Dear Clients and Friends,
The Korean government announced measures to
support the businesses and individuals from the impact of the coronavirus
(COVID-19) outbreak. While the government’s package of help for businesses and
individuals will evolve over time, we summarize the key elements of the current
proposals of the government for your information for the time being as briefly
Government emergency funds to help businesses, prevent job losses, and stabilize markets in Korea
Bank of Korea (central bank in Korea) announced that it has decided to temporarily supply an unlimited amount of
liquidity to financial institutions in Korea. This new measure announced on March 26, 2020 aims to stabilize the financial market and minimize
the economic fallout from the COVID-19 outbreak. This is the first time Korea's central bank has taken such an unconventional measure. It will supply unlimited amount of liquidity
for the next three months starting April
With the global pandemic casting a
shadow on the local economy, Korea's grand 80 billion US Dollar economic relief
package aims to fend off the worst of it. It is expected to save local
businesses facing business closure because of the outbreak. Part of why small
business has suffered is known to be from the trickle-down effect from the
damage done to big business, so it is also a quick move to look after the
country's leading companies as well. The data show that in the recent two
months since Korea confirmed its very first COVID-19 case, Korea's biggest
companies have seen one third of their market capitalization simply disappear.
The package is also aimed at preventing an economic domino effect because the
loss of jobs and household income could spill into other industries and parts
of the economy. This relief package for COVID-19 is 20 times the size of the
one provided during the financial crisis of 2008.
Tax relief package for corporate income tax and indirect tax (VAT)
The Korean government unveiled a
package of tax relief measures for corporate income tax and indirect tax (VAT)
earlier this March 2020 to help support businesses and individuals affected by
COVID-19 as below.
a. Corporate Income Tax (“CIT”):
qualified corporations may apply for extension of CIT returns filing and CIT
payments thereof as much as nine (9) months.
income tax reduction rates for the qualified small and medium sized
corporations located in the designated areas shall be doubled from 15 ∼ 30%
to 30 ∼ 60%.
limitation of entertainment expenses shall be increased from 0.3% ∼0.03%
to 0.35% ∼ 0.06% of revenues.
upon the given situation, a tax audit shall be stopped or postponed.
b. Indirect tax (“VAT”):
qualified corporations may apply for extension of quarterly VAT return filing
and VAT payments thereof as much as nine (9) months.
the qualified small individual business with less than annual revenue of KRW 80
Million, VAT payments shall be reduced from 10% to 0.5 ∼ 3%.
Government subsidy for travel industry that are affected by COVID-19 pandemic for job security of their workers
To be qualified for this government subsidy, the affected
company should have implemented employment retention measures such as cessation
of business (휴업 in
Korean) or leave of absence (휴직 in
Korean) without reducing its number of workers. The eligible companies may
receive up to KRW 1,980,000 max per month and per person (KRW 66,000 per person
and per day). In addition to the implementation of employment retention
measures, companies should also meet certain requirements such as 50% increase
in inventory, reduction in production volume, sales decrease by 15% or more,
Coronavirus employment retention subsidy
help businesses from the COVID-19 outbreak, Korea is topping up a financial
support package to encourage companies to keep hold of their employees. The
extra funds amount to nearly 325 million US Dollars
raising the total financial support
fund to be more
than 405 million US Dollars. Government said
the support will be available for all industries and will be distributed
between April and June 2020. It is expected that
the subsidies would help companies trying to maintain their employment numbers
despite the challenging economic climate. It means that, even if the businesses
have to close temporarily, they will retain their workers on the books. The government said that the applications
for the subsidies have been strong across all industries. The subsidies are
expected to help companies fend off bankruptcy and avoid a sharp contraction of
jobs. The coronavirus impact is making manufacturing almost impossible. The
support will help workers sustain their wages and their spending capacity.
To encourage higher retention of
employment, 67% (large sized company) or 90% (small and medium sized company)
of employment suspension allowance paid shall be subsidized by the government
for 3 months from April to June 2020. To qualify for this government subsidy,
the employer shall submit an application together with its employment retention
plan to the government, and the employer should have been enrolled at the
unemployment insurance for its employees.
Government subsidy for statutory paid leave granted to hospitalized/quarantined workers
The government subsidy for paid leave
will be available to employers who have granted paid leave to hospitalized or
quarantined workers in accordance with the Infectious Disease Control and
Prevention Act. The amount of support is based on the daily wage of the worker
(up to KRW 130,000 per day) and employers can apply for the subsidy to the
National Pension Service.
Reduction in statutory social insurance premiums for employer and employee
Korea government is discussing to reduce
the monthly social insurance premiums and for now, for the employee whose
monthly national health insurance premium is less than the 20% in the bottom in
the scale (50% in the bottom for the designated disaster areas), 50% of monthly
national health insurance premiums for 3 months from March to May 2020 shall be
subsidized by the government for the qualified employees. Please consult with
our payroll service team if you require further review on whether your Korean
operation is eligible for this reduction program.
* * * * *
Very fortunately, the number of
confirmed patients has been sharply decreasing since last week in Korea and we
are hopeful that the situation will improve significantly and the COVID-19 can
be contained successfully within the next couple of weeks in Korea.
We are confident that we will prevail
this difficult time and all our firm members at Hanul LLC wish you and your
family the very best of health.
Please contact any of the following
individuals with any inquiries or comments.
KS Han, J W Choi, G S Sim, or S Y Lee at Tax & BPO Services
Member Crowe Global
Sindo Building, 10th Floor, 14 Teheran-ro 88-gil,
Gangnam-gu, Seoul 06179, Korea
TEL: (82)(2) 316-6600 FAX: (82)(2)
(You may find this newsletter and other items of
interest at http://www.crowe.kr)