Income Tax Will to Be Reduced by 180,000 Won

The government plans to cut taxes next year for low salaried workers and small business owners by increasing the interval of the standard of assessment for the first time in 11 years, and the taxes will be cut ranging from 180,000 to 720,000 won annually based on workers’ wage levels or their family size.

Furthermore, 100 million won worth of the succession deduction, which occurs when small entrepreneurs give their businesses to their own children, will be increased to up to 3 billion won.

The Ministry of Finance and Economy decided in a Tax Development Committee meeting on August 22 to submit a “2007 tax revision bill” in a regular session of the National Assembly after voting for the issue at a Cabinet Council.

Accordingly, the standard of assessment, which has been applied since 1996, will be changed: income tax rate will be 8 percent for those who have less than 12 million won of annual income, 17 percent for 12-46 million won, 26 percent for 46 million-88 million won and 35 percent for more than 88 million won.

When the bill is passed and settled in the National Assembly, based on three or four person households, the annual income tax burden will be reduced by about 180,000 won for those with annual salaries worth about 40 million-60 million won; 420,000-550,000 won for those who make 70 million won a year; and 720,000 won for people who make 80-100 million won a year.

Medical treatment costs and education fees for self employed businesspeople paying taxes properly will be deducted next year so the tax burden for four family member households with an annual salary of 30 million won will be cut to 1.248 million won.

The changing inheritance deduction will apply only to those who inherit their parents’ businesses and maintain them for over 15 years.

A way to cut capital gains taxes for those who have owned more than 600 million won worth of housing for a long time will also change.

Based on the current tax system, those who own a house for more than three years or less than five years can get a 10 percent deduction of their marginal profits; those who have owned for more than 10 years can get 30 percent; and those who have owned for more than 15 years can get 45 percent when they sell a house. Next year, the rate will be 10 percent for three years’ possession and 12 percent for those who have possessed their house for four years. After five years of possessing the same house, the deduction rate will increase by three percent annually and a 45 percent deduction rate will apply to persons owning a house for more than 15 years.