Tax Credit for Enterprises Increasing Jobs

 Date: Oct 8, 2020

I. Introduction

Tax credit for investment creating jobs and enterprises increasing youth employment has been integrated into tax credit for enterprise increasing jobs. This post gives a brief about the tax credit for enterprise increasing jobs.

 

 

II. Definition

1) Entitlement of tax credit for enterprises increasing jobs

Where the number of full-time employees employed by a national for the relevant taxable year, during the period until the taxable year in which December 31, 2021 falls, exceeds the number of full-time employees in the immediately preceding taxable year, the national is entitledt o deduct an amount calculated by adding up the following amount, from the income tax (limited to income tax on business income) or corporate tax payable for the relevant taxable year and for the period until the taxable year inwhich the first anniversary (or the second anniversary in cases of a small or medium enterprise or a middle-standing enterprise prescribed by Presidential Decree

☞ "Consumer servicebusiness prescribed by Presidential Decree" in Article 32 (1) of the Actmeans any of the following businesses (hereinafter referred to as"consumer service business"):

1.  Hotelbusiness and inn business (excluding tourist accommodation business under theTourism Promotion Act);

 

2.  Barbusiness (applicable only to general entertainment bar business, dancing entertainment bar business, and karaoke bar business under Article 21 of the Enforcement Decree of the Food Sanitation Act, but excluding foreigner-only entertainment restaurant business and tourist entertainment restaurant business under the Tourism Promotion Act);

 

3.  Other businesses for the purpose of amusement, entertainment, etc., which are prescribed by Ordinance of the Ministry of Economy and Finance.

 

2) Tax credit

☞ An enterprise is entitled to deduct the aggregate of the following amounts from income tax(limited to income tax on business income) or corporate tax payable by it forthe relevant taxable year, if the number of its full-time employees increases between a certain taxable year and the immediately preceding taxable year.

                                                                                                                                           

                                                                                                                                                                 (unit:won)

	Small and Medium enterprises		Middle-standing enterprises	Large enterprises
	increase  occurred in a region inside the Seoul Metropolitan area	increase  occurred in a region outside the Seoul Metropolitan area
Per increase in regular youth employees and employees with disabilities	11,000,000	12,000,000	8,000,000	4,000,000
Per increase in the number of full-time employees other than full-time youth employees	7,000,000	7,700,000	4,500,000	-

 

 

☞ The scope of full-time employees

 

"Full-time employees prescribed by Presidential Decree" in the main sentence of Article 19 (1) of the Act means employees with Korean nationality who have signed an employment contract under the Labor Standards Act

☆ An employee whose period of employment contract is less than one year: Provided, That an employee, whose total period of employment contracts is at least one year due to the consecutive renewal of an employment contract shall be deemed a full-time employee;

 

☆ A part-time employee defined in Article 2 (1) 9 of the Labor Standards Act: Provided, That an employee whose contractual work hours per month are at least 60 hours shall be deemed a full-time employee;

 

☆ An executive officer falling under any subparagraph of Article 40 (1) of the Enforcement Decree ofthe Corporate Tax Act;

 

☆ The largest stockholder or the largest investor of the relevant enterprise (referring to the representative, if the relevant enterprise is a sole proprietor), and his/herspouse;

 

 

☆ A lineal ascendant or descendent (including his/her spouse) of a person falling under subparagraph 4,or a blood relative referred to in Article 1-2 (1) of the Enforcement Decree ofthe framework Act on National Taxes;

 

 

☆ A person in whose case neither the fact that his/her gross wage and salary income tax has been withheld nor the fact that any of the following amounts has been paid is verified by a book for tax withholding for gross wage and salary income underArticle 196 of the Enforcement Decree of the Income Tax Act:

 

(a)  An employer contribution or employee contribution defined in Article 3 (1) 11 or12 of the National Pension Act;

 

(b)  An insurance contribution of the employee insured under Article 69 of the National Health Insurance Act;

 

 

☞The scope of youth employee

The number of youth employees, employees with disabilities, and employees aged at least 60, as referred to in Article 26 (1)2 (b) of the Act shall be calculated as follows

 

☆ Number of youth employees: The number of full-time employees (the maximum number of suchemployees shall be calculated by subtracting the number of full-time employeesin the immediately preceding taxable year and the number of graduates from highschools, etc. aligned to industry demand under paragraph (7), from the numberof full-time employees in the relevant taxable period) between the ages of 15and 29 on the date an employment contract is entered into: Provided, That, if aperson has performed the military service specified in any item of Article 27(1) 1, and his age calculated by subtracting the period of such militaryservice (which shall not exceed six years) from his age as on the date anemployment contract is entered into, does not exceed 29 years, the person shallbe deemed a youth;

