“South Korea plans on cutting corporate and income taxes in a proposal to motivate companies to increase investment and reduce the tax pressure on people troubled by high inflation”, the finance ministry said.
This is the first time in 15 years that the South Korea government has pushed to cut income taxes to benefit middle-and low-income people.
To encourage companies to invest and generate more jobs, South Korea plans to reduce the maximum rate of corporate tax to 22% from 25%.
Importance of the tax cut in Korea
- To revive the stock market that has slumped nearly 20% so far this year, the South Korea government proposed to exempt capital gains taxes on retail investments, except for holdings worth more than 10 billion won in any one stock.
- One of the main goals of this tax cut is to revise tax codes to fit into the global standards, and to revitalize the Korean market.
- A maximum corporate tax rate of 22% in South Korea would put it in equality with the average of countries in the Organization for Economic Cooperation and Development, which the ministry said will end up profiting “shareholders through dividends, and consumers through lower prices of products and services.”
- With the tax cut, the South Korea government plans on helping companies expand investment and create jobs.
- In another fundamental element of the tax reform, South Korea plans to change the comprehensive real estate holding tax scheme by reducing the tax rate and raising the tax base.
- Among other purposes to support business activities, the tax deduction rate for capital investment in important technology sectors, will be raised to 8% from 6% for big corporations, according to the plan.
- Taxes on foreigners’ income from investments in South Korea’s treasury bonds and monetary stabilization bonds will be scrapped as well, a move seen to bring South Korea closer to inclusion in the FTSE World Government Bond Index.
- The government will also reduce the double taxation burden of businesses operating at home and oversea in an endeavor to prevent them from setting aside overseas income in foreign countries.
South Korea wants to attract more international talents
The government also disclosed benefits for foreign employees to attract more top talent to the country. While foreign workers enjoy tax reductions for the first five years from the date they begin work here, the government will eliminate the period limit under the new measures.
Damalion helps international investors to register companies on a global scale. If you want to set up your company in South Korea, please contact your Damalion expert now.
