On 21 July 2022, South Korea’s Ministry of Economy and Finance (MOEF) announced the tax reform plans for 2022. The aim of this plan is to enhance corporate competitiveness, reinforcement of tax support for jobs and investment, support smooth family business succession, and activation of the financial market. The main measures of the tax reform plan are:
- The maximum corporate tax rate will be lowered to 22% from the current 25%, levied on the tax base of over KRW 300 billion;
- In the case of small and medium-sized enterprises (SMEs), the current minimum tax rate of 10% is applied if the tax base is KRW 200 million won or less, but if certain conditions are met, the tax base will be expanded to KRW 500 million won and the 10% tax rate will be applied. In case of tax rate base of KRW 500 million to 20 billion for SMEs, the 10% tax rate will be applied;
- To prevent double taxation of dividends received from subsidiaries, measures to relax the share ratio requirement and increase the non-inclusion rate of gross income, expand the scope of the employment increase tax credit and significantly increase the tax credit amount;
- Deduction limitation for carried forward losses has been increased from 60% of taxable income to 80% of taxable income (100% of taxable income for SMEs);
- Introduces global minimum tax policy in accordance with OECD’s pillar two model rules.
