{"id":2203821,"date":"2024-02-14T08:00:52","date_gmt":"2024-02-13T23:00:52","guid":{"rendered":"https:\/\/koreapro.org\/?p=2203821"},"modified":"2024-02-14T11:02:20","modified_gmt":"2024-02-14T02:02:20","slug":"south-korea-extends-grace-period-for-smes-to-delay-taxation-as-larger-firms","status":"publish","type":"post","link":"https:\/\/koreapro.org\/2024\/02\/south-korea-extends-grace-period-for-smes-to-delay-taxation-as-larger-firms\/","title":{"rendered":"South Korea extends grace period for SMEs to delay taxation as larger firms"},"content":{"rendered":"<p>South Korea\u2019s Cabinet has officially <a href=\"https:\/\/www.yna.co.kr\/view\/AKR20240213058700030\">passed<\/a> an extension of the \u201cgraduation deferral\u201d grace period for small and medium enterprises (SMEs) from three to five years. This means small companies will receive two extra years before being recognized and taxed as larger, mid-sized firms. Initially passed by the National Assembly in late January, this legislative amendment aims to support SMEs&#8217; stable growth and transition into mid-sized enterprises. The amendment will go into effect six months after its proclamation on Feb. 20, next week.<\/p>\n<p>The initiative, the SME ministry stated, addresses what it called the &#8220;<a href=\"https:\/\/www.korea.kr\/briefing\/pressReleaseView.do?newsId=156610354\">Peter Pan Syndrome<\/a>&#8221; among smaller businesses, where SMEs fear growth due to the potential loss of government support, such as lower corporate tax rates and special tax reductions, higher deductions for research and development and increased regulatory obligations for mid-sized businesses. By extending the grace period, the government aims to provide a more gradual transition for such companies, the ministry said on Tuesday.<\/p>\n<p><strong>Why It Matters<\/strong><\/p>\n<p>Recent <a href=\"https:\/\/www.joongang.co.kr\/article\/25136235#home\">polls<\/a> show many SMEs \u201cregret\u201d becoming mid-sized, with 77% of 300 surveyed by the Korean Chamber of Commerce feeling the negative impact, and nearly 24% wanting to revert back for benefits. Over half cited increased taxes as the main issue. Critics claim the three-year grace period is too short and discourages growth, potentially stifling innovation. Some mid-sized companies actively reverted to SMEs by adjusting growth and reorganization: According to the Federation of Midsize Enterprises of Korea, the <a href=\"https:\/\/www.mk.co.kr\/news\/economy\/10931211\">number<\/a> of such companies that reverted back to a smaller firm doubled from 40 in 2017 to 92 in 2021.<\/p>\n<p>However, while the extended grace period aims to mitigate such challenges, it also poses potential risks of normalizing delayed adjustments that businesses must make to thrive at a larger scale and too much dependency on state-led supports, potentially leading to a lack of sustainability. While the policy may help the ruling party win more votes from small and medium-sized enterprise owners, such policies will be seen by critics as contradictory to a conservative economic agenda and lacking fiscal sustainability, as the government has already experienced <a href=\"https:\/\/koreapro.org\/2023\/10\/south-koreas-rising-national-debt-will-likely-solidify-yoons-fiscal-policy\/\">rising<\/a> national debt and a reduction in tax revenue.<\/p>\n<div class=\"content-tags\"><a href=\"https:\/\/koreapro.org\/tag\/business-economy\/\"><span class=\"tag\">Business &amp; Economy<\/span><\/a><a href=\"https:\/\/koreapro.org\/tag\/domestic-politics\/\"><span class=\"tag\">Domestic Politics<\/span><\/a><\/div>","protected":false},"excerpt":{"rendered":"<p>South Korea\u2019s Cabinet has officially passed an extension of the \u201cgraduation deferral\u201d grace period for small and medium enterprises (SMEs) from three to five years. This means small companies will receive two extra years before being recognized and taxed as larger, mid-sized firms. Initially passed by the National Assembly in late January, this legislative amendment [&hellip;]<\/p>\n","protected":false},"author":5770,"featured_media":2203825,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[30],"tags":[24,27],"class_list":["post-2203821","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-briefings","tag-business-economy","tag-domestic-politics"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v23.7 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>South Korea extends grace period for SMEs to delay taxation as larger firms - KOREA PRO<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/koreapro.org\/2024\/02\/south-korea-extends-grace-period-for-smes-to-delay-taxation-as-larger-firms\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"South Korea extends grace period for SMEs to delay taxation as larger firms - KOREA PRO\" \/>\n<meta property=\"og:description\" content=\"South Korea\u2019s Cabinet has officially passed an extension of the \u201cgraduation deferral\u201d grace period for small and medium enterprises (SMEs) from three to five years. This means small companies will receive two extra years before being recognized and taxed as larger, mid-sized firms. Initially passed by the National Assembly in late January, this legislative amendment [&hellip;]\" \/>\n<meta property=\"og:url\" content=\"https:\/\/koreapro.org\/2024\/02\/south-korea-extends-grace-period-for-smes-to-delay-taxation-as-larger-firms\/\" \/>\n<meta property=\"og:site_name\" content=\"KOREA PRO\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/nknewsorg\/\" \/>\n<meta property=\"article:published_time\" content=\"2024-02-13T23:00:52+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2024-02-14T02:02:20+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/koreapro.org\/wp-content\/uploads\/sites\/6\/2024\/02\/1684855712139-1255x670-1.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1255\" \/>\n\t<meta property=\"og:image:height\" content=\"670\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Jeongmin\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@southkoreapro\" \/>\n<meta name=\"twitter:site\" content=\"@southkoreapro\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"KOREA PRO\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"2 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/koreapro.org\/2024\/02\/south-korea-extends-grace-period-for-smes-to-delay-taxation-as-larger-firms\/#article\",\"isPartOf\":{\"@id\":\"https:\/\/koreapro.org\/2024\/02\/south-korea-extends-grace-period-for-smes-to-delay-taxation-as-larger-firms\/\"},\"author\":{\"name\":\"Jeongmin\",\"@id\":\"https:\/\/koreapro.org\/#\/schema\/person\/66a3b705c65f3c50916a5c126f8a718c\"},\"headline\":\"South Korea extends grace period for SMEs to delay taxation as larger firms\",\"datePublished\":\"2024-02-13T23:00:52+00:00\",\"dateModified\":\"2024-02-14T02:02:20+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/koreapro.org\/2024\/02\/south-korea-extends-grace-period-for-smes-to-delay-taxation-as-larger-firms\/\"},\"wordCount\":357,\"publisher\":{\"@id\":\"https:\/\/koreapro.org\/#organization\"},\"image\":{\"@id\":\"https:\/\/koreapro.org\/2024\/02\/south-korea-extends-grace-period-for-smes-to-delay-taxation-as-larger-firms\/#primaryimage\"},\"thumbnailUrl\":\"https:\/\/assets.korearisk.com\/uploads\/sites\/6\/2024\/02\/1684855712139-1255x670-1.jpg\",\"keywords\":[\"Business &amp; 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