Exclusion of SMEs Expanding Investment and Creating Jobs from Tax Audit Targets
The National Tax Service (NTS) has announced a new initiative aimed at fostering investment and job creation by excluding small and medium-sized enterprises (SMEs) that meet certain criteria from regular tax audits for the fiscal year 2023. The details are outlined below.
l SMEs expanding investment
- Eligibility criteria:
SMEs under the Special Tax Treatment Control Law (excluding those in the grace period) for the fiscal year ended in 2023, with annual revenue of KRW 150 billion or less1) in 2023.
*1) Corporations: For entities with total assets of KRW 200 billion or more or engaged in professional services, annual revenue shall be less than KRW 50 billion.
Individuals: For professional service providers, annual revenue shall be less than KRW 50 billion.
Additionally, the SMEs shall plan to increase their investment ranging between 5% to 20% or more in 2025 compared to 2024 depending on their annual revenue volume as below.
Minimum investment growth rate by annual revenue
|
Annual revenue for FY2023 |
Less than KRW 50 billion |
Between KRW 50 billion and 150 billion |
|
General SMEs |
10% or more |
20% or more |
|
SMEs investing in non-metropolitan areas2) |
5% or more |
15% or more |
*2) SMEs that invest 80% or more in non-metropolitan areas (outside of Seoul, Incheon and Gyeonggi-do) qualify as SMEs investing in non-metropolitan areas.
The qualified SMEs are required to submit an investment expansion plan between November 1, 2024 and December 2, 2024, and ensure the plan is fully implemented.
- Exclusion:
The following are not eligible for exclusion from tax audits:
Dishonest businesses with tax in arrears, committing tax offenses, or accounting fraud.
Individuals who are required to submit a confirmation of compliant tax filing, but have failed to do so.
l SMEs creating jobs
- Eligibility criteria:
SMEs under the special tax treatment control law (excluding those in the grace period) for the fiscal year ended in 2023, with annual revenue of KRW 150 billion or less3) in 2023.
*3) Corporations: For entities with total assets of KRW 200 billion or more or engaged in professional services, annual revenue shall be less than KRW 50 billion.
Individuals: For professional service providers, annual revenue shall be less than KRW 50 billion.
Additionally, the SMEs shall plan to increase the number of full-time employees4) by 2% to 3% or more (net increase of at least one employee) in 2025 compared to 2024. They are required to submit a job creation plan between November 1, 2024 and December 2, 2024, and ensure it is implemented.
*4) The monthly average of the number of full-time employees at the end of each month during the relevant year
Job creation rate by annual revenue
|
Annual revenue for FY2023 |
Less than KRW 50 billion |
Between KRW 50 billion and 150 billion |
|
Minimum job creation rate |
2% or more |
3% or more |
- Exclusion:
The following are not eligible for exclusion from tax audits:
Business owners whose name has been publicly disclosed by the Ministry of Employment and Labor for failing to pay wages and compensation to employees, under Article 43-2 of the Labor Standards Act.
Dishonest businesses with tax in arrears, committing tax offenses, or accounting fraud.
Corporations that previously submitted a plan, but failed to achieve the minimum net increase of one full-time employee.
Individuals who are required to submit a confirmation of compliant tax filing, but have failed to do so.