 

 

☆ Number of employees withdisabilities: The aggregate of the number of full-time employees withdisabilities subject to the Act on Welfare of Persons with Disabilities, andthe number of full-time employees who are wounded persons under the Act on theHonorable Treatment of and Support for Persons of Distinguished Service to theState (the maximum number of such employees shall be calculated by subtractingthe number of full-time employees in the immediately preceding taxable year,the number of graduates from high schools, etc. aligned to industry demandunder paragraph (7), and the number of youth employees referred to insubparagraph 1, from the number of full-time employees in the relevant taxableperiod);

 

 

☆ Number of employees aged atleast 60: The number of full-time employees who are aged at least 60 on thedate an employment contract is entered into (the maximum number of suchemployees shall be calculated by subtracting the number of full-time employeesin the immediately preceding taxable year, the number of graduates from highschools, etc. aligned to industry demand under paragraph (7), the number ofyouth employees referred to in subparagraph 1, and the number of employees withdisabilities referred to in subparagraph 2, from the number of full-timeemployees in the relevant taxable period).

 

① Where the number offull-time employees decreased only in one taxable year: The number of full-timeemployees decreased compared to that in the tax-credit granted taxable yearunder Article 26 (1) 2 or 144 (3) of the Act (referring to the second taxableyear, if tax credits were granted for two consecutive taxable years) × Tenmillion won;

 

② Where the number of full-timeemployees decreased for two consecutive taxable years:

(a)  Thefirst taxable year in which the number of full-time employees decreased: Anamount calculated under subparagraph 1;

(b)  Thesecond taxable year in which the number of full-time employees decreased: Thedecreased number of full-time employees between the immediately precedingtaxable year and the relevant taxable year × Ten million won.

③ For the purposes ofparagraphs (7) through (9), full-time employees shall be nationals who haveenter into an employment contract under the Labor Standards Act: Provided, Thatthe following persons shall be excluded herefrom:

 

☆ Any worker whoseemployment contract is for less than one year: Provided, That workers whoseemployment contract exceeds one year in total as a consequence of consecutiverenewal of the employment contrAct shall be deemed full-time employees; 

 

☆ Part-time workersdefined in Article 2 (1) 9 of the Labor Standards Act: Provided, That workerswho work at least 60 hours for one month, shall be deemed full-timeemployees; 

 

☆ Executive officers specifiedunder subparagraphs of Article 40 (1) of the Enforcement Decree of theCorporate Tax Act;

 

☆ The largest stockholder orlargest investor (referring to the representative in cases of a soleproprietor) of the relevant enterprise and his/her spouse;

 

☆ Lineal ascendants anddescendants (including their spouses) of the persons referred to insubparagraph 4, and relatives defined in Article 1-2 (1) of the EnforcementDecree of the framework Act on National Taxes, of such persons;

 

④ For the purposes ofparagraphs (7) and (8), the number of full-time employees shall be calculatedby the formula provided for in subparagraph 1. In such cases, one workerprovided for in the proviso to paragraph (10) 2 shall be calculated as 0.5person; where all of the requirements for support provided for in the items ofsubparagraph 2 are met, one worker shall be calculated as 0.75 person:

 

1. Formula:

Number of full-time employees = Sum of thenumber of full-time employees as at the end of each month in the relevanttaxable year ÷ the number of months in the relevant taxable year

 

2. Requirements for support:

(a)  Thenumber of full-time employees in the relevant taxable year (excluding theworkers provided for in the proviso to paragraph (10) 2) shall not be decreasedas compared with that in the immediately preceding taxable year (excluding theworkers provided for in the proviso to paragraph (10) 2);

(b)  Theyshall have entered into an indefinite employment contract;

(c)  Theyshall not be given discriminatory treatment defined in subparagraph 3 ofArticle 2 of the Act on the Protection of Fixed-Term and Part-Time Workers, intheir hourly wages (including wages defined in Article 2 (1) 5 of the LaborStandards Act, regularly paid bonuses, such as regular bonuses and holidaybonuses, and performance-based incentives) and other matters concerning theterms and conditions of employment, welfare, etc.; 

(d)  Thehourly wage shall be at least 130/100 (or 120/100, in cases of a small ormedium enterprise) of the minimum wage prescribed under Article 5 of theMinimum Wage Act. 

 

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