National Tax Service outlines tax support and audits for SMEs

The National Tax Service is conducting special tax audits on 41 companies in essential living sectors suspected of evading approximately 1 trillion won in taxes. Meanwhile, the government offers various tax support systems for SMEs, including corporate tax reductions of up to 100% for certain startups and loss carryback deductions to offset current deficits against previous years' income.

In the process of operating a small or medium-sized enterprise (SME), businesses face tax burdens at various stages, from the initial startup phase and facility investment to unexpected management crises. According to information provided by the National Tax Service, the government operates differentiated tax support systems for each business stage to aid the sustainable growth of SMEs.

Tax Reductions Based on Industry and Location from Startup to Stable Operation

Startups in their early stages can receive corporate tax or income tax reduction benefits. These apply for up to five years starting from the year the first income is generated, with reduction rates ranging from a minimum of 25% to a maximum of 100% depending on requirements such as the startup location, whether it is a youth-led startup, and the industry type. Additional reduction benefits are also possible if certain employment increase requirements are met.

Companies that have already reached a stable stage can consider the "Special Tax Reduction for SMEs" system. This system reduces annual corporate or income tax by 5% to 30% depending on the size of the company, its location, and its industry. Since application requirements vary depending on the specific situation of the company, prior verification is necessary.

Tax Credit Systems for R&D and Facility Investment Expansion

Support measures are also in place when companies conduct research and development (R&D) or facility investment to secure future growth engines. For the research and human resources development tax credit, companies can choose to receive a credit based on the expenditure of the current year or based on the increase compared to the previous year. Depending on the method chosen, they can receive a credit of 25% of the current year's expenditure or 50% of the increase.

When investing in business assets such as machinery or equipment, the "Integrated Investment Tax Credit" applies. However, the eligibility for the credit and the specific credit rate vary depending on the type of asset invested in, the size of the company, the timing of the investment, and the applicable field.

Utilizing "Loss Carryback Deduction" During Management Deficits

When a deficit situation occurs where losses exceed profits due to economic downturns, the "Loss Carryback Deduction" system can be used to ease the tax burden. This system allows companies to offset losses incurred in the current year against the income of the previous business year, enabling them to receive a partial refund of taxes already paid.

However, not all companies are eligible. A company must have had taxable income in the previous business year and a history of actually paying taxes, and must strictly comply with legal requirements and application deadlines. The National Tax Service provides consultation services through the National Tax Counseling Center (dial 126 without an area code) so that companies can check customized benefits.

Special Tax Audit Conducted on Companies Suspected of Tax Evasion in Essential Living Sectors

Meanwhile, the National Tax Service has announced a strict response policy against acts of unfairly raising prices or evading taxes under the pretext of rising inflation. The National Tax Service has launched special tax audits on 41 companies directly related to people's livelihoods, such as agricultural and livestock products, processed foods, franchises, and delivery platforms. The suspected tax evasion amount of the target companies is estimated to reach approximately 1 trillion won.

The audit targets include cases in the agricultural and livestock sectors directly linked to food prices. According to the video, some egg producers are suspected of requesting non-documented transactions to avoid leaving sales records or receiving sales proceeds through non-business accounts to avoid income reporting. Additionally, cases are under investigation where laying hens were supplied at prices lower than market prices to distribute profits to a separate corporation owned by a family, or where subsidies from local governments were suspected of not being reported as income.

In the case of food companies, they are suspected of attempting to reduce corporate tax by including costs that should be borne by affiliates in the product cost while raising product prices citing increases in raw material and logistics costs. Among franchise headquarters, cases are being investigated where income was distributed by operating franchised stores under the names of employees, or where supercars worth hundreds of millions of won were purchased under corporate names for personal use. Delivery platform companies are suspected of evading taxes by shifting promotional costs, such as discount coupons, to franchisees (restaurants, supermarkets, etc.) under the guise of commissions or advertising fees, and transferring 1 trillion won of revenue generated in Korea to overseas parent companies.

In this investigation, the National Tax Service plans to focus on verifying whether the production and distribution costs used as the basis for price increases were appropriate and whether transactions with counterparties were conducted normally. An official from the National Tax Service stated that if violations of the Punishment of Tax Evaders Act, such as hiding income through borrowed-name accounts, issuing false tax invoices, or lending names, are confirmed, they intend to respond strictly by converting these into Punishment of Tax Evaders Act cases. Furthermore, they plan to continuously monitor tax evasion in fields closely related to the lives of citizens, such as food, clothing, and housing.

Source: original video (YouTube)