The Ministry of Strategy and Finance said Monday it would expand the scope of its tax incentives for conglomerates in line with efforts to induce them to increase investments, dividends and employees’ wages.
The ministry said companies that increased investments to expand headquarters as well as production, retail and sales facilities would be exempted from paying related taxes.
Spending on infrastructure such as warehouses, logistics centers and training institutes for employees will also be recognized as corporate investments. Under this revised scheme, they will be excluded from paying taxes on such funds.
It added that companies would need to expand their real estate infrastructure within two years of acquiring the land.
The tax revision will pave the way for Hyundai Motor Group to reduce its taxes on its purchase of the Korea Electric Power Corp. property ― worth more than 10 trillion won ― in the affluent Gangnam district in southern Seoul.
The ministry said it planned to implement the revised corporate tax system early next month.
This came as the government had been contemplating Hyundai Motor’s tax issues concerning the acquisition of the KEPCO site, on which the auto giant seeks to build a 115-story office tower with an art hall, hotel and convention center.
As Hyundai Motor’s planned hotel and art hall will unlikely be recognized as corporate investments, they will not receive tax benefits.
However, Korea’s largest automaker, which seeks to complete all paperwork for the construction of its office tower and other facilities by 2016, is expected to save about 800 billion won in taxes.
The government proposed to revise the tax benefit scheme last year, which included imposing taxes on excess cash reserves held by conglomerates with equity capital of more than 50 billion won, as a means to encourage conglomerates to spend on employment and increase household income.
