S. Korea to extend tax relief on passenger vehicles by another 6 months

[Photo by Lee Chung-woo]

South Korea is extending a temporary 30 percent cut in individual consumption tax on passenger vehicles for another six months until the end of December, putting the stimuli grant for total 18 months long.

The Ministry of Economy and Finance said on Tuesday that it approved the amendment to the enforcement decree during a Cabinet meeting.

As part of efforts to boost consumption and support the local auto industry, the government has been offering a 30 percent cut in sales tax on domestic car purchases to 3.5 percent. A cut in consumption tax also lowers education tax and value-added tax.

Maximum benefit from the tax cut has been set at 1 million won ($882). The incentive was in place for six months from July last year to stimulate consumption amid Covid-19 outbreak and was extended twice.

An individual that buys a passenger vehicle will be able to receive up to 1.43 million won in benefit including 1 million won in individual consumption tax, 300,000 won in education tax, and 130,000 won in value-added tax.

An individual will be able to seek total 750,000 won in tax benefits when buying a mid-size passenger vehicle priced at 35 million won.

The government expected the extension will help boost domestic auto sales and overall consumption, paving the way for an economic recovery in the second half.

Average monthly auto sales reached 140,000 units after the 30 percent tax cut in 2015, 8.5 percent higher than the period without the relief, the government said.

The change will be enforced upon presidential approval.

[¨Ï Maeil Business Newspaper & mk.co.kr, All rights reserved]