The government will recognize the expenditure amount for local love gift certificates as expenditure for traditional markets, including it in the additional limit for corporate business expenses, and will also double that limit. In addition, it will lower the tax burden on self-employed individuals who have canceled their yellow umbrella insurance due to management difficulties and relax the criteria for exempting outstanding debts of small individual businesses that restarted after closing down.
On the 31st, the Ministry of Economy and Finance held a tax policy development advisory committee meeting chaired by Vice Minister Lee Hyung-il and announced the '2025 tax reform plan' containing these details.
◇ Expenditure for traditional markets expanded to 20%… Expenditure for local love gift certificates included
The government is expanding the limit for corporate business expenses for local love gift certificates to support self-employed individuals and small businesses. Business expenses refer to costs that corporations incur to generate revenue, which can be deducted from taxable income under tax law within certain limits.
The limit for business expenses is divided into a general limit determined by sales and an additional limit recognized for specific items such as cultural expenses and traditional market expenditures. Previously, only 10% of the general limit was additionally recognized for traditional market expenditures. According to the revision plan, this ratio will increase to 20%, and the usage amount of local love gift certificates will also be included.
The tax burden on self-employed individuals and small business owners who cancel their yellow umbrella insurance due to management difficulties will also be reduced. An additional income tax of 15% is imposed on the compensation received after cancellation, but previously, when the income had decreased by more than 50% compared to the average of the previous three years, a lower retirement income tax rate was applied. However, from now on, it will be expanded to those whose income has decreased by more than 20% compared to the previous three years.
The collection exception system for small individual businesses that have reopened after closing down will also be improved. Currently, it is only possible to apply if the individual has been engaged in business for over one month or has worked for over three months, but in the future, special workers such as delivery drivers and insurance planners will also be able to apply if they have worked for over three months. Additionally, the criteria for applying the collection exception will be raised from 50 million won to 80 million won.
The scope of tax reductions for livelihood startup small corporations will also be expanded. Currently, small corporations for livelihood with annual income of 80 million won or less receive a reduction of 50–100% in income tax and corporate tax for five years starting from the first taxable year in which income is generated. However, in the future, the tax reduction target will expand to corporations with annual income of 100 million won or less.
The 'good landlord tax credit', which was scheduled to end at the end of the year, will be extended for three years until the end of 2028. If real estate rental businesses lower rent for small businesses, 70% of the reduced amount will be deducted from income and corporate taxes. Rental businesses with comprehensive income exceeding 100 million won receive a deduction of up to 50%.
◇ Land that has not received business approval within five years will be exempt from the comprehensive real estate tax if there are legitimate reasons
Measures have also been prepared to protect taxpayer rights and enhance convenience. First, the criteria for excluding capital gains tax deferral have been expanded. Until now, deferral was only excluded in cases where the donor spouse had died, but it will now also include cases where direct descendants have died.
Capital gains tax deferral refers to the system for calculating capital gains tax based on the acquisition price of assets received as a gift from a spouse or direct descendant when those assets are disposed of. This is a measure to prevent tax avoidance through the sale of assets after inter-family gifting.
Exceptions for comprehensive real estate tax collection concerning land will also be newly established. Under current law, land acquired for residential construction that does not receive business approval within five years is subject to comprehensive real estate tax, but in the future, taxes will be exempted if there are legitimate reasons such as natural disasters.
Regulations related to tariffs have also been revised. The notice period for general customs investigations has been amended from 15 days before the investigation to 20 days before, and same-day notifications for exceptional investigations are now mandatory. Additionally, even if an additional tax is imposed due to failure to report in the pre-clearance process, it will be exempted if a corrected report is made within two months.
The calculation method for late payment additional tax will also be revised. Previously, additional tax was calculated daily, and any delay in the designated payment deadline by just one day would incur taxes. However, from now on, it will be restructured to a monthly basis, and if full payment is made within one month after the payment deadline, the additional tax will be exempted.
Vice Minister Lee Hyung-il noted, 'This year's tax reform plan focuses on supporting the leap to an economic powerhouse and stabilizing public livelihoods while strengthening the weakened revenue base for fiscal sustainability.' He also stated that the '2025 tax reform plan' is expected to be submitted to the National Assembly after going through the Cabinet meeting, and will be finalized through discussions in the National Assembly.