Corporate Tax Rate to Be Lowered to 20%
By Lee Hyo-sik
Staff Reporter
The government will cut the maximum corporate tax rate from 25 percent to 20 percent by 2011, two years ahead of the initial timetable, to encourage businesses to invest more and attract more foreign investment. It also plans to scrap excise taxes on green fees at golf courses in provincial areas before 2011 to make it cheaper for golfers to play, encouraging them to spend money here rather than overseas.
The Ministry of Strategy and Finance unveiled these and other measures included in a revised tax bill aimed at turning the country more business-friendly. It plans to submit the revised bill to the National Assembly for approval this month.
Under the revision, the maximum corporate tax rates will be slashed from the current 25 percent to 22 percent next year and then further to 20 percent by 2011. The minimum tax rate will also be lowered to 10 percent from the current 13 percent over the next three years.
Currently, companies earning over 100 million won in taxable income are subject to up to 25 percent corporate income tax, while those earning less than 100 million are required to pay up to 13 percent.
The threshold will be raised to 200 million won from the current 100 million won to make small businesses earning between 100 million won and 200 million won benefit from lower corporate rates.
Deputy Minister for Tax and Customs Lee hi-su said the ministry decided to lower the rates faster than originally scheduled to promote investment and job creation amid an economic slowdown.
``The corporate tax cut will help businesses reduce costs, increase investment and create jobs. Companies will be able to save more than 8.7 trillion won in tax payments over the next four years,'' he said.
High corporate tax rates here have been cited as a major obstacle in attracting foreign companies and investors, with Hong Kong, Singapore and other Asian economies having slashed rates in recent years to draw more inbound investment.
The abolishment of excise taxes levied on green fees at provincial golf courses is to boost domestic demand amid an economic slowdown and improve the services account balance ― the measure is expected to cut green fees by 24,000 won.
The government also plans to lower the comprehensive real estate tax levied on golf courses next year, further making it cheaper for golfers to play here. Currently, many courses are required to pay a maximum 4 percent of their property value as all-inclusive property tax, forcing operators to charge higher green fees. But the rate will go down to as low as 0.8 percent.
The ministry will allow businesses to deduct 10 percent of research and development investment from taxable income, up from the current 7 percent, while enabling large businesses to deduct 0.4 percent of cash payments to suppliers from taxable income, up from the current 0.3 percent.