2025 Tax Reductions for SME Employees and VAT Amendments

Let's look at the changes in Korea's 2025 tax law revisions that you can benefit from.
Checking the revisions in advance and planning a strategy to receive tax benefits can, in some cases, be a good way to manage your finances.

< Income Tax Reduction for SME Employees >
1) Those eligible for the reduction are SME employees (workers at small and medium-sized enterprises under the Framework Act on Small and Medium Enterprises) who meet the following criteria.
Young people (aged 15-34), women with career breaks (women whose careers were interrupted for 3 years or more due to childbirth, childcare, etc.), older people (aged 60 or over) and people with disabilities (all must have worked for at least 1 year)
2) Income tax reduction details.
Young people : 90% reduction for up to 5 years (limit of 2,000,000 won)
Women with career breaks : 70% reduction (limit of 2,000,000 won)
Older people (aged 60 or over) : 70% reduction (limit of 2,000,000 won)
People with disabilities : 70% reduction for 3 years (limit of 2,000,000 won)
3) Exclusions from the reduction
Company executives, largest shareholders or their related parties, daily workers, and workers whose payment of the four major social insurance premiums cannot be confirmed
Even if you did not apply during the year-end tax settlement, you can still file later, so you can contact the tax office for your area of residence and file.

< VAT Amendments >
1) Higher threshold for simplified taxpayers
Before: annual sales of 80 million won or less
Revised: annual sales of 100 million won or less
2) Expanded obligation to issue electronic tax invoices
Before: corporations and individual businesses above a certain size
Revised: corporate businesses, and individual businesses with annual sales of 50 million won or more
3) Changes to penalty taxes and fines
A penalty tax rate applies if not issued by the deadline.
(Must be issued by the 10th of the month following the supply date of the goods)
General taxpayers: 2% of the reported amount,
Simplified taxpayers: 1% of the reported amount
As the obligation to issue electronic tax invoices expands, business owners who were not previously subject to it should check whether they meet the new criteria and comply, so they are not charged penalty taxes and can avoid unnecessary expenses.

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