Under the Framework Plan for Tax Expenditures for the year 2014 South Korea is committed to amending the system of tax relief. This could result in the abolition of some tax incentives and taxpayers need to keep a close eye on developments as they arise. Owing to spending commitments in respect of welfare and economic innovation the government has to raise more revenue by 2015.
The new plan will therefore look at how to restructure tax incentives by conducting assessments to see to what extent the government’s goals have been met by the operation of the tax incentives. When a tax incentive expires it will only be renewed if it has passed the assessment and is seen to be effective. Also, a similar value of existing tax expenditures will need to have expired before the incentive is renewed.
Priority will be given to tax relief in sectors that create employment, attract investment from multinational companies or pursue research and development. Priority will also be given to venture capital and support for small and medium enterprises, and to tax relief for employees.
