The Ministry of SMEs and Startups announced that it approved amendments to the Enforcement Decree of the Framework Act on Small and Medium Enterprises to raise the standards for small and medium enterprises based on sales at a Cabinet meeting on the 26th.
The criteria for determining whether a business is a small or medium enterprise are based on two factors: the size criteria (asset, sales) and the independence criteria based on affiliation. The sales size criteria, which are based on the three-year average sales by industry, have been maintained for 10 years since they were established in 2015.
There have been voices from the field of small and medium enterprises calling for an increase in the sales criteria for small and medium enterprises due to the rapid rise in prices and the surge in production costs since COVID-19, which has led to increases in sales merely due to inflation without real growth of corporations.
In response, the Ministry of SMEs and Startups has raised the sales criteria for small and medium enterprises to a maximum of 180 billion won to reasonably adjust the criteria based on discussions with industry stakeholders, relevant ministries, academia, and experts. The upper limit of the sales criteria by industry has also been raised by 20 billion to 30 billion won from the current standard. The sales criteria for small businesses, which determine the criteria for small merchants, have been raised from a maximum of 12 billion won to 14 billion won.
On the same day, the Ministry of SMEs and Startups approved the amendment of the Enforcement Decree of the Framework Act on Small and Medium Enterprises at a Cabinet meeting. The revised decree will go into effect on September 1.
After the effective date of September 1, businesses with the settlement of account date coming in September will be judged as small and medium enterprises according to the revised sales criteria. Moreover, corporations that are subject to the suspension of graduation from small and medium enterprises due to the amendment of the enforcement decree will be granted special provisions for the suspension of graduation.
The suspension system for graduation from small and medium enterprises allows enterprises that exceed the range of small and medium enterprises due to sales expansion to be considered small and medium enterprises for five years, providing an incentive for stable growth and establishment of small and medium enterprises. This will be granted only once if they are no longer classified as small and medium enterprises.
However, in cases where corporations that are currently under suspension of graduation from small and medium enterprises due to exceeding the range of small and medium enterprises, and are reclassified as small and medium enterprises due to the raising of sales criteria, the suspension period may be terminated early but will allow for a special provision to apply for the suspension of small and medium enterprises only once when exceeding the range again in the future.
Minister Han Seong-suk said, "To resolve the issue of support for small and medium enterprises being discontinued due to increases in sales from inflation rather than growth of corporations, we have raised the standards to a reasonable level. We will work to establish a foundation for small and medium enterprises to grow stably and take a leap forward."