Ministry of Finance and Economy

The Consumer Price Index was 119.77 (2020=100) in July 2026. The index decreased 0.2 percent from the preceding month and rose 2.8 percent from the same month of the previous year. Please refer to the attached pdf for the full report.

I.          Background   (Macroeconomic Economy) The Korean economy maintains strong growth momentum, supported by robust exports driven by the global semiconductor boom and resilient domestic demand underpinned by government policy measures. However, persistent uncertainties, including the conflict in the Middle East and U.S. tariffs, underscore the need to address pressing challenges such as supply chain risks and intensifying competition in high-tech industries.   (Household Economic Conditions and Structural Challenges) Despite the recovery in growth, structural challenges persist, including widening disparities across sectors and regions. K-shaped polarization, inflationary pressures resulting from high oil prices, and rising interest rates and exchange rates continue to place a heavy burden on vulnerable groups, including low- and middle-income households and young people. Amid widening disparities between the Seoul metropolitan area and other regions, driven in part by regional population decline, the government will step up its policy efforts to promote region-led growth.   (Revenue Outlook) Tax revenue is expected to remain on a solid upward trajectory, led by corporate income tax receipts, amid the broad-based economic recovery, the semiconductor upcycle, and stronger stock market activity. However, downside risks associated with the economic cycle, demographic changes, and entrenched tax expenditures could weaken the revenue base over the medium to long term. At the same time, a more proactive fiscal role will be required to meet rising welfare spending driven by population aging, strengthen the competitiveness of future high-tech industries, and address widening economic polarization.   II.       Policy Directions for the 2026 Tax Revision Bill   ①       Supporting a Rebound in Potential Growth Beyond the Semiconductor Upcycle ②       Supporting Low- and Middle-Income Households, Youth, and Regional Development ③       Advancing Tax Reform for a Fairer Tax System ④       Modernizing the Tax System and Enhancing Taxpayer Convenience   ▶  Policy Goal: Supporting the Next Economic Leap toward an Indispensable Korea     The key initiatives under the 2026 Tax Revision Bill are detailed below:       1.      Supporting a Rebound in Potential Growth   1)      Enhancing future growth engines   -          Introduce a domestic production tax credit: Grant individual and corporate income tax credits based on production volumes for products with a weak domestic production base, including (i) solar power generation equipment, (ii) wind power generation equipment, (iii) secondary batteries, (iv) semiconductors, (v) critical materials, and (vi) AI and robotics components. (Applicable through December 31, 2036) -          Adjust the depreciation cap for environment-friendly business passenger vehicles. -          Expand the scope of national strategic technologies: Broaden the existing hydrogen sector into the future energy sector, including SMR and MMR technologies and facilities. -          Allow the VAT input tax credit for autonomous passenger vehicles used for R&D purposes.  -          Provide corporate income tax support for business restructuring in the petrochemical industry. -          Introduce special tax treatment for certified coastal shipping companies.   2)      Strengthening the Competitiveness of SMEs and Venture Businesses   -          Introduce a gradual phase-out of tax incentives to support SME growth: Establish a three-year phase-out period for the special tax reduction for SMEs and the tax credit for video and webtoon content production costs. * [Current] Benefits expire immediately after the five-year grace period following graduation from SME status.  [Proposed] Reduced benefits will apply for an additional three years before expiring.   -          Introduce accelerated depreciation for SME investments in safety facilities. -          Enhance tax incentives for venture investment: Relax the age requirement for eligible venture companies under venture investment tax incentives by expanding the eligibility period from within seven years to within ten years of establishment, thereby supporting the scale-up of venture businesses.   3)      Supporting Productive Finance and the Capital Market   -          Introduce a “Productive Finance Individual Savings Account (ISA)” with enhanced tax benefits for domestic investment, including full exemption from tax on interest and dividend income. -          Introduce special tax treatment for Business Development Companies (BDCs): Apply a preferential separate tax rate of 9% to dividend income derived from investments in BDCs, up to an investment amount of KRW 100 million. -          Increase the tax-deductible limit for loan-loss provisions on productive-sector lending.   2.      