju will rise by 1.5 KRW to 44.4 KRW.
The Korea Federation of Medium-sized Enterprises' request to expand tax support targets was not accepted. On the 7th, the Federation submitted its 'Opinions of Medium-sized Enterprises on the 2022 Tax Reform Follow-up Enforcement Ordinance Amendments' to the Ministry of Strategy and Finance. The Federation pointed out that "Considering the scale of investment in the materials, parts, and equipment sectors, which are mostly medium-sized enterprises, limiting the research and development and integrated investment tax credit targets to medium-sized enterprises with an average sales of 500 billion KRW and 300 billion KRW over three years respectively would make it difficult to expect meaningful effects."
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