The South Korean government is expected to replace tax benefits previously granted to newlyweds with direct subsidies to encourage marriage. The housing savings plan, which has been periodically reviewed for potential elimination, is likely to be made a permanent program to ensure housing stability for low-income households. The family business inheritance tax exemption will undergo a comprehensive redesign for the first time in 30 years to prevent circumvention of regulations.
According to government sources, the tax reform plan to be announced in early August will focus on 'livelihood taxes' for citizens and vulnerable groups, as well as 'growth taxes' to support economic development.
The most significant change will be the transition of the marriage tax credit into a subsidy. Currently, couples who register their marriage can receive a tax credit of up to 1 million won, but those with low incomes who do not pay taxes miss out on this benefit and must wait until year-end tax settlements. The government is also considering converting tax credits for childbirth, adoption, infertility treatments, and medical expenses for children under six into cash support.
The housing savings plan, represented by the housing savings income deduction, is expected to be made permanent by eliminating its sunset provision. This program allows heads of households without homes to deduct 40% of their contributions, up to 3 million won annually, to support housing stability for low-income families.
For young workers in small businesses, there are currently tax reductions of 90% on income tax for the first five years of employment, and 70% for seniors and people with disabilities for three years. Additional benefits for workers outside the capital region are anticipated. Currently, young startups in non-capital areas receive up to 100% tax reductions on income and corporate taxes for five years, and further measures are expected.
The core of the growth tax reform is the domestic production promotion tax system, referred to as the 'Korean version of the Inflation Reduction Act (IRA).' This initiative will provide tax incentives for domestic production and investment in strategic industries such as semiconductors and secondary batteries, along with the establishment of productive financial ISAs and expanded tax credits for R&D and investment in advanced industries.
Tax incentives for startups in new industries such as AI, robotics, and biotechnology will be increased, and advanced safety technologies may be added to the list of new growth and core technologies. Additional tax incentives are also being discussed for companies that invest, hire, or conduct R&D in non-capital regions as part of the '5 Extremes and 3 Specialties' initiative.
The family business inheritance tax exemption, introduced in 1997, will be reformed to prevent circumvention by narrowing the scope of eligible industries and land, while strengthening minimum management periods and post-management requirements. Industries that are at risk of being misused as real estate succession tools will be excluded from eligibility, and the evaluation method for inheritance and gift taxes on low PBR listed stocks will also be revised.
To prevent intentional 'stock price suppression' by major shareholders, the evaluation method for inheritance and gift taxes on listed stocks will be reformed. A proposal is being discussed to reflect asset and income values in the evaluation of stocks of listed companies with a price-to-book ratio (PBR) below 0.8. The government's stance on the taxation of virtual assets, which has recently raised the need for a fourth extension, is also expected to be clarified during the announcement of the tax reform plan.
The government plans to finalize the restructuring of tax expenditures and announce the complete tax reform plan in early August.
According to government sources, the tax reform plan to be announced in early August will focus on 'livelihood taxes' for citizens and vulnerable groups, as well as 'growth taxes' to support economic development.
The most significant change will be the transition of the marriage tax credit into a subsidy. Currently, couples who register their marriage can receive a tax credit of up to 1 million won, but those with low incomes who do not pay taxes miss out on this benefit and must wait until year-end tax settlements. The government is also considering converting tax credits for childbirth, adoption, infertility treatments, and medical expenses for children under six into cash support.
The housing savings plan, represented by the housing savings income deduction, is expected to be made permanent by eliminating its sunset provision. This program allows heads of households without homes to deduct 40% of their contributions, up to 3 million won annually, to support housing stability for low-income families.
For young workers in small businesses, there are currently tax reductions of 90% on income tax for the first five years of employment, and 70% for seniors and people with disabilities for three years. Additional benefits for workers outside the capital region are anticipated. Currently, young startups in non-capital areas receive up to 100% tax reductions on income and corporate taxes for five years, and further measures are expected.
The core of the growth tax reform is the domestic production promotion tax system, referred to as the 'Korean version of the Inflation Reduction Act (IRA).' This initiative will provide tax incentives for domestic production and investment in strategic industries such as semiconductors and secondary batteries, along with the establishment of productive financial ISAs and expanded tax credits for R&D and investment in advanced industries.
Tax incentives for startups in new industries such as AI, robotics, and biotechnology will be increased, and advanced safety technologies may be added to the list of new growth and core technologies. Additional tax incentives are also being discussed for companies that invest, hire, or conduct R&D in non-capital regions as part of the '5 Extremes and 3 Specialties' initiative.
The family business inheritance tax exemption, introduced in 1997, will be reformed to prevent circumvention by narrowing the scope of eligible industries and land, while strengthening minimum management periods and post-management requirements. Industries that are at risk of being misused as real estate succession tools will be excluded from eligibility, and the evaluation method for inheritance and gift taxes on low PBR listed stocks will also be revised.
To prevent intentional 'stock price suppression' by major shareholders, the evaluation method for inheritance and gift taxes on listed stocks will be reformed. A proposal is being discussed to reflect asset and income values in the evaluation of stocks of listed companies with a price-to-book ratio (PBR) below 0.8. The government's stance on the taxation of virtual assets, which has recently raised the need for a fourth extension, is also expected to be clarified during the announcement of the tax reform plan.
The government plans to finalize the restructuring of tax expenditures and announce the complete tax reform plan in early August.
* This article has been translated by AI.
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