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Increased capital income tax for people with multiple dwellings in the area subject to adjustment and a requirement of a period of stay was added to the special deduction for long-term tenure
Establishment of an integrated investment tax credit, collectively extending the period of transfer and deduction of the tax credit to 10 years under the Special Law
Special case of accelerated amortization for investment in facilities, applied for one year until the end of next year
Deduction period for transferring taxes abroad, extended from 5 to 10 years … Deduction allowance for the monthly amount not deducted
Starting next year, the comprehensive real estate tax rate for individuals with multiple households and corporate housing and the capital gains tax rate for individuals with multiple households in the area subject to adjustment will increase significantly. In particular, when calculating the number of houses for capital gains tax, the right of sale is also included and the requirement of a period of residence is added to the special deduction for long-term ownership of a home, a house .
The support measures for companies are also notable, such as the establishment of the integrated investment tax credit, the extension of the transfer deduction period for all tax credits under the Law of Restriction of Special Taxes to 10 years, and the application of a special case for a limited time of one year for the accelerated amortization of the investment in facilities.
On the 28th, the Ministry of Strategy and Finance published a brochure entitled ‘Systems that will change from 2021’, which summarizes the system and regulations of each ministry that will change from next year.
First, it will further increase the comprehensive real estate tax rate for people with multiple households and corporate housing. First, the tax rate for people with two or fewer houses increases from 0.1 to 0.3 percentage points. Depending on the tax base, the current tax rate of 0.5% to 2.7% increases from 0.6% to 3.0%. A flat tax rate of 3.0% applies to corporations with two houses or less.
For people with three or more houses or two houses in the area subject to adjustment, the tax rate rises from 0.6% to 2.8% points. Depending on the tax base, it goes from 0.6% to 3.2%, going from 1.2% to 6.0%. A flat tax rate of 6% applies to corporations with more than 3 houses or 2 houses in the area subject to adjustment.
The upper limit for itemized charges is also raised. The application of the upper limit to corporate housing sub-bills will be abolished and the upper limit for sub-deductible payments for 2 owners in areas subject to individual adjustment will be increased from 200% to 300%. In particular, the global property tax deduction of KRW 600 million for business-owned housing will be abolished.
However, the limits of the tax deduction rate and the combined deduction rate for the elderly who own a home and a house will be raised to reduce the burden on actual residents. Consequently, the deduction rate for people aged 60 and over increases by 10% p for age. Those over 60 to 65 years increased from 10% to 20%, those over 65 to 70, 20% to 30% and those over 70 30% to 40%. The long-term holding deduction and the combined deduction will also increase from 70% to 80%.
The capital gains tax is also reinforced. First, beginning next June, the capital gains tax rate on homes held for less than two years will increase (including the right to move and sell for partners). For houses maintained for less than a year, 40% to 70% above, and for houses maintained for less than one or two years, a transfer tax rate of 60% of the previous base rate applies. In particular, even if the right to pre-sale is maintained for more than two years, a hefty tax rate of 60% applies.
The capital gains tax rate will also increase for people with multiple dwellings in the area subject to adjustment. The basic tax rate + 20% p is applied for 2 houses and 3 or more houses the basic tax rate + 30% p.
In particular, newly acquired sales rights as of January 1 of the next year are included in the number of homes when determining whether there is a single owner in a home or a multiple owner in the area subject to adjustment.
Also, when a corporation transfers a home, the additional tax rate increases from 10% to 20% in addition to the corporate tax rate (10-25%). The additional tax rate on the transfer also applies to the right to acquire a house owned by a corporation (right to move as a member of a union, right to sell in lots).
In addition, the period of residence is in addition to the requirements for applying the special long-term deduction for single-family dwelling (actual transaction greater than 900 million won). The deduction rate, which was 8% per year during the holding period, will be adjusted to the ‘4% retention period + 4% residence period’ of houses transferred after January 1 of the next year.
On the other hand, the corporate support tax system will be strengthened to overcome Crown 19 and support economic vitality.
First, an integrated investment tax credit will be established. Consequently, the investment tax credit for nine specific lines and the investment tax credit for SMEs are integrated. The key to the integrated investment tax credit is the expansion of assets subject to fiscal support, incentives for investment growth, and preferential treatment for investments related to new growth technologies.
It applies from those who declare income tax and corporate tax after January 1, 2021, but for investments in 2020 and 2021, companies can choose the most advantageous between the integrated investment tax credit and the tax credit investment for existing specific facilities.
In addition, under the Excise Tax Restriction Act, the transfer deduction period for all tax credits is extended to 10 years. Currently, the deductions are extended for 5 years, except for some tax deductions for R&D expenses for new growth source technologies, but the carry-over deduction period has been extended to 10 years for all tax deductions collectively.
The special case of accelerated depreciation for investment in facilities applies for one year until the end of next year. The useful lives reported within the range of 50% (large companies) and 75% (medium and small and medium companies) of the standard useful life apply.
Transfer earnings are not taxable when investing in materials, parts and equipment for SMEs, such as venture capital. It is subject to acquisitions as investments from January 1 of next year to December 31, 2022.
The mutual benefit cooperation and investment promotion tax system is redesigned and the application period is extended by two years. The corporate income share including investment will be adjusted from 65% to 70%, and the wage increase target for regular workers will be expanded from 70 million won to 80 million won in total salary. The carry-over period for excess reflux also increases from 1 to 2 years.
In addition, in order to reduce the burden of double taxation of domestic companies in foreign markets, which are in trouble due to the Corona 19 crisis, the period for the carry-over of foreign tax payments was extended from 5 to 10 years, allowing the inclusion of deductibles of the amount not deducted. Consequently, if the amount of foreign tax paid that has not been deducted remains during the carry-over deduction period (10 years), it can be included as a deductible in the year following the end of the carry-over deduction period.
In addition, fiscal support will be established for New Deal Infrastructure Fund investors and investors who have invested in investment loan funds under the Private Investment in Social Infrastructure Act.
Investors in mutual loan funds pay taxes separately at a rate of 14% on dividend income from the KRW 100 million cap, and investors in New Deal infrastructure funds pay taxes at a rate of 9% from the limit of KRW 200 million.
