Korea to extend tax reduction period for reshoring companies to 10 years

[Image source: Gettyimagesbank]

South Korea will expand tax reduction benefits for companies that move their overseas production bases back to Korea. Furthermore, the country will double the income tax exemption limit for maternity and childcare allowances from 100,000 won ($77.72) to 200,000 won per month.

These measures were taken during a policy coordination meeting between the government and ruling People Power Party, which was organized to revamp the country’s tax law for 2023, according to the policy committee of the ruling party on Friday.

Under the measures, the government and ruling party decided to expand the income and corporate tax breaks for companies returning to Korea from the current “five-year 100 percent plus two-year 50 percent” to “seven-year 100 percent plus three-year 50 percent.” This means that the period of full income tax and corporate tax exemption for companies that return overseas production bases and other legal entities to Korea will be extended from the current five years to seven years. In addition, the half-tax reduction period, which is applied for two years after the full reduction period ends, will be extended by one year to three years. This means that the total period of income tax and corporate tax exemption for returning companies will increase to 10 years from the current seven years.

Furthermore, the government and ruling party decided to promote corporate investment and employment and alleviate the tax burden on lower and middle-income households amid high inflation and interest rates.