Supporting Households and Regional Development   1)         Supporting low- and middle-income households   -          Relax the income eligibility requirements and increase the maximum benefit under the Earned Income Tax Credit (EITC) (for dual-income households, raise the income threshold from KRW 44 million to KRW 52 million and the maximum benefit from KRW 3.3 million to KRW 3.6 million). -          Increase the annual rent ceiling eligible for the monthly rent tax credit from KRW 10 million to 12 million. -          Expand eligibility for the basic deduction under the comprehensive income tax. -          Make the income deductions for Housing Subscription Savings Accounts and similar savings plans permanent. -          Lower the withholding tax rate on business income from personal services from 3% to 2%. -          Extend the application period for tax credits on medical expenses and other eligible expenses for qualified business operators. -          Extend the application period of the exemption from deemed rental income taxation for small-scale housing. -          Extend by three years the application period for reductions in the individual consumption tax and related taxes on taxi fuel. -          Extend the application period of the preferential VAT deemed input tax credit for restaurant businesses. -          Extend the application period of special measures, including deferred seizure, for restarting entrepreneurs. -          Increase the limit on gift tax taxable value exclusion for trusts for persons with disabilities. -          Make tax incentives for farmers and fishers permanent and extend their application periods. -          Strengthen oversight of products subject to intensive monitoring under the tariff-rate quota (TRQ) program: Allow customs authorities to order the release of such products from bonded areas and shorten the deadline for filing import declarations.     2)         Supporting youth, marriage and childbirth   -          Increase the monthly rent tax credit rate for young people from 15% to 17%. -          Increase the tax credit rate for Individual Retirement Pension (IRP) contributions by young people from 12% to 15%. -          Introduce a Youth Productive Finance Individual Savings Account (ISA). -          Exempt public dormitories from VAT to help reduce housing costs for university students. -          Extend the application period of the tax exemption on interest income from the installment savings for future-preparation of military personnel. -          Extend the application period of the VAT exemption on catering services provided to schools, factories, and similar institutions. -          Expand eligibility for the income deduction for principal and interest repayments on housing lease loans. -          Extend eligibility for the fuel tax refund to one vehicle owned by newly married couples where both spouses each own a compact car. -          Expand the employment income tax exemption for childbirth support payments to cover payments made during pregnancy. -          Expand eligibility for the employment income tax exemption on childcare allowances to cover allowances paid in respect of foster children.   3)         Strengthening region-led growth   -          Provide preferential tax incentives for R&D and investment in regional areas: Apply regional adjustment factors to the basic tax credit rates for the R&D tax credit and the integrated investment tax credit.   * Regional adjustment factors: (i) Seoul metropolitan area: 1.0; (ii) non-capital metropolitan cities and provinces: 1.1; (iii) other non-capital regions: 1.3; and (iv) designated preferential non- capital regions: 1.5.   -          Provide preferential tax relief for employees of SMEs working in regional areas and extend the application period. -          Exempt relocation allowances paid to employees relocating to non-metropolitan areas from income tax. -          Provide preferential income tax credits for Hometown Love Donations to regional areas. -          Redesign the tax reduction regime for start-up SMEs. -          Strengthen safeguards against the abuse of tax incentives for business relocation and establishment in special zones. -          Introduce a tax reduction for start-ups established in special zones within the Gwangju-Jeonnam Integrated Special Metropolitan City. -          Extend the application period of the special tax treatment for businesses relocating to Opportunity Development Zones.     3.      Advancing Tax Reform for a Fairer Tax System   1)         Rationalizing the real estate tax system   ①       Normalize the tax burden on non-owner-occupied housing and high-value residential properties.            【Normalizing the capital gains tax system】   -          Split the long-term holding deduction into separate schemes for residential properties and non-residential assets, and rename them. -          Reform the long-term residence deduction (formerly the long-term holding deduction for residential properties): (i) Replace the current homeownership-based deduction with a residency-based deduction to better support owner-occupiers. (ii) Introduce a cap on the long-term residency income deduction to rationalize the level of the deduction (KRW 2 billion in 2028 → KRW 1 billion from 2029 onward). (iii) Implement the reform in phases after a one-year grace period.   