South Korea To Create Jobs With Tax Incentives

by Mary Swire, Tax-News.com, Hong Kong

22 January 2010

The South Korean government has signaled its intention to prioritize the creation of new jobs in the economy, partly by the implementation of tax incentives for small and medium-sized businesses.

While the government has seen signs of an economic recovery, that does not seem to have fed through into increased employment. The country’s unemployment rate in 2009 remained at 3.6%. The government has therefore set itself the target of reducing that rate to nearer 3% by end-2010 by creating another 250,000 new jobs in the economy.

As part of that effort, the government will organize tax incentives for small and medium-sized companies that succeed in employing more full-time workers. A previous government also tried this in 2004 when it offered a KRW1m (USD880) tax credit for each new employee hired in excess of the company’s average number of employees for the immediately preceding year.

The credit was effective from January 1, 2004, to December 31, 2006. All industries, with the exception of the entertainment industry, were eligible for the credit. However, it was canceled after its expiry, having had very little material effect at that time.

In addition, there has been mention of providing tax breaks for companies re-locating back to South Korea. With other forms of employment, such as part-time jobs and those with flexible hours, also being promoted, further discussions within the government can be expected in the near future.

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