Article 6 (Tax Reduction for Start-up Small and Medium Enterprises, etc.)

For small and medium enterprises prescribed by Presidential Decree (hereinafter referred to as "small and medium enterprises"), among those that have started a business in the industries specified in the subparagraphs of Paragraph 3 by December 31, 2027 (hereinafter referred to as "start-up small and medium enterprises" in this Article), and for domestic individuals designated as start-up incubation center operators under Article 53 (1) of the 「Act on the Promotion of Venture Capital Investment」 (hereinafter referred to as "start-up incubation center operators" in this Article), the amount equivalent to the tax reduction calculated by multiplying the income tax or corporate tax generated from the business by the rates according to the following subparagraphs shall be reduced for the taxation year in which income is first generated from the business (or the taxation year that includes the fifth anniversary of the business commencement date if no income is generated from the business by the fifth anniversary of the business commencement date; hereinafter the same applies in Paragraph 6) and for the taxation years ending within four years from the commencement of the next taxation year. <Amended by Act No. 12256, Jan. 1, 2013; Act No. 13827, Dec. 15, 2015; Act No. 14472, Dec. 20, 2016; Act No. 15222, Dec. 19, 2017; Act No. 15573, May 29, 2018; Act No. 17781, Dec. 29, 2020; Act No. 18641, Dec. 28, 2021; Act No. 19858, Dec. 31, 2024> 1. For start-up small and medium enterprises: Rates according to the following categories a. If started before December 31, 2025 1) For start-up youth small and medium enterprises prescribed by Presidential Decree, which started a business in areas outside the Seoul Metropolitan Area's overpopulation control zone (hereinafter referred to as "youth start-up small and medium enterprises"): 100 percent 2) For youth start-up small and medium enterprises that started a business in the Seoul Metropolitan Area's overpopulation control zone and start-up small and medium enterprises that started a business in areas outside the Seoul Metropolitan Area's overpopulation control zone: 50 percent b. If started on or after January 1, 2026 1) For youth start-up small and medium enterprises that started a business in areas outside the Seoul Metropolitan Area or in depopulated areas of the Seoul Metropolitan Area: 100 percent 2) For youth start-up small and medium enterprises that started a business in the Seoul Metropolitan Area (excluding the Seoul Metropolitan Area's overpopulation control zone and depopulated areas): 75 percent 3) For youth start-up small and medium enterprises that started a business in the Seoul Metropolitan Area's overpopulation control zone and start-up small and medium enterprises that started a business in areas outside the Seoul Metropolitan Area or in depopulated areas of the Seoul Metropolitan Area: 50 percent 4) For start-up small and medium enterprises that started a business in the Seoul Metropolitan Area (excluding the Seoul Metropolitan Area's overpopulation control zone and depopulated areas): 25 percent 2. For start-up incubation center operators: 50 percent

The scope of start-up small and medium enterprises and start-up venture small and medium enterprises shall be small and medium enterprises that operate businesses in the following industries. <Amended by Act No. 17054, Dec. 31, 2019; Act No. 18371, Aug. 17, 2021; Act No. 19515, Feb. 27, 2024; Act No. 19858, Dec. 31, 2024> 1. Mining industry 2. Manufacturing industry (including businesses similar to the manufacturing industry as prescribed by Presidential Decree. Hereinafter the same applies) 3. Water supply, sewerage and waste treatment, and resource recovery 4. Construction industry 5. Mail-order retail business 6. Logistics industry prescribed by Presidential Decree (hereinafter referred to as "logistics industry") 7. Restaurants and other eating places 8. Information and communication industry. However, the following industries are excluded. a. Video viewing room operation b. News provision c. Virtual asset trading and brokerage 9. Financial and insurance industries, among those that provide financial services using information and communication as prescribed by Presidential Decree 10. Professional, scientific and technical services [including engineering services prescribed by Presidential Decree (hereinafter referred to as "engineering services")]. However, the following industries are excluded. a. Law practice b. Patent attorney practice c. Judicial scrivener practice d. Certified public accountant practice e. Tax accountant practice f. Veterinary practice g. Business operating an office established under Article 14 of the 「Act on the Establishment and Operation of Administrative Agents」 h. Business operating an architectural office reported under Article 23 of the 「Architectural Act」 11. Business facility management, business support and rental services, among which the following industries are included. a. Business facility management and landscaping services b. Business support services (employment placement and manpower supply services include the supply of agricultural labor) 12. Social welfare services 13. Arts, sports and recreation services. However, the following industries are excluded. a. Self-employed artists b. Amusement facility operation c. Water recreation services d. Gambling facility management and operation e. Other recreation-related services 14. Associations and organizations, repair and other personal services, among which the following industries are included. a. Personal and consumer goods repair services b. Hairdressing and beauty services 15. Business operating an academy that teaches vocational skills under the 「Act on the Establishment and Operation of Academies and Tutoring」 or a vocational skills development training facility under the 「Lifelong Vocational Skills Development Promotion Act」 (limited to cases where vocational skills development training is the main business) 16. Tourism accommodation business, international conference business, theme park business and tourist facility business prescribed by Presidential Decree under the 「Tourism Promotion Act」 17. Business operating welfare facilities for the elderly under the 「Welfare of Aged Persons Act」 18. Exhibition industry under the 「Exhibition Industry Development Act」

