Government plans to fully exempt tax for childbirth subsidies companies give to their employees

President Yoon Seok-yul speaks at a public discussion on “Korea Leaping Forward with the Power of Youth!” at ibex studio in Gwangmyeong, Gyeonggi Province, on Friday. By Kim Chang-gil

The government is planning to exempt tax for all childbirth subsidies paid by companies to employees who have given birth for less than two years. This is an extraordinary tax benefit that the government promised to ease the tax burden that hinders the payment of maternity benefits. However, it is unclear whether the policy will be as effective as the government hopes, given that the number of companies and workers who can benefit is limited to large companies, and the government has pulled out the tax cut card again amid a massive tax revenue shortfall.

"The maternity benefits paid by companies to their workers will be fully tax exempt, easing the burden on companies and allowing workers to receive more benefits," President Yoon Suk-yeol said at the 17th public debate on March 5.

Earlier, some companies, including Booyoung Group, paid their employees up to 100 million won per child as maternity support. The government announced its policy to fully exempt tax for the childbirth subsidies after it was pointed out that the tax imposed on them was excessive.

The government plans to revise the Income Tax Act to consider maternity subsidies paid within two years of childbirth as earned income and fully tax exempt up to two times per child, without a limit. This will also reduce the corporate tax burden on companies as maternity benefits will be recognized as labor costs.

For example, if a worker with an annual salary of 50 million won receives 100 million won in maternity support from a company, she previously had to pay about 27.5 million won in labor income tax. However, if the maternity support is tax-free, she will only have to pay 2.5 million won in taxes, down from 25 million won.

The tax exemption will be retroactively applied to childbirth subsidies for children born after 2021. Also from next year, the government will introduce a system that pays child support first when single parents raising children alone do not receive child support from non-custodians, and the cost will be recovered from non-custodians.

In addition, the number of people eligible for national scholarships, currently 1 million, will be increased to 1.5 million, and the number of people eligible for work scholarships, currently 120,000, will be increased to 200,000 next year. Facility fees, such as swimming pools and gyms, as well as cultural expenses, will be eligible for income deductions.

※This article has undergone review by a professional translator after being translated by an AI translation tool.