Welcome to the high-level summary of Covid-19 related actions by the South Korean Government. The details and links below have been split between “Tax Filings Affected”, “Government Employee Wages Benefits Programs” and “Government Loan and Support Programs”; and are simply extracts from the more detailed information available on the websites of the South Korean Praxity Participant firms’ websites, links to which are available at the bottom of this page. Praxity Participant Firms in South Korea are Mazars and Dasan Accounting Corporation.
Tax Filing Affected
VAT and Indirect Tax Measures
Reduction of VAT for small business (2020): For 2020, only small individual business, i.e. with sales under KRW 80 million (excluding real estate, bar, etc.) are allowed to apply simplified calculation method.
Exemption for simplified taxable persons (2020): Only simplified taxable person – KRW 48 million annual sales (vs. KRW 30 million annual sales).
Corporate Income Tax Measures
Reduction of income tax and corporate income tax for disaster areas (2020): Both individual business and legal entities. Conditions: 1) SMEs (excl. real estate, bar, etc.) and 2) disaster area of the infectious disease (Daegu, Gyeongsan, Bonghwa and Cheongdo). Tax reduction: 60% for small enterprise and 30% for medium enterprise. No special rural development tax on the reduced amount.
Extension for tax filing and payment deadline (up to 9 months): For companies if there are “exceptional circumstances”. Other cases:
- For special disaster zone: 1 month.
- Businesses in tourism, travel business, wholesale, retail, etc. with infected employees, visited by infected person, China-trading SMEs, tax payers with business disruption from factories in China. Application 3 days at least before the tax return date.
Extension for payment deadline of local taxes up to 1 year: In case of infection case, quarantine impact and closure. Upon approval by the local gov’t tax office.
Rental business operators providing rent reduction to commercial stores: Rate reduction AND no increase of rent at the end of the year. Income tax deduction of 50% of the rent decrease for the 1st semester 2020. Increase of the limit of deduction for entertainment expenses for 2020 entertainment expenses.
80% tax deduction rates for payments with personal credit/debit card: April 1 to July 31, 2020 purchases by credit/debit card. 80% uniform deduction rates (regardless of method of payment).
Special consumption tax (“SCT”) reduction: For purchasing vehicles from March 1 to June 30, 2020. Reduction of SCT by 70% (with a cap of KRW 1 million). Revised 2020 Tax Bill Main components:
- Integrations and simplification of investment tax credit: New Investment Tax Credit
- Extension of tax credit carried forward period prescribed in restriction of special taxation act
- Extension of foreign tax payment deduction carry-over period
- Extension of NOL Carry-Over Period
- Extension of application deadline for SME special tax reduction (restriction of special taxation act)
- Support for SME’s housing
- Relief of obligation to maintain operation records for used for business vehicles.
- Adjustment of the carryover deduction method for business vehicles
- Increase of tax limit for entertainment expenses.
- Relief of Capitalization for Small Repair Costs
- Revised Method of Deducting Donation Carryover
- Change in scope of Bad Debt Allowance
- Extended Due Date for Submission of International Transaction Related Data
Government Employee Wages Benefits Programs
Employee retention subsidy Eligibility:
- In case of *management difficulties (*Management difficulties criteria is detailed by Ministry of Employment and Labor) leading to suspending/closing temporarily the business (휴업)
- Requesting employees to take leaves due to the decrease of business
- All industries for 3 months (April to June)
- Submission of employment retention plan
- Monthly submission Impact: Support up to 90% of salary allowances (salary allowances equal 70% of average wage) with a maximum of KRW 66,000 per day and per person Contact: Ministry of Employment and Labor (Application: Employment Insurance Website)
Subsidy for Work & Life balance (measure available before the covid19 outbreak) Eligibility:
- Companies that have introduced work & life balance system for a better Work & Life balance, such as remote working system or flexible hour system.
- Maximum 30% of employees Impact:
- Subsidy up to KRW 5.2 million per person per year (only for 1 year)
- No retroactive support
- Some IT system fee support is also possible Contact: Ministry of Employment and Labor (Application: Employment Insurance Website)
Labor Standard Act Revision Plan (effective date is April 6, 2021): new flexible working system with a unit period into 6 months
- The approved bill increases the flexibility of working hour management by extending the unit period from the current 3 months to a maximum of 6 months and relaxing the requirement of pre-determining working hours.
- Also, workers’ health damage and loss of wages according to an extension of the unit period can be prevented by regulating an 11-hour continuous break system between working days and mandatory notification of wage protection plan.
- Effective 3 months after proclamation for businesses with more than 50 employees and effective from 1st July 2021 for businesses with more than 5 and less than 50 employees.
Government Loan and Support Programs
Tax reductions for disaster areas Reduction of income tax and corporate income tax for disaster areas (2020)
- Eligibility: Both individual business and legal entities. Conditions: SMEs (excl. real estate, bar, etc.) and disaster area of the infectious disease (Daegu, Gyeong- san, Bonghwa and Cheongdo)
- Tax Impact: Tax reduction: 60% for small size enterprise and 30% for medium size enterprise - No special rural development tax on the reduced amount
Tax reductions for individuals & Individual businesses
Reduction of VAT for small business (2020)
- Eligibility: For 2020, only small individual business, i.e. with sales under KRW 80 million (excluding real estate, bar, etc.)
- Tax Impact: Allowed to apply simplified calculation method
Tax exemption for simplified taxable persons (2020)
- Eligibility: Simplified taxable persons with annual sales below KRW 48 Million
- Tax Impact: KRW 48 million annual sales (vs. KRW 30 million annual sales)
Double tax deduction rates for payments with personal credit/debit card
- Eligibility: March 1 to June 30, 2020 purchases by credit/debit card
- Tax Impact: Double deduction rates
Special consumption tax (“SCT”) reduction
- Eligibility: For purchasing vehicles from March 1 to June 30, 2020
- Tax Impact: Reduction of SCT by 70% (with a cap of KRW 1 million)
Tax reductions for companies Rental business operators
providing rent reduction to commercial stores
- Eligibility: Rental fee reduction
- Tax Impact: Income tax deduction of 50% of the rent decrease for the 1st semester 2020
Increase of the limit of deduction for entertainment expenses
- Eligibility: For 2020 entertainment expenses
- Tax Impact: Increase of limits, based on revenue
Links to Our Member Firms
Further Covid-19 advice
The information contained herein on Covid-19 government measures within the G8, consists solely of information that can be found on the websites of one or more Praxity Participant firms, and has not been written, modified or verified by Praxity, it’s staff, officers or directors.