Corporate tax cap to be lowered to 22% under new scheme l KBS WORLD

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Photo: Yonhap News

The government will lower top corporate tax rates from 25% to 22% as it rationalizes tax brackets in an effort to stimulate private sector growth.

The adjustments were announced as part of the 2022 Tax Review Bill published on Thursday.

The tax reduction aims to stimulate business investment and job creation. The number of tax brackets will also be simplified from four to two or three depending on the size of the business.

Currently, corporation tax has four rate brackets at 10, 20, 22 and 25%, but the new plan removes the 25% bracket.

Large enterprises will be subject to the 20 and 22 percent bands, while all three rates will apply to small and medium enterprises with annual sales of less than 300 billion won.

The adjustments correlate with the government’s view that the country’s higher corporate tax rates compared to other countries discourage both domestic and foreign companies from investing in South Korea, with domestic companies choosing instead to venture abroad.

In a detailed briefing on the announcement, Finance Minister Choo Kyung-ho said the tax adjustments focus on expanding support for business activities, namely investment and job creation, to help to revitalize the private sector. He pledged to revamp the corporate tax system in line with global standards.

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