Korean SMEs call for tax reform for family business succession

[Photo by Han Joo-hyung]

South Korea’s small and medium-sized enterprises (SMEs) held a press conference at the Korea Federation of SMEs (KBIZ) in Yeouido, Seoul, on Tuesday, calling for the swift passage of the three major items on their wish list in the National Assembly to revitalize family business succession.

The three wishes include expanding the 10 percent gift tax rate for the low-rate bracket from 6 billion won ($4.66 million) to 30 billion won; extending the deferred payment period for gift taxes from 5 years to 20 years; and easing or abolishing the change in industry requirements.

The entrepreneurs who attended the press conference expressed concern, saying they would have no choice but to consider closing their businesses if slapped with excessive taxes on inheritance and gifts. A SME representative cited a survey in which 52 percent of respondents said that if passing down their businesses is not possible, they will consider closing or selling them, emphasizing the current situation where excessive penalties are imposed on family business succession.

“More than 80 percent of CEOs who have been running companies for more than 30 years are in their 60s, and more than 30 percent are in their 70s,” an SME CEO said. “If it is difficult to pass this wish list under the current National Assembly, I hope the next National Assembly will make sure to do it. ”

Meanwhile, the draft tax revision bill to revitalize family business succession is currently under discussion in the National Assembly’s Strategy and Finance Committee, but given the body’s timetable, it is unlikely that the bill will be passed in the current National Assembly.