2013 Tax Law Changes
Amendments to the Proposed Tax Law Changes in 2013
Several amendments have been made to the proposed tax law changes released by the Ministry of Strategy and Finance in August 2012 after gathering opinions through pre-announcement of draft bills and discussions with other governmental bodies. The amendments will become effective from January 2013 if those amendments are sanctioned by the National Assembly. We summarized below some of the major amendments made to the proposed tax law changes in 2013 to keep you updated.
■ R&D tax credit formula – changes in meaning of immediately preceding year
(Article 10 of the Special Tax Treatment Control Law (“STTCL”))
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Original proposal |
Amended proposal |
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□Tax credit amounts = (R&D expenses incurred in the current year –R&D expenses incurred inimmediately preceding year)× 40% (50%for small and medium-sized company) |
□“R&D expenses incurred in the immediately preceding year” will be changed as below. Annual average R&D expenses incurred in the precedingfouryears(For 2012)→Annual average R&D expenses incurred in the precedingthreeyears(For 2013)→Annual average R&D expenses incurred in the precedingtwoyears(For 2014)→R&D expenses incurred in immediately preceding year(From 2015) |
■ Changes in conditions for income tax deduction on long-term fund
(Article 91-15 of the STTCL)
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Original proposal |
Amended proposal |
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□Individuals eligible for income tax deduction on long-term fund : - Employee with payroll income of KRW 50 million or less -Individual businessmanwith total income of KRW 35 million or less |
□Changes in conditions for income tax deduction on long-term fund : ①If determine eligibility as of the initial join date :Employee with payroll income ofKRW 50 million or less, individual businessman with total income of KRW 35 million or less ②If determine eligibility as of the year the deduction is actually to be applied (during the tax year concerned): Employee with payroll income of KRW 80 million or less, individual businessman with total income of KRW 60 million or less |
■ Cancellation of the proposed retirement income deduction and maintaining current provision (Article 48 of the Individual Income Tax Law)
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Original proposal |
Amended proposal |
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□Proposed retirement income deduction ①Flat deduction rate: 50% of retirement income ②Deduction by the length of service:abolished |
□Maintaining current retirement income deduction ①Flat deduction rate: 40% of retirement income ②Deduction by the length of service:remains unchanged |
■ Declaration of overseas financial accounts – changes in computation method of maximum balance threshold amounts (i.e., KRW 1 billion)
(Article 34 of the International Tax Coordination Law)
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Original proposal |
Amended proposal |
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□ Sum up balances of all overseas financial accounts as of the end of every quarter (effective from January 1, 2012) |
□ Sum up balances of all overseas financial accounts as of the end of every month (effective from January 1, 2013) |