'Income tax and corporate tax of 0 won' We are investigating the abuse of youth start-up tax reduction

Following criticism that the income tax and corporate tax exemption system intended to encourage youth entrepreneurship is being abused, the tax authorities are beginning to investigate the actual situation.

The youth start-up tax reduction is a system that provides income tax and corporate tax reduction for five years when young people (15 to 34 years old) start a business. This is an unprecedented tax benefit that provides a 100% tax deduction for businesses starting outside of an overpopulation control area, and a 50% tax exemption for 5 years if starting a business in an overpopulation control area.

The overconcentration control area is an area that is overly dense or is likely to be overly dense and requires redevelopment for the proper placement of population and industry in Seoul and the metropolitan area. Therefore, if you have a business address outside of Seoul and some areas of Gyeonggi, you do not have to pay a single won in taxes.

Compared to 2016, the scale of youth start-up tax reduction benefits increased rapidly, with a 437.8% increase in number of people and a 650.6% increase in amount. It can be seen that this is a huge figure when compared to the figures showing an increase of 54.0% in number of people and 83.3% in amount of total tax reduction under the Restriction of Special Taxation Act over the same period.

As many people are receiving tax reductions, the number of people who do not pay a single penny of taxes through expedient means has also increased. A representative example is moving the business address outside of the overpopulation control area, registering the business falsely, and receiving a reduction in income tax and corporate tax. This clearly has the potential for tax evasion.

This is the first time that the National Tax Service has initiated a tax investigation into young entrepreneurs receiving tax breaks. The tax authorities will first check the status of business registration and check whether there are any legal deficiencies.

Kim In-won, a tax lawyer who has been handling tax-related cases for a long time, including violations of the Tax Criminal Punishment Act, said, "The number of consultations for young people to receive tax reductions such as income tax and corporate tax when starting a business is steadily increasing. As a strict investigation by the tax authorities is predicted, if you have started a business, you will need to check the current situation, such as getting tax advice in advance to make sure there are no problems when starting a business, in preparation for irregular tax audits." “I can see it,” he advised.

In general, there is no problem if you go through legal procedures to save taxes, but tax evasion by not paying taxes through illegal acts is an illegal act. Therefore, it can be said that tax issues absolutely require assistance, such as review, from an expert with long-term accumulated professional experience appropriate to the situation.

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