100% tax benefits to be offered for U-turn companies

The income tax and corporate tax break duration for "U-turn companies" that have advanced overseas but return to Korea will increase from seven years to 10 years. The limit of income tax exemption for workers' maternity and childcare allowances will also go up from 100,000 won to 200,000 won per month.

The People’s Power Party Policy Committee announced on Friday that the 2023 Tax Law Amendment Bill was confirmed at a working-level meeting two days ago. “The basic direction of next year’s tax law amendment bill has been set to boost economic vitality, stabilize the people’s livelihood, and prepare for the future," the government and the ruling party said. "It will promote corporate investment and employment and ease the tax burden of the working class and middle class under high inflation and high-interest rates.”

First, the government and the ruling party decided to expand the income tax and corporate tax breaks for businesses returning to Korea from the current ‘5 years 100% + 2 years 50%’ to ‘7 years 100% + 3 years 50%.’ Rep. Park Dae-chool, the chairman of the Policy Committee, emphasized at the consultation, “For the manufacturing industry, which is the backbone of our economy, to thrive again and create many quality jobs, we need to increase tax support for the return of companies that have advanced overseas.”

This decision is considered part of the reshoring policies to promote the U-turn of domestic companies that have moved their manufacturing bases to China and Southeast Asia. In the meantime, there have been voices in the industry that tax support should be expanded for companies returning to Korea as more companies leave China due to high production costs and government regulations and intensifying tensions between the U.S. and China.


Na-Ri Shin journari@donga.com