2026 Tax Revision Bill: Part 1 1. Supporting a Rebound in Potential Growth 2. Supporting Households and Regional Development 3. Advancing Tax Reform for a Fairer Tax System 4. Modernizing the Tax System and Enhancing Taxpayer Convenience 1. Supporting a Rebound in Potential Growth ○ Enhancing Future Growth Engines ① Introducing a Domestic Production Tax Credit Eligible Sectors Solar Power / Wind Power / Secondary Batteries / Semiconductors / Critical Materials /AI & Robotics Components Eligibility Requirements Direct domestic production and sales Tax Credit Amount Eligible production volume × Standard credit amount (1.1–1.5× preferential rate for regional areas) ② Expanding the “Hydrogen” Sector into the “Future Energy” Sector under National Strategic Technologies - Examples: SMR and MMR technologies and facilities General Technologies < National Strategic Technologies R&D Tax Credit Rate 2~25% 30~50% 1. Supporting a Rebound in Potential Growth ○ Strengthening the Competitiveness of SMEs and Venture Businesses ① Introducing a Gradual Phase-Out of Tax Incentives to Support SME Growth *(Tax incentives covered:) 1. Special Tax Reduction for SMEs, 2. Tax Credit for Video and Webtoon Content Production Costs Current Revised ② Enhancing Tax Incentives for Venture Investment Business Age Requirement Within 10 years of establishment, up from 7 years Equity Investment Tax Credit Corporate income tax credit increased from 5% to 7% for direct investments in venture businesses located in population-decline or at-risk areas 1. Supporting a Rebound in Potential Growth ○ Supporting Productive Finance and the Capital Market ① Introducing a Productive Finance ISA and Reforming the General ISA Framework Reformed General ISA Productive Finance ISA General youth Eligibility Residents aged 19 or older (Employed individuals aged 15 or older) Young people aged 34 or younger with a gross annual salary of KRW 75 million or less Tax Benefits Tax exemption on up to KRW 2 million in interest and dividend income (KRW 4 million for the low-income type) Full exemption from tax on interest and dividend income Full exemption from tax on interest and dividend income + 10% income deduction for contributions Eligible Investments Deposits and savings, domestic stocks, funds, etc. Domestic stocks, domestic equity funds, the National Growth Fund, etc. Contribution Limit KRW 20 million per year, up to KRW 100 million in total (unused annual limits may not be carried forward) KRW 20 million per year, up to KRW 200 million in total (unused annual limits may not be carried forward) Contribution Period 3 years (extendable up to 5 years in total) 3 years (extendable up to 10 years in total) ② Introducing Special Tax Treatment for Business Development Companies (BDCs) General Dividend Income Dividend Income from BDC Investments 14% Preferential separate tax rate of 9% (up to KRW 100 million in investment) 2. Supporting Households and Regional Development ○ Supporting Low- and Middle-Income Households ① Relaxing Income Eligibility Requirements and Increasing the Maximum EITC Benefit Single-Person Households / Single-Earner Households Dual-Income Households ② Increasing the Annual Rent Ceiling Eligible for the Monthly Rent Tax Credit Current -> Revised Annual Rent Ceiling Eligible for Tax Credit KRW 10 million KRW 12 million 2. Supporting Households and Regional Development ○ Supporting Youth, Marriage and Childbirth ① Expanding Tax Support for Youth General Youth Monthly Rent Tax Credit 15% (17% for those with gross annual salary of KRW 55 million or less) 17% Tax Credit for IRP Contributions 12% (15% for those with a gross annual salary of KRW 55 million or less) 15% Productive Finance ISA Full exemption from tax on interest and dividend income Additional income deduction equal to 10% of contributions ② Supporting Marriage and Childbirth Current Revised Income Deduction for Housing Lease Loan Repayments Where both spouses rent separate homes, only one spouse may claim the deduction Each spouse in a married couple who does not own a home may claim the deduction Fuel Tax Refund for Compact Cars Refund unavailable where both spouses each own a compact car Refund available for one compact car per household Childbirth Support Payments for Employees Payments made within two years after childbirth are tax-exempt Payments made from pregnancy onward are also tax-exempt 2. Supporting Households and Regional Development ○ Strengthening Region-Led Growth ① Applying Regional Adjustment Factors to R&D and Investment Tax Credit Rates Region Classification Region I Capital Area Region II Non-Capital Metropolitan Cities and Provinces Region III Other Non-Capital Regions Region IV Designated Preferential Non-Capital Regions ② Providing Preferential Income Tax Relief for SME Employees Working in Regional Areas Workplace Location Youth Age 60+, Persons with Disabilities, etc Current Revised Current Revised Region I 90% for 5 years 90% for 5 years 70% for 3 years 70% for 3 years Region II 90% for 6 years 75% for 3 years Region III 90% for 7 years 80% for 3 years Region IV 90% for 10 years 90% for 3 years