Eunsuk Choi of People Power Party Proposes Bill to Extend Expiring Mutual Finance Tax Exemption by Three Years

People Power Party lawmaker Eunsuk Choi (Daegu Dong-gu and Gunwi-gun Gap) announced on the 17th that he has proposed a revision to the Restriction of Special Taxation Act, which includes a three-year extension of tax-exempt benefits for deposits and savings accounts at mutual financial institutions such as the National Agricultural Cooperative Federation (Nonghyup), National Federation of Fisheries Cooperatives (Suhyup), National Credit Union Federation of Korea (Shinhyup), Saemaul Geumgo, and the National Forestry Cooperative Federation.

Generally, interest income is subject to a 15.4% tax (14% interest income tax plus 1.4% local income tax). However, under current law, members, associate members, and regular members of mutual financial institutions are eligible for tax exemption on interest income from deposits and savings accounts up to 30 million won per person.

People Power Party Eunsuk Choi

However, since this special provision is set to expire on December 31, 2025, there are concerns about a significant outflow of deposits from mutual financial institutions. In particular, given that mutual financial institutions are primarily concentrated in non-metropolitan areas and that this system serves as a crucial means of building financial assets for local communities and the elderly, the expiration of the special provision is highly likely to lead to instability in regional finance.

Accordingly, the proposed amendment primarily seeks to extend the sunset date for tax exemption on interest income from deposits at cooperatives and similar institutions by three years, until December 31, 2028.

In addition, the amendment also extends by three years the sunset dates for the following: tax exemption on interest and dividend income from investment shares held by members, associate members, and regular members; reduced corporate tax rates on net income of cooperative corporations; application of zero-rated value-added tax (VAT) on agricultural, livestock, forestry, and fishery equipment; and VAT exemption on equipment directly imported by farmers and fishers. These measures are intended to enhance the competitiveness of agriculture and fisheries and to support the sustainable development of regional economies.

Choi emphasized, "As of 2024, farm household income is only 58.5% of urban worker income, and the aging rate in rural areas has reached 55.8%, further widening the urban-rural income gap and deepening the structural crisis of declining agricultural labor." He added, "This special tax measure will help farmers and ordinary citizens build assets and stabilize their incomes, while also contributing to the financial soundness of cooperatives."