Korea’s ruling party seeks tax cuts to aid companies to move out of Seoul area

[Photo by MK DB]

South Korea’s ruling party is seeking to reduce corporate tax rates by 5 percentage points on those that relocate their headquarters outside the Seoul metropolitan area and exempt companies from the real estate acquisition and property tax when they set up factories in non-capital areas in a bid to boost regional investments and seek balanced regional development.

According to sources from the political circle on Tuesday, Representative Ku Ja-keun of the ruling People Power Party proposed six bills to that effect, including the Special Act on Regional Investment Promotion, with 32 lawmakers listed as co-sponsors. The government is also taking steps to come up with detailed support measures in preparation for a revision of the enforcement ordinances of related laws.

The core of the bills is to boost regional investments by offering various tax benefits, such as cuts in corporate and acquisition tax rates, to companies that relocate offices outside the Seoul metropolitan area.

The restriction of special taxation act will be revised to waive acquisition tax until 2026 on real estate purchased by companies to build or expand factories in non-capital areas. The revised bill will call for the property tax to be waived for 10 years after real estate acquisition and reduced 50 percent for the next 10 years.

Furthermore, for companies that relocate their headquarters outside the Seoul metropolitan area and have a higher proportion of sales or workforce in provinces, corporate tax rates will be lowered by 5 percentage points to a range of 4 percent to 19 percent from the current range of 9 percent to 24 percent.

The tax credit rate for investment in regional facilities will also be raised by 5 percentage points to a range of 6 percent to 15 percent from the current range of 1 percent to 10 percent and for research and development (R&D) will be raised to 7 percent to 30 percent from the current 2 percent to 25 percent, respectively.