New Tax Benefits for Individual Investors in Government Bonds and High-Yield Funds
Credit Card Income Deduction for Public Transportation Use Increased from 40% to 80%
Higher Tax Rates Applied to Multiple Homeowners Among Public Housing Residents and Public Interest Corporations
The National Assembly's Strategy and Finance Committee passed the amendment to the Restriction of Special Taxation Act (K-Chips Act) to support the domestic semiconductor industry at the plenary session held on the morning of the 22nd.
The amendment legally defines semiconductors, secondary batteries, vaccines, displays, hydrogen, and future mobility (electric vehicles) as national strategic technologies, and increases the tax credit rate for facility investments in these industries from the current 8% to 15% for large and medium-sized enterprises, and from the current 16% to 25% for small and medium-sized enterprises. Additionally, for this year only, the tax credit rates for investments in new growth and source technologies and general technologies will be raised by 2 to 6 percentage points, and a "temporary investment tax credit" system will be introduced, which allows an additional 10% credit on the amount exceeding the average investment amount over the past three years.
Earlier, the ruling and opposition parties agreed on December 23 last year to raise the tax credit rate for large enterprises from 6% to 8%, but due to the semiconductor industry's downturn, additional support is being provided after just three months. Jang Hye-young, a member of the Strategy and Finance Committee from the Justice Party, criticized at the plenary session, saying, "In a situation where tax revenue is insufficient, I have never received a convincing explanation from the Ministry of Strategy and Finance, which is trying to pass a semiconductor investment tax credit that will certainly reduce tax revenue but whose effects are uncertain," and added, "We must not set a precedent of passing such a rushed review during difficult times for the Korean economy."
Yoon Young-seok, Chairman of the Planning and Finance Committee, is delivering a greeting at the Planning and Finance Committee plenary meeting held on the morning of the 14th of last month at the National Assembly in Yeouido, Seoul. [Image source=Yonhap News]
Meanwhile, the Strategy and Finance Committee also approved an amendment to the Restriction of Special Taxation Act that introduces special tax treatment on interest income from government bonds for individual investors and on interest and dividend income arising from investments in high-risk, high-return bond investment trusts called "High Yield Funds." This applies only to subscriptions made by December 31 of next year.
Along with this, the committee passed an amendment to the Restriction of Special Taxation Act that raises the income deduction rate for public transportation use under the credit card income deduction from the existing 40% to 80% until the end of this year, following the increase in the second half of last year.
The amendment to the Restriction of Special Taxation Act that provides tax credits for participation in hometown love donations also passed the committee. Additionally, an amendment to the Comprehensive Real Estate Tax Act, which excludes public housing project operators from the application of the heavy tax rate for multiple homeowners, passed as a chairman's alternative. Public interest corporations such as religious organizations, schools, social welfare corporations, and medical corporations will be subject to the basic progressive tax rate regardless of the number of houses they own. Other certified corporations will be subject to the heavy progressive tax rate starting from owning three or more houses.
The approved amendments are expected to pass the plenary session of the National Assembly on the 30th.
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
