The government will cut income and corporate taxes by up to 100% for new small and midsize corporations that launch in the provinces, and expand the age-of-firm standard for corporations eligible for venture investment tax incentives from within 7 years of founding to within 10 years. It will also introduce a special tax measure to support small and midsize corporations that have difficulty finding a family successor.
The Ministry of SMEs and Startups on the 7th announced key measures for the small and venture corporation sector in the "2026 tax reform plan." The plan focuses on expanding growth engines for startups and venture corporations and supporting the sustained growth of small and midsize corporations and balanced regional development.
First, the system for tax reductions for startup small and midsize corporations will be overhauled to strengthen benefits for launching outside the capital area. The non-capital regions will be subdivided by area to raise reduction rates, and support will be expanded for promising corporations such as scale-up small and midsize corporations and youth new-industry small and midsize corporations.
Scale-up small and midsize corporations launched in non-capital regions can receive income and corporate tax cuts of up to 80%, depending on the area. New-industry small and midsize corporations in non-capital regions will be eligible for reductions of up to 100%.
Tax support to spur venture investment will also be expanded. The age-of-firm standard for portfolio corporations whose stock capital gains are eligible for reductions for venture capital firms and others will be eased from within 7 years of founding to within 10 years. The sunset for related special taxation, which had been set to end by the end of 2028, will also be eliminated and converted into a permanent system.
When a corporation makes a direct equity investment in a venture corporation located in a depopulated area or an area of depopulation concern in the provinces, the tax credit rate will be raised from the current 5% to 7%. The age-of-firm standard for investee corporations will also be eased to draw more regional venture investment. Depopulated areas will be eligible for support even if they are in the capital region.
A new system will also be introduced to ease the tax burden when passing a small and midsize corporation to a third party outside the family. When transferring the shares or equity stakes of the corporation subject to succession, or business-use assets, capital gains tax will be cut by 20%, and for the corporation that takes over the business, income and corporate taxes will be cut by 10% for five years after succession. The plan is to broaden succession options for small and midsize corporations without family successors.
The burden of losing tax benefits all at once after a small and midsize corporation grows in size will also be eased. For the special tax reduction for small and midsize corporations, after the grace period ends, 50% of the medium-sized corporation reduction rate will be applied for three years. For video and webtoon content production corporations, an income and corporate tax credit rate of 12.5% will be applied for three years after the grace period ends.
Support will also be strengthened to ease labor shortages at regional small and midsize corporations. The system reducing earned income tax for employees hired by small and midsize corporations, targeting youth, older adults, people with disabilities and workers who left the workforce, will be revamped to apply longer reduction periods and higher reduction rates for employees of small and midsize corporations located in the provinces.
In addition, the system was refined to encourage safety facility investment by small and midsize corporations. Safety facilities such as those for preventing industrial accidents and fires will be added to the special depreciation for facility investment assets, and the reported useful life will be applied within 50% of the standard useful life.
The government plans to preannounce the legislation for the tax reform plan by midmonth and submit it to the regular National Assembly early next month.
No Yong-seok, first vice minister of the Ministry of SMEs and Startups (MSS), said, "This tax system reform plan focuses on easing the management burden on small and midsize corporations and expanding innovative growth for startups and venture corporations, while building a growth ladder that allows small and midsize corporations to leap forward even after growth," and added, "We will continue to work with related ministries so that tax support can lead to investment, innovation and job creation by corporations."