The Ministry of Strategy and Finance of Korea (Rep.) approved the Tax Revision Bill 2013 on 26 September 2013 with various changes. The Tax Revision Bill 2013 will mostly take effect from 1 January 2014.

According to the approved bill receipts will be required for cash transactions whose value exceeds KRW 100,000. A tax credit of 15% will be allowed for charitable donations of up to KRW 30 million and the rate will be 30% for amounts exceeding KRW 30 million. Businesses employing socially vulnerable and physically disabled persons will be exempt from tax for 3 years and will receive a 50% tax reduction for the following 2 years.

The tax deduction for corporate R&D reserves will be removed. Additionally, training and overseas education costs will no longer be tax deductible. Corporate inheritance tax credits will be made available to companies with annual revenues of KRW 300 billion or less, while punitive tax rates for not keeping the same businesses for 10 years will be eased.

Under the new method, individuals with earning up to KRW 55 million a year will not be subject to an increase in tax liability, while those earning between KRW 55 million and KRW 70 million will suffer from a tax increase of a minimum of KRW 20,000-30,000. There will be a progressive tax increase for those earning more than KRW 70 million a year.

Individuals with an annual income of up to KRW 55 million will receive a tax reduction of up to KRW 660,000, while individuals earning less than KRW 70 million a year will receive tax reductions of up to KRW 630,000. Individuals earning more than KRW 70 million will receive a maximum tax deduction of KRW 500,000. The current tax credit rates of 55% on income taxes of up to KRW 500,000, and 30% on income taxes of more than KRW 500,000 will remain.

The earned income tax credit will also be expanded and a child tax credit (KRW 500,000 per child) will be introduced in 2015, whereby single parents and basic social security recipients will be eligible for earned income tax credit, and the income ceilings for both credits will be increased.

Government employees will be subject to income tax on their allowances from 2015.