Tax Deduction For Cash Purchases Over 5000 Won

Starting the second half of next year, it will be possible to receive an income tax deduction for cash purchases of items costing more than 5000 won, as is the case for purchases made with a credit card.

In addition, in order to receive a tax deduction on donations of over 2 million won to a temple, church, or social organization, a floppy disk containing the receipt statement for the donation must be submitted to the National Tax Service (NTS).

Furthermore, farmers with land exceeding a certain size who run lodging pensions will not be required to pay taxes on annual incomes of less than 12 million won.

The Ministry of Finance and Economy announced on November 26 that it would prepare a “2003 Revised Bill of Tax Law Enforcement Ordinance” and put into effect it next month with the ratification of vice-ministers and the Cabinet.

The ministry plans to introduce a “cash receipt system” during the second half of next year in order to expose the taxable revenue of self-employed individuals. Under the new system, 5000 won is the minimum expenditure required for an income tax deduction.

According to the system, the annual purchase records of those buying products or services exceeding 5000 won will be sent to the NTS through a special device set up at stores, allowing the buyers to receive a tax deduction at the end of the year. The maximum amount of deduction will be 20 percent of the expenses exceeding 10 percent of annual salary.

Moreover, to address concerns that many receive tax deductions by fabricating receipts for donations and medical treatments, such claims over 2 million won will be required to submit a government-provided floppy disk containing their receipt statements to the NTS. In the beginning of this year, 4.26 million people (2.93 million for donation, 1.33 million for medical treatment) received tax deductions and the amount deducted reached 5.42 trillion won (3.41 trillion for donation, 2.1 trillion for medical expenses).

In addition, the ministry plans to reduce the tax burden for those running lodging pensions by adding lodging, food sales, manufacture of indigenous products, and production of traditional tea to the tax-exempted additional income sources of farmhouses.

As for the 210,000 self-employed people with more than one employee, the ministry approved health insurance fees for such individuals as necessary expenses, thereby allowing a tax deduction that will total roughly 20 billion won. Currently, only health insurance costs an employer pays for his employees is deductable from income tax, and the employer himself receives no tax deduction for his own health insurance payments.

The tax exemption limit for food expenses that corporations pay for their employees will increase from the current 50,000 won to 100,000 won. It is expected that employee wages will increase in step with the tax deductions received by corporations.

The ministry also decided to levy a new value added tax on marriage consulting companies, such as Duo, naming and fortune-telling businesses, bond collecting companies, and credit investigation businesses, which had not formerly been subject to a value added tax.

The Ministry of Finance and Economy said that this revision of the tax ordinance will create tax deductions of 69.1 billion won.