No Tax in the Incheon Songdo or Yongin?

Creators living on the outskirts are quite numerous. It's for tax evasion. Streamers live there because Incheon Songdo provides a lot of support." This conversation among famous YouTubers on a YouTube channel at the end of last year was a hot topic. It was about how influencers such as YouTubers and streamers can earn hundreds of millions of won in income but do not have to pay income tax if they live in places like Incheon Songdo or Gyeonggi Yongin.

Such tax benefits can be enjoyed until next year, but from 2026, income tax must be paid even in Incheon Songdo. This is because the government has revised the tax law this year and reformed the tax reduction system.

According to the Ministry of Economy and Finance on the 1st, the 'Small Business Tax Reduction' system, which provides up to 100% reduction in income tax and corporate tax to young entrepreneurs for 5 years to support start-up companies, will end at the end of this year. The government has decided to extend this system until the end of 2027 through the amendment of the '2024 Tax Law Amendment', but to adjust the reduction rate.

Previously, the government has been providing up to 100% tax reduction for 5 years to young start-up small businesses. The target was the representative at the time of start-up, aged 15 to 34, and the tax reduction rate varied by region. In overcrowded control areas, 50% of taxes are exempt, but in non-overcrowded control areas, 100% is exempt. Overcrowded control areas refer to regions where the population and industry are excessively concentrated or are likely to be concentrated, necessitating relocation or restructuring.

Overcrowded control areas include most areas of Seoul, Gyeonggi-do, and Incheon, but Incheon Free Economic Zones such as Songdo, Cheongna, and Yeongjong, Namdong Industrial Complex, and Siheung Banwol Special Area were excluded. For this reason, streamers, BJs, YouTubers, etc., have established their corporations in Incheon Songdo, which is not far from Seoul and has developed infrastructure, and have been receiving 100% tax exemption benefits.

However, the Ministry of Economy and Finance announced this year's tax law amendment to reduce the exemption rate for metropolitan areas outside the overcrowded control areas, which have favorable start-up conditions compared to the provinces. Young entrepreneurs will also receive only a 75% exemption from the existing 100%. However, the current 100% exemption is maintained in population-decreasing areas. The tax exemption limit is also limited to 500 million won per year.

The adjustment of the metropolitan area exemption rate will apply to start-ups from January 1, 2026. An official from the Ministry of Economy and Finance said, "Until next year, the current regulations will be applied, but from the year after next, the changed exemption rate will be applied to those who start a business."

The Ministry of Economy and Finance amended the tax law for this reason to more actively support the decentralization of the metropolitan population. An official from the Ministry of Economy and Finance explained, "There was criticism that it is not fair to give the same 100% exemption to places like Songdo and Cheongna, which have a lot of population inflow and decent start-up conditions, as the provinces."

According to the Ministry of Economy and Finance, the population of the metropolitan area has been increasing recently, mainly in non-overcrowded control areas such as Songdo. Looking at the population change by region over the past five years (2019-2023), the overcrowded control area decreased by 449,000 people (-2%), but the non-overcrowded control growth management area increased by 606,000 people (11%) during the same period. This is why young entrepreneurs flock to Incheon Songdo and others to save taxes as the online broadcasting market, including YouTube, grows.

Also, cases of unfairly receiving tax exemptions by falsely registering a business in a shared office in a 100% exemption area while broadcasting in Seoul have been detected. They unfairly received hundreds of millions of won in tax exemptions annually, acquired expensive resort memberships and high-end foreign cars, and enjoyed a luxurious life while living in luxury apartments. In relation to this, the National Tax Service stated, "We will strictly investigate suspicions of unfair tax exemption, omission of reported income, etc.," and "We will ensure that the tax exemption system intended to support young entrepreneurs and create employment in areas outside the metropolitan area is operated correctly." Money Today, HyeYoon Jeong~ 2024 Aug. 02