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The Korea Herald
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THE INVESTOR
July 26, 2024

Market Now

[Contribution] Taxpayer support can serve as springboard for SMEs

  • PUBLISHED :May 30, 2023 - 09:08
  • UPDATED :May 30, 2023 - 09:08
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National Tax Service Vice Commissioner Kim Tae-ho

By Kim Tae-ho

National Tax Service vice commissioner

Amid high inflation and elevated interest rates worldwide, the growth of the global economy is being hampered by sluggish domestic demand, as well as contractions in the manufacturing sector and trade.

In an effort to overcome the global economic downturn, the Korean government has designated key industries such as semiconductors, secondary batteries and displays as national strategic technologies. This designation aims to expand tax benefits and provide financial support to exporting companies.

In line with these comprehensive support measures, the National Tax Service has established the Future Growth Taxpayer Support Center, specifically designed to provide systematic tax support to small and medium-sized enterprises with high growth potential.

Last month, the CEO of an exporting SME which received tax support through the Future Growth Taxpayer Support Center expressed his gratitude to the National Tax Service in a letter.

In particular, he thanked the tax authority for support, including a preliminary review of R&D tax credits and ex officio extension on corporate tax payment, which greatly helped the corporate management.

There have been letters of appreciation for the handling of individual civil complaints in the past, but never from a company representative to express gratitude for the taxpayer support policy.

The Future Growth Taxpayer Support Center was established at the NTS headquarters, seven regional tax offices and 133 district tax offices, following discussions within the Tax Administration Capacity Enhancement Task Force.

This center provides tax support to SMEs in innovative growth industries, emerging sectors and restructuring SMEs, as well as encouraging the exports of SMEs selected by relevant ministries such as the Ministry of Trade, Industry and Energy and the Ministry of SMEs and Startups.

Of note, the National Tax Service has selected and added several SMEs engaged in exporting to its list. Korea has experienced a decline in export volume recently, prompting the government to implement comprehensive policies aimed at supporting exporters. Recognizing the importance of this cause, the National Tax Service is actively committed to providing support on the national tax administration front to these exporting SMEs. To qualify for taxpayer support, the SME’s exports must account for more than 50 percent of its total sales in either 2021 or 2022. Currently, there are approximately 22,000 companies are eligible.

Companies benefiting from tax support are granted extensions on national tax payments, with exemptions on tax security provided for amounts up to 100 million won ($75,500). Additionally, value-added tax refunds are processed expeditiously to help companies secure liquidity.Furthermore, priority is given to the selected companies that seek a preliminary review from the National Tax Service to determine the eligibility of their R&D expenses for tax credits, to promptly and effectively address any uncertainties related to the application of tax laws. Also, these selected companies are exempt from tax return verification, relieving them of the administrative burden and allowing them to concentrate fully on their core business activities.

Additionally, the Korean tax administration offers an exclusive counseling service through Hometax to address the specific needs of exporting SMEs and SMEs in emerging sectors, enabling them to resolve tax difficulties without being encumbered by formalities and procedures. Dedicated tax counseling services related to restructuring are also available to assist SMEs in resolving any tax issues that may arise during the process.

In principle, taxpayer support is granted to companies that apply for it. However, as a measure of proactive administration, a three-month extension was granted to 22,000 exporting SMEs, and a total of 31,000 taxpayer support services provided by the Future Growth Taxpayer Support Center benefited companies between January and March this year.

Securing future growth engines is crucial for the national economy to advance further. If the aforementioned tax support serves as a catalyst, enabling exporting SMEs to manufacture competitive products in the global market and facilitating the development of innovative SMEs through technological innovation, it will significantly contribute to economic growth and job creation.

In conclusion, the National Tax Service in Korea is committed to extending its role beyond revenue collection and actively providing ongoing taxpayer support so that companies with high growth potential can focus on their core business activities. With these comprehensive measures in place, we anticipate further growth in the Korean economy.

Kim Tae-ho is vice commissioner of the National Tax Service. Views in this column are his own. – Ed

By Im Eun-byel (silverstar@heraldcorp.com)

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