Notwithstanding Paragraphs 1, 2, and 4, for start-up small and medium enterprises that started a business in areas outside the Seoul Metropolitan Area's overpopulation control zone by December 31, 2024 (excluding youth start-up small and medium enterprises), start-up venture small and medium enterprises confirmed as venture companies by December 31, 2024, and enterprises engaged in new growth service industries prescribed by Presidential Decree as energy new technology small and medium enterprises by December 31, 2024, the amount equivalent to 75 percent of the income tax or corporate tax shall be reduced for the taxation year in which tax reduction is first received and for the taxation years ending within two years from the commencement of the next taxation year, and the amount equivalent to 50 percent of the income tax or corporate tax shall be reduced for the taxation years ending within the following two years. <Newly inserted by Act No. 15222, Dec. 19, 2017; Act No. 15573, May 29, 2018; Act No. 18641, Dec. 28, 2021>

For start-up small and medium enterprises, start-up incubation center operators, start-up venture small and medium enterprises, and energy new technology small and medium enterprises that employ at least the number of regular employees prescribed by Presidential Decree for each industry (hereinafter referred to as "minimum employment number by industry" in this Article), if the number of regular employees in the taxation year during the reduction period under the respective paragraphs is greater than the number of regular employees in the preceding taxation year (if the number of regular employees in the preceding taxation year is less than the minimum employment number by industry, the minimum employment number by industry shall be considered), the amount calculated by multiplying the tax under subparagraph 1 by the rate under subparagraph 2 shall be added to the reduced tax amount under the respective paragraphs and reduced. However, in the taxation year where a tax reduction equivalent to 100 percent is received under Paragraphs 1 and 6, the reduction under this Paragraph shall not apply. <Newly inserted by Act No. 15222, Dec. 19, 2017; Act No. 15573, May 29, 2018; Act No. 17054, Dec. 31, 2019; Act No. 19858, Dec. 31, 2024> 1. Income tax or corporate tax generated from the business 2. Rate calculated by the following formula. However, the rate shall be capped at 50 percent (or 25 percent for taxation years where a tax reduction equivalent to 75 percent is received under Paragraphs 1, 5, and 6), and any part less than 1 percent shall be disregarded. <img src="http://www.law.go.kr/flDownload.do?flSeq=147210881" alt="img147210881"> ┌────────────────────────────┐ │ │ │ │ │ (Number of regular employees in the relevant taxation year － Number of regular employees in the preceding taxation year) │ │ │ │ │ │────────────────────────────│ │ │ │ │ │ Number of regular employees in the preceding taxation year │ │ │ │ │ └────────────────────────────┘

When applying Paragraph 7, the scope of regular employees, the method of calculating the number of regular employees, and other necessary matters shall be prescribed by Presidential Decree. <Newly inserted by Act No. 15222, Dec. 19, 2017; Act No. 15573, May 29, 2018>

If a company that has received tax reduction under Paragraphs 1, 2, and 4 through 7 ceases to be a small and medium enterprise due to reasons prescribed by Presidential Decree, such as merging with a company that is not a small and medium enterprise under the 「Small and Medium Enterprises Basic Act」, the tax reduction shall not apply from the taxation year in which such reason occurs. <Newly inserted by Act No. 14472, Dec. 20, 2016; Act No. 15222, Dec. 19, 2017; Act No. 15573, May 29, 2018>

If the total amount of tax reduction received under Paragraphs 1, 2, and 4 through 7 for each taxation year exceeds 500 million won, the excess amount shall not be reduced. <Newly inserted by Act No. 19858, Dec. 31, 2024>