Rep. Moon Jin-seok of the Democratic Party of Korea has introduced a bill to extend for three more years a preferential tax credit on small business credit card sales that is set to expire at the end of this year. The move aims to prevent an increase in the tax burden on small business owners as the government pushes to reduce both the credit rate and the cap.
Moon, a member of the National Assembly's Finance and Economic Planning Committee, said on the 27th that he had sponsored an amendment to the Value-Added Tax Act to extend the preferential credit on credit card and other sales through the end of 2029.
Under current law, sole proprietors and simplified taxpayers with annual supply value of 1 billion won or less receive a tax credit at a base rate of 1% on sales made through credit cards and cash receipts, capped at 5 million won a year. Through the end of this year, however, a preferential credit applies at a rate of 1.3% with an annual cap of 10 million won.
In this year's tax code revision plan, the government proposed ending the preferential credit and adjusting the base rate to 1.2% with an annual cap of 5 million won. Moon's office estimated that if the government plan takes effect, an operator with 100 million won in eligible payments would see the credit fall by 100,000 won a year, while one with 420 million won would lose 460,000 won. For operators with roughly 770 million won or more in eligible payments, the reduction could reach as much as 5 million won.
Moon stressed that tax support should not be scaled back at a time when the delinquency rate on loans to the self-employed stood at 1.99% at the end of the second quarter this year, above the long-term average of 1.60%. "With more businesses selling through online platforms and the expansion of payment gateways and simple payment services, the settlement fees borne by small business owners are actually growing," he said. "Maintaining the preferential credit is the fastest measure that small business owners can feel right away."