No VAT on 100,000 Won Holiday Employee Gifts... Graduation and Mid-term Benefits for 5 Years

Amendment of Enforcement Decrees for Five Laws Including Income Tax Act and Corporate Tax Act

Gifts provided by companies to employees during holidays are exempt from value-added tax up to a maximum of 100,000 won. Even if a small and medium-sized enterprise (SME) grows and exceeds the 'SME criteria' set by law, it can continue to receive tax benefits for five years.

On the 12th, the Ministry of Economy and Finance announced the legislative notice of amendments to the Enforcement Decrees of the Income Tax Act, Corporate Tax Act, Restriction of Special Taxation Act, Value-Added Tax Act, and Comprehensive Real Estate Tax Act, which include these details.

For goods provided by companies to employees during holidays such as Seol (Lunar New Year) and Chuseok (Korean Thanksgiving), value-added tax is not imposed up to 100,000 won separately from other welfare expenses. Until now, value-added tax was exempt up to a total of 100,000 won including holidays, birthdays, and company anniversaries, but going forward, in addition to the 100,000 won exemption for birthdays and company anniversaries, holiday gifts will also be exempt up to 100,000 won.

The 'graduation grace period,' during which SMEs can maintain tax benefits even if their sales exceed the SME size criteria, will be extended from three years to five years.

When a man and a woman, each owning one house, marry and become a single household with two houses, the period during which they are considered a single household with one house for calculating capital gains tax and comprehensive real estate tax will be extended from five years to ten years. When considered a single household with one house, capital gains tax is exempt up to a transfer price of 1.2 billion won. For comprehensive real estate tax, a basic deduction of 1.2 billion won can be applied.

The amendment also includes extending the period by two years during which newly built small houses that are not apartments are excluded from the number of houses when calculating capital gains tax and comprehensive real estate tax.

The amendment also includes provisions to maintain income deduction application and exclude tax reassessment when canceling a new subscription account to revive an existing subscription account due to reasons such as pre-subscription cancellation.

The amendment to the Enforcement Decree is scheduled to be promulgated and enforced in November after legislative notice, vice ministerial meetings, and Cabinet meetings.