Follow-up measures for business-friendly tax reform
Rural housing also includes fortified areas
Permission to view national tax arrears for owners of jeon and monthly rent
Two-homeowners, including houses located in Yeoncheon, Incheon, Ganghwa, and Ongjin-gun, Gyeonggi-do, will receive comprehensive real estate tax and capital gains tax benefits for single-homeowners. This is a change that occurred when houses in these areas were included in the category of rural housing, which is excluded when calculating the number of houses in the transfer tax. Starting from April, lessees living in jeonse or monthly rent with a deposit of more than 10 million won can view the landlord’s national tax arrears without a separate consent procedure. Starting this year, payment in kind for inheritance tax with cultural assets or works of art is also allowed.
On the 18th, the Ministry of Strategy and Finance announced an amendment to the enforcement ordinance following the 2022 tax reform with these contents. In addition to the business-friendly tax reform, measures to drastically reduce various tax burdens mainly borne by the middle class were accompanied.
The inclusion of houses in Ganghwa, following Yeoncheon and Ongjin, into the category of rural housing is basically an exception to the principle that the metropolitan area is not the location of rural housing. The government decided to add ‘depopulation areas and border areas in the metropolitan area’ to the scope of application for local low-cost housing, which is subject to special exceptions for the number of houses in the real estate market.
The revision of the Enforcement Decree, which allows tenants living on a monthly or monthly basis to open the amount of national tax arrears of the lessor at any tax office nationwide from the date of contract to the date of posting the lease was prepared as a follow-up measure to the ‘Villa King’ jeonse fraud case.
The amended enforcement decree is also designed to provide benefits for additional contributions to pension accounts for housing “downsizing,” in which the elderly reduce their homes and move. Currently, only up to 18 million won can be paid annually for pension savings and retirement pensions, but an additional payment limit of up to 100 million won (cumulative basis) is granted to senior households with one house. If one of the couple is over 60 years old and lives in a house with a standard market price of less than 1.2 billion won and moves to a house with a lower price, the gain from the transfer of the existing house is paid into the pension account.
Payment in kind, which enables inheritance tax to be paid as cultural assets or works of art, is allowed when the amount of inheritance tax to be paid exceeds 20 million won and the amount of inherited property exceeds the value of financial property. Items that can be paid in kind as inheritance tax are cultural properties designated and registered as tangible cultural properties or folk cultural properties under the Cultural Heritage Protection Act, and artworks such as paintings, prints, sculptures, crafts, and calligraphy. When a taxpayer who wants to pay inheritance tax in kind applies for payment in kind to the competent tax office, the tax office notifies the Ministry of Culture, Sports and Tourism.
The government also decided to raise the standard for applying a simple expense ratio for platform workers such as quick service delivery drivers and designated drivers, or small human service providers, including instructors visiting study centers, from less than 24 million won to less than 36 million won per year. The Ministry of Strategy and Finance explained that this would reduce the taxable income and thus lower the individual’s tax burden.
The stance of business-friendly tax reform was also maintained. First of all, the Enforcement Decree of the Inheritance Tax and Gift Tax Act was amended to expand transactions exempted from taxation for driving family members. In addition, domestic transactions for the purpose of export and transactions for the purpose of overseas supply of services, such as leasing of intellectual property rights, are excluded from taxation, regardless of the size of the company.
It also supports the smooth succession of family businesses. The government will ease the requirements for maintaining a family business for a recipient (inherited person) who can receive special taxation of gift tax through family business inheritance deduction from 7 years to 5 years from the date of gift. Family Business Inheritance Deduction is a system in which a part of inherited property is deducted from the taxable value when an ancestor who has operated a business for more than 10 years inherits a family business. The period of inauguration of the CEO is reduced from 5 years to 3 years.
The government amends the Enforcement Decree of the Restriction of Special Taxation Act to add a new ‘display’ to the scope of national strategic technologies (semiconductors, secondary batteries, vaccines). Active organic light emitting diode (AMOLED), micro light emitting diode (LED), and quantum dot (QD) are the targets. A 30-50% tax credit rate is applied to national strategic technology research and development (R&D) expenses.
Reporter Sejong Lee Young-joon