【Normalizing the comprehensive real estate holding tax (CRET)】   -          Adjust the scope of residential properties subject to the comprehensive real estate holding tax: (Households owning a single home) Apply the tax to homes with an officially assessed value exceeding KRW 1.4 billion (approximately KRW 2 billion in market value). -          Adjust the basic deduction for the comprehensive real estate holding tax on residential properties: (Households owning a single home) Increase the basic deduction for owner-occupied homes from KRW 1.2 billion to KRW 1.4 billion, while lowering the basic deduction for homes not occupied by their owners from KRW 1.2 billion to KRW 900 million. -          Increase the fair market value ratio for the comprehensive real estate holding tax on residential properties: (Households owning a single home and households owning one or two homes in non-capital regions) Increase the ratio from 60% to 70%, effective from 2027. -          Gradually unify the residential comprehensive real estate holding tax rates based on property value rather than the number of homes owned. -          Reform the tax credit for households owing a single home under the comprehensive real estate holding tax: (i) Replace the current holding-period-based tax credit with a residency-period-based tax credit to better support owner-occupiers. (ii) Introduce a cap on the tax credit (KRW 8 million in 2027 → KRW 6 million from 2028 onward). -          Raise the cap on the comprehensive real estate holding tax liability from 150% to 200%. -          Expand the tax payment deferral program under the comprehensive real estate holding tax.   【Supporting long-term residents, older homeowners, and homes in regional areas, while facilitating home sales by multi-homeowners】   -          Increase the basic deduction for capital gains tax on long-term owner-occupied single homes: Increase the annual deduction from KRW 2.5 million to KRW 25 million for households owning a single home that has been owner-occupied for at least 10 years and is sold for KRW 3 billion or less. -          Introduce temporary special tax treatment under the capital gains tax for older owner-occupied single-homeowners. -          Expand special tax treatment for second homes in regional areas under the capital gains tax and the comprehensive real estate holding tax. -          Temporarily ease the higher capital gains tax rates on homes in designated adjustment areas owned by multi-homeowners (2027-2028).   【Rationalizing eligibility requirements for special tax treatment】   -          Shorten the special treatment period for temporary two-home ownership in designated adjustment areas from 3 years to 2 years. -          Phase out the exclusion from higher capital gains tax rates and the preferential long-term holding deduction for rental apartments acquired in designated adjustment areas. -          Adjust the exemption from the residence requirement for Win-win Rental Housing. -          Revise special capital gains tax treatment for rental housing and unsold housing by introducing expiration dates.   【Circumstances for deeming periods of non-residence as periods of residence】   -          Deem periods of non-residence due to unavoidable circumstances and other qualifying circumstances as periods of residence. * Qualifying circumstances include education (high school or university), a change of employer or job relocation, medical treatment or recuperation for at least one year due to illness, school transfer (due to school violence), overseas stay (for education, a change of employer, or job relocation), or co-residence with and support for parents or other lineal ascendants aged 60 or older.   【Supporting housing supply】   -          Increase the capital gains tax reduction rate for land transferred to public housing developers and extend the application period. -          Expand the scope of the exclusion from aggregation under the comprehensive real estate holding tax for land designated for new housing construction.   ② Normalize taxation of non-business land.   -          Exclude non-business land owned by individuals from the long-term holding deduction for capital gains tax. -          Raise the higher income tax and corporate income tax rates on gains from the transfer of non-business land by 10 percentage points. -          Raise the top comprehensive real estate holding tax rates for land subject to aggregate taxation from 3% to 4%.   2)         Reforming family business succession tax relief   -          Define “family business” as a business possessing specialized technologies or management know-how. -          Select 727 eligible industries for the family business succession tax relief and move the relevant provisions from the Enforcement Decree to the Act. -          Strengthen the eligibility criteria and compliance requirements for family business succession tax relief: Apply the tax relief only if the decedent has continuously operated the family business for at least 30 years (up from 10 years under the current rules), and extend the post-relief compliance period following succession from 5 years to 10 years. -          Adjust the coverage and calculation method of family business succession tax relief: Calculate the tax relief as KRW 2 billion multiplied by the number of years the decedent has managed the family business, while increasing the maximum deduction to KRW 100 billion. -          Introduce special tax treatment to support third-party business succession: (Seller) Provide a 20% reduction in capital gain tax, capped at KRW 50 million for each year of business operation. (Buyer) Provide a 10% reduction in individual and corporate income taxes for five years, subject to an annual cap of KRW 500 million.   