Posted September. 02, 2008 08:58,
The corporate tax rate will be cut five percentage points and the corporate tax base, a standard based on net profit before tax, will be raised to benefit more companies.
The government, however, will delay for a year lowering corporate taxes on companies with a tax base of more than 200 million won a year and use the money to stabilize prices.
The new tax plan will gradually lower the corporate tax rate from 13 percent for those with a tax base of 100 million won or less to 10 percent and a tax base of 200 million won or less. The rate and tax base will fall from 25 percent for those with a tax base exceeding 100 million won to 20 percent for those exceeding 200 million won.
With the tax base doubling from 100 million to 200 million won, 90 percent of all corporations in the country, or around 320,000, will pay lower taxes.
○ Large Companies to get cuts in a year
With the general profit rate of companies seven percent and the net profit and the tax base coinciding with each other, companies earning three billion won in revenues and 200 million won in net profit have paid 38 million won in corporate taxes at most, but in 2010, the tax will fall to a maximum 20 million won, down 47.4 percent.
Small and mid-size companies will pay three percent less in taxes while large companies will enjoy savings of five percent, leading to criticism that larger companies will reap more benefits.
The benefits for smaller companies will expand as well. Their minimum tax rate will gradually decrease from 10 percent to seven percent, and the minimum tax rate for companies with 100 billion won as a tax base will drop from 13 percent to 10 percent. For companies with more than 100 billion won as a tax base, the rate will decrease from 15 percent to 13 percent.
Smaller companies will also see income and corporate taxes lowered 10 to 30 percent, a benefit to be extended to 2011. If they move their factories to other regions after operating for more than 10 years, they can pay transfer taxes in two-year installments over a four-year period.
The tax reduction limit will increase from three billion to 10 billion won for smaller companies whose owners pass on their businesses to their children. The reduction will rise from 20 percent to 40 percent of the amount of inherited assets to guarantee continuity in business operations.
○ R&D investment and service sector to be promoted
The government will also provide more tax assistance to R&D investment to increase R&D investment to five percent of GDP by 2012.
Corporate law will recognize companies that invest three percent of their revenues in R&D investment reserves, and if they invest in research and testing facilities, they will receive tax cuts as high as 10 percent of their invested amount.
If businesses donate R&D facilities to colleges or offer tailored industry education at universities, they will get tax credits for the cost. If they donate research funds, all of their funding expenses will be recognized.
The government will also seek measures to revive the service industry. Those who play golf at domestic golf courses have had to pay 22,200 won in individual income and education taxes, but this will be lifted at domestic courses from next month.
From next year, restaurants, construction companies and movie theaters that will open in provinces will receive a 50-percent tax break for four years from the tax year in which the first income is generated.
The government will also increase the tax reduction rate for environmental preservation facilities to 10 percent and that for energy conservation facilities to 20 percent. Individual consumption taxes will be lifted for hybrid and import cars for test and research to lay the groundwork for green growth.
The process for large-scale foreign investment will be streamlined and requirements will be specified for fees for small-scale advertising, sales and management. The government will also attract foreign talents by lowering the income tax rate for foreign workers to 15 percent, lower than Hong Kongs 16 percent.