Minister of Interior and Safety Yun Ho-jung submits a hometown donation fund form at the NongHyup branch inside Government Complex Seoul in December last year. [Ministry of Interior and Safety]
Minister of Interior and Safety Yun Ho-jung submits a hometown donation fund form at the NongHyup branch inside Government Complex Seoul in December last year. [Ministry of Interior and Safety]

Tax benefits for participants in the hometown donation program are set to grow. Donors who give the annual maximum of 20 million won ($14,100) will be eligible for a tax deduction of up to 2.19 million won.

Tax incentives for regional research and development and for companies relocating outside the Greater Seoul area will also be expanded.

The Ministry of Interior and Safety said Sunday that the government's tax reform package, announced Monday, includes measures designed to support regional growth.

The hometown donation program allows individuals to donate up to 20 million won per year to any local government other than the one where they are registered as a resident. Donations fund community purposes in the recipient region, and donors receive tax deductions and local gift items in return.

Under the current system, a uniform tax deduction rate applies regardless of the donation destination. Starting next year, however, the rate will vary across four regional categories: the Greater Seoul metropolitan area, non-metropolitan major cities, other non-metropolitan areas, and preferential non-metropolitan areas.

For donations between 100,000 won and 200,000 won, the deduction rate for other non-metropolitan areas and preferential non-metropolitan areas will rise from 44.0 percent to 55.0 percent. For amounts above 200,000 won, the rate for preferential non-metropolitan areas will increase from 16.5 percent to 27.5 percent.

As a result, the maximum tax deduction available through the hometown donation program will increase from 3.41 million won to 5.6 million won.

*Regional classifications will be defined in the enforcement decree of the Restriction of Special Taxation Act, taking into account distance from Seoul, population, and economic and social conditions. [Ministry of Interior and Safety]
*Regional classifications will be defined in the enforcement decree of the Restriction of Special Taxation Act, taking into account distance from Seoul, population, and economic and social conditions. [Ministry of Interior and Safety]

Regional weighting factors will also apply to R&D tax credits, raising deductions by 10 to 50 percent. The tax-exempt ceiling on relocation allowances will also increase from 200,000 won to up to 500,000 won per month for workers who move when their employer relocates outside the Greater Seoul area or opens or expands a facility in a regional area.

A new special provision will grant companies that start a business or open a new facility in investment promotion zones or cultural industry promotion zones within the South Jeolla Province-Gwangju integrated special city a full exemption from income and corporate taxes for five years, followed by a 50 percent reduction for the subsequent two years.

The tax reform package is subject to legislative revision and National Assembly review before taking effect. The regional preferential deduction for hometown donations and the expanded R&D tax support are set to apply from next year.


thlee@heraldcorp.com