3)         Rationalizing tax exemptions and tax reductions   ➤  Significantly rationalize tax expenditure programs (115 out of 241 programs).   ① Termination (20 measures)   -          Terminate tax expenditures with limited effectiveness, such as those that have fulfilled their policy objectives or seen low utilization: Allow the individual consumption tax reduction for hybrid vehicles, capped at KRW 700,000 per vehicle, to expire; and terminate the VAT refund scheme for accommodation services supplied to foreign tourists after June 30, 2027.   ②       Conversion to direct fiscal support (17 measures)   -          Replace the tax credit for childbirth, adoption, and marriage with direct fiscal support. -          Replace the individual consumption tax reduction for electric and hydrogen-powered vehicles with direct fiscal support. -          Replace the additional income tax deduction for public transportation expenses paid by credit card and other eligible payment methods with direct fiscal support.   ③       Restructuring (64 measures)   -          Rationalize the eligibility for the income tax deduction for interest payments on long-mortgage loans: Limit the deduction to taxpayers who reside in the relevant home. -          Rationalize the scope of the education tax credit for pre-school children. -          Improve the VAT tax credit scheme for credit card sales. -          Increase the preferential income tax rate for foreign workers: Raise the preferential income tax rate for foreign workers from 19% to 21%, taking into account tax equity with domestic workers, and extend the application period by three years (through December 31, 2029). -          Rationalize eligibility for the income tax reduction on contributions to the performance-based compensation fund for key personnel. -          Introduce sunset dates for investment tax credits by detailed technologies and facilities under the new growth engine and original technology and national strategic technology categories. -          Adjust the individual and corporate income tax reduction rates for small-home rental business operators. -          Rationalize eligibility for the integrated employment tax credit. -          Reduce the stamp tax exemption borne by financial institutions on loan documents for start-ups and SMEs.   4.      Modernizing the tax system and enhancing taxpayer convenience   1)         Rationalize the tax system   -          Improve the valuation method for listed shares in cases of suspected share price suppression: Where the relevant presumptive criteria are met, the tax authorities may, following review and resolution by the Valuation Review Committee, extend the valuation period and reassess the value of the shares. -          Exempt VAT on gold bullion withdrawn by the Bank of Korea from a custodian. -          Rationalize the tax treatment of treasury shares. -          Allow the temporary reduced liquor tax rate for draft beer to expire. -          Rationalize the criteria for determining Controlled Foreign Corporations (CFCs): Adjust the effective tax rate threshold for determining CFC status to 15%, in line with the Global Minimum Tax. -          Include Qualified Domestic Minimum Top-up Tax (QDMTT) in the scope of the foreign tax credit.   2)         Prevent tax avoidance and evasion and support tax administration   -          Reform the reward system. -          Strengthen the oversight of offshore trusts: (i) Introduce rewards for reporting failures to submit offshore trust statements. (ii) Increase the maximum administrative fine for failure to comply with offshore trust reporting requirements from KRW 100 million to KRW 1 billion. -          Strengthen the requirements for releasing seized assets. -          Introduce a customs compliance verification system.   3)         Enhance taxpayer convenience   -          Increase the threshold for business promotion expenses that may be claimed without qualified supporting documentation. -          Expand reductions in penalties for late tax returns filed voluntarily within a short period after the statutory filing deadline. -          Expand reductions in late payment interest where a decision on a pre-assessment review is delayed. -          Rationalize business registration rules for trust property consisting of movable assets. -          Introduce criteria for exempting delinquent taxpayers from applications for detention. -          Refine the VAT rules applicable to transactions involving services provided by foreign corporations. -          Rename certain required information on tax invoices.        Please refer to the attached files. 

Statistics Korea released Monthly Industrial Statistics, June 2026 report on July 31, 2026 The Index of All Industry Production in June increased by 2.3 percent from the previous month. Please refer to the attached pdf for the full report.