Synthetic Nicotine Cigarettes, 50% Temporary Individual Consumption Tax Reduction for Two Years
Special Provisions for a Single Residence Expanded to Population-Decrease Concern Areas in Non-Capital Regions
Three-Month Grace Period for Virtual Asset Sales Contracts…Retention of Detention for Large Delinquents Maintained
500 Million Won Debt Relief for Livelihood Delinquents…Temporary Liquor Tax Reduction for Low-Alcohol Mixed Beverages
Increased Information on Narcotics Control…New Obligation to Prepare Tax Expenditure Settlement Report
On November 30, 2025, a tax reform bill that separates dividend income taxation and sets the maximum rate to 30%, along with a tax exemption on interest income from “Youth Future Savings,” passed the National Assembly Planning and Finance Committee. The committee resolved amendments to 11 tax laws, including the Income Tax Act, the Restriction of Special Taxation Act, and the Customs Act.
The government plans were based on the “2025 Tax Amendment Plan” submitted to the National Assembly on September 3, but several adjustments were made with bipartisan agreement regarding the separate taxation framework for dividend income, support for young, regional, and livelihood taxpayers, and the timing of virtual asset sales commissions.
1. Reduction of the Maximum Rate for Separate Dividend Taxation from 35% to 30% and Tax Exemption for Youth Future Savings:
The Restriction of Special Taxation Act saw adjustments in multiple clauses including the separate dividend taxation system, tax exemptions for mutual financial institutions, and support for youth, regions, and R&D. The highest rate for high-dividend companies was lowered, and qualifications for separate taxation were strengthened. The condition for dividend increase compared to the previous year was changed, and standards for tax-exempt interest from deposits and investments in mutual financial entities were eased. New tax exemptions on interest income were introduced for Youth Future Savings for eligible young people aged 19-34 meeting income requirements.
2. 50% Temporary Individual Consumption Tax Reduction for Synthetic Nicotine Cigarettes:
The amended Value-Added Tax Act introduced a temporary individual consumption tax reduction for synthetic nicotine cigarettes beginning from the act’s enforcement day for two years. This aims to alleviate the tax burden on small business owners during the transition period.
3. Expanded Real Estate Tax Special Provisions for Non-Capital Population-Decrease Concern Areas:
Special real estate tax treatments were expanded and extended to cover more areas, including non-capital regions of population decline interest. The application period for unsold newly built homes and properties in such areas was extended.
4. Delay in Commissioning Management of Virtual Asset Liquidations, Retention of Detention for Large Delinquents:
The enactment date of the delegation of virtual asset seizure and sale tasks to the Korea Asset Management Corporation was postponed by three months, while the detention practice for habitual and significant tax delinquents remained unchanged.
5. Debt Relief for Livelihood Delinquents and Temporary Liquor Tax Reduction:
A special provision was created to abolish tax payment obligations for livelihood delinquent taxpayers experiencing economic hardships. Temporary liquor tax relief was also introduced for low-alcohol mixed beverages considering changing consumer trends and competitive industry conditions.
6. Enhanced Narcotic Control Information and Tax Expenditure Report Obligation:
The Customs Act amendment included extending customs and value-added tax exemptions for imported rare disease drugs and specific mineral imports for supply chain stability. Information related to narcotics precursor materials and temporary narcotics is now included in customs information requests, and there are new provisions for body searches under certain suspicions. A new requirement mandates the preparation of a tax expenditure report to improve the post-management of tax incentives.
This comprehensive tax bill reflects numerous adjustments based on practicality and economic considerations, aiming to balance public welfare and fiscal integrity.