The Ministry of SMEs and Startups will provide corporate tax reductions of up to 100% to support promising small and medium-sized enterprises (SMEs) outside the capital region and will implement tax incentives to stimulate venture investments.
On August 7, the ministry introduced key tax reform details for small and venture businesses as part of the recently announced '2026 Tax Reform Plan.' This reform aims to enhance the growth potential of startups and venture companies, support the sustainable growth of SMEs, and promote balanced development across the country.
The ministry plans to strengthen support for promising SMEs by easing eligibility requirements for venture investments and making tax benefits permanent.
To favor local startups, the ministry will increase tax reduction rates by further categorizing regions outside the capital. For jump-up SMEs and young industry SMEs, corporate tax reductions will be enhanced. Jump-up SMEs in non-capital regions can receive income and corporate tax reductions of up to 80%, while new industry SMEs in these areas can benefit from reductions of up to 100%.
To promote venture investments, the eligibility period for tax benefits on capital gains from shares of venture investment companies will be extended from 7 years to 10 years.
Additionally, for venture companies located in areas experiencing population decline, the tax credit rate for direct investments will be increased from 5% to 7%, and eligibility requirements for investment target companies will be relaxed to stimulate regional venture investments.
To facilitate smooth business succession, a new tax benefit for third-party business succession will be established. This will reduce capital gains tax on the transfer of shares or business assets of the successor company by 20%, and income and corporate taxes for the successor company will be reduced by 10% for five years after the succession.
To ensure that SMEs can continue to invest and create jobs after growth, a gradual reduction structure for tax support will be introduced. Special tax reductions for SMEs will apply at 50% of the medium-sized enterprise reduction rate for three years after the grace period ends, and companies in the film and webtoon content production sectors will also see a 12.5% tax deduction for three years after the grace period.
For regional balanced development, the income tax reduction system for employees of SMEs, including youth, seniors, people with disabilities, and those with interrupted careers, will be amended to provide preferential treatment in terms of reduction periods and rates for employees of SMEs located in regional areas.
On August 3, the government announced the '2026 Tax Reform Plan.' In response, the Korea Federation of SMEs issued a statement saying, "The increase in R&D and investment tax credit rates for SMEs outside the capital region and the permanent exemption of capital gains tax on shares of venture investment companies are expected to contribute to the innovative growth of SMEs."
This tax reform will undergo legislative notice until mid-August and will be submitted for processing in the regular National Assembly session in early September.
Yoon Yong-seok, the First Deputy Minister of the Ministry of SMEs and Startups, emphasized, "We will continue to work closely with relevant ministries to ensure that tax support leads to corporate investment, innovation, and job creation, striving to build a growth ladder for SMEs and ventures and realize an indispensable South Korea where everyone can grow together."
* This article has been translated by AI.
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