SMEs Increasing Employment and Investment to Be Excluded from Regular Tax Audits

Upon Submission of an Employment Growth or Investment Expansion Plan
NTS to Exclude SMEs from Regular Tax Audit Selection for 2025 Corporate and Comprehensive Income Taxes

Small and medium-sized enterprises planning to increase employment or investment next year will be excluded from the National Tax Service's regular tax audit selection. The measure is intended to support SMEs that boost the vitality of the Korean economy through new hiring and investment.

The National Tax Service announced on October 28 that SMEs submitting an employment growth plan or an investment expansion plan will be excluded from regular tax audit selection for corporate income tax for the 2025 business year and comprehensive income tax for tax year 2025.

The Asia Business Daily DB

◆Must meet industry-specific revenue thresholds... Hiring young people, older workers and people with disabilities carries extra weight= Eligible for tax administration support are corporations and sole proprietors whose revenue for the 2025 business year (or, for individuals, tax year 2025) does not exceed the threshold for their industry and that meet the SME criteria under the Restriction of Special Taxation Act. The revenue thresholds are KRW 180 billion for primary metal manufacturing, KRW 150 billion for clothing, footwear and furniture manufacturing, KRW 120 billion for food manufacturing, KRW 100 billion for transportation, KRW 80 billion for printing, KRW 60 billion for repair services, and KRW 40 billion for food and accommodation services. However, excluded are corporations that, for the 2025 business year, have total assets of at least KRW 200 billion and revenue of at least KRW 50 billion; corporations providing professional personal services, such as legal or tax services; and individual practitioners in professions such as medicine or law with revenue of at least KRW 50 billion.

Eligible for employment-related tax administration support are SMEs that submit an employment growth plan to increase their number of regular employees in 2027 by 2% to 3% or more (at least one person) compared with 2026. If revenue for the 2025 business year is below KRW 50 billion, the number of regular employees must increase by at least 2%; if revenue is between KRW 50 billion and KRW 180 billion, it must increase by at least 3%. In particular, for ordinary SMEs, hiring one regular employee aged 15 to 34 will count as hiring two when calculating the employment growth rate. To favor youth employment and youth-led businesses, when youth startups and SMEs designated as strong youth employers hire one regular employee, the hire will also count as two when calculating the employment growth rate. Ordinary SMEs that hire older workers aged 60 or above or people with disabilities will likewise receive the same twofold weighting as for hiring young people.

◆Different investment ratios for the Seoul metropolitan area and other regions= Eligible for investment-related tax administration support are SMEs that submit an investment expansion plan to increase investment in 2027 by at least 5% to 20% compared with 2026. To support regional economic growth and balanced national development, different investment benchmarks will apply to business sites in the Seoul metropolitan area (Seoul, Incheon and Gyeonggi) and those in other regions.

For business sites in the Seoul metropolitan area, investment must increase by at least 10% if revenue for the 2025 business year is below KRW 50 billion, or by at least 20% if revenue is between KRW 50 billion and KRW 180 billion. In other regions, the required investment increase is 5 percentage points lower: at least 5% for revenue below KRW 50 billion and at least 15% for revenue between KRW 50 billion and KRW 180 billion. SMEs investing in both the Seoul metropolitan area and other regions will receive tax administration support under the investment benchmark for business sites in other regions if at least 80% of their investment is made at those sites.

SMEs do not need to submit both an employment growth plan and an investment expansion plan to receive tax administration support; submitting either one is sufficient. Plans can be submitted online through HomeTax from November 2 through 30, or by mail or in person at the competent tax office. When a plan is prepared through HomeTax, ratios such as employment and investment growth are calculated automatically and can be submitted along with the plan.

The National Tax Service plans to additionally select for a regular tax audit in 2028 any SME that was excluded from regular audit selection after submitting an employment or investment expansion plan but failed to increase employment or investment as originally planned.

This content was produced with the assistance of AI translation services.