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Special Taxation for Gift Tax on Start-Up Funds
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2021-08-23
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Special Taxation for Gift Tax on Start-Up Funds

 

Ⅰ. Introduction

Where a resident aged at least 18 accepts donations of any property (except land and buildings which are subject to imposition of transfer tax) from any of his/her parents aged at least 60, in order to start a small or medium enterprise, 500 million won shall be deducted from the taxable value of gift tax (the maximum taxable value of gift tax shall be three billion won (or five billion won, if the resident hires at least ten new employees through the start-up of business)) on the business start-up fund out of the value of the property that he/she receives as a gift, and gift tax shall be levied at the tax rate of 10/100. Let’s look into the areas and the method of filing application of special taxation for gift tax on start-up funds.

 

Ⅱ. Areas of Special Taxation for Gift Tax on Start-Up Funds

1) A resident aged at least 18 accepts donations of any property from any of his/her parents aged at least 60, in order to start a small or medium enterprise. However, properties included in the paragraph 1 of the article 94 of the Income tax Act, such as land and buildings are not subject to this special taxation.

*The properties included in the paragraph 1 of the article 94 of the Income TaxAct are assets that are subject to capital gains tax, such as land, buildings, real property rights, and other assets (the rights to exclusively use facilities, business rights transferred with fixed assets for business, etc.).

 

2) A person in receipt of donated start-up funds shall commence his/her business within two years from the date of the donation.

In cases where a person acquires a business asset or pays a security deposit or arent for an extended place of business shall be deemed new business startups, but none of the following cases shall be deemed a new business startup:

1.          Where anyone succeeds to a previous business in the course of a merger, split-off, investment in kind, or acquisition of business, or operates the same type of business upon acquiring or purchasing assets used for a previous business;

2.          Where a resident incorporates a new corporation upon converting a business he/she has operated, into a corporation;

3.          Where anyone operates the same type of business as the previous business upon resuming the business after closure of the business;

4.          Where it is impracticable to deem thata new business is commenced, as it involves adding another type of business, and in similar cases prescribed by Presidential Decree.

 

3) A person in receipt of donated start-up funds shall use all of such start-up funds for the relevant purpose by the fourth anniversary from the date he/she receives such donated start-up funds.

 

4) The person shall submit a statement on the spending of start-up funds by the end of the month in which the date of start-up falls and the deadline forf iling a tax return for the taxable year.

 

Ⅲ. Details

1)Special Taxation for Gift Tax

텍스트 상자: The amount of gift tax = (the taxable value of the gift tax – 500 million won) x 10%

 

 

 

 

* If such resident receives donated start-up funds at least twice, or from each of his/her parents respectively, deductions shall apply based on the aggregate of taxable amounts of gift tax.

** The value of property other than start-up funds donated by the same person (including his/her spouse) as a gift, shall not be added to the taxable valueof gift tax on start-up funds, and even where the tax return of gift tax on start-up funds is filed, the tax credit for a voluntary return shall not apply.

 

2) The maximum taxable value of gift tax shall be three billion won (or five billion won, if the resident hires at least ten new employees through the start-up of business.)

 

3) Start-up funds shall be deemed the taxable value of the inheritance tax, regardless of the period from the date the start-up funds are donated until the date the inheritance commences.

* The amount of gift tax on start-up funds shall be deducted from the amount of inheritance tax calculated. In such cases, where the amount of the deductible gift tax exceeds the amount of inheritance tax calculated, the amount of gift tax equivalent to the difference between them shall not be refunded.

 

4) The special taxation for gift tax on succession to family business (Article 30-6 of the Restriction of Special Taxation Act) shall not be redundantly applied when special taxation for gift tax on start-up funds is applied.

 

Ⅳ. Application

Anyone who intends to be accorded special taxation on gift tax on start-up funds shall file a tax return on gift tax, an application for special taxation for start-up funds in the form prescribed by Ordinance of the Ministry of Economy and Finance, and a statement on the spending of start-up funds, with the head of atax office having jurisdiction over the place of tax payment by the deadline for filing a tax return.

 

 

 

 

 



 
 
 
 




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