Ministry of SMEs outlines 2026 small-business tax overhaul

South Korea's Ministry of SMEs and Startups said Friday that its 2026 tax overhaul plan would grant eligible new-industry small businesses outside the capital region income- and corporate-tax reductions of up to 100 percent to support regional start-ups and small-business formation.

The plan would let venture investors claim tax benefits on investments in companies up to 10 years after their establishment, rather than seven, and make permanent a capital-gains tax preference due to expire at the end of 2028. The ministry said the relaxed company-age requirement would extend tax benefits to scale-up investment. It would also raise to 7 percent from 5 percent the tax-credit rate for domestic corporations directly investing in venture companies in population-declining or population-decline-interest areas.

Noh Yong-seok, the ministry's first vice minister, said the plan "focuses on easing the management burden on SMEs and expanding innovation-led growth for start-ups and venture companies."

It would introduce a tax preference for third-party business succession, cutting capital-gains tax by 20 percent when SMEs without suitable family successors transfer their business to a third party. Acquiring companies would receive a 10 percent income- or corporate-tax reduction for five years. The ministry said the measure was needed as business owners age and the lack of successors deepens, increasing the need for M&A-based succession.

For companies moving beyond small-business status, the proposal would phase down special tax relief, retaining 50 percent of the applicable reduction for three years after the grace period. It also calls for regional preferential treatment for wage-income tax reductions available to qualifying workers at small businesses.

The ministry also proposed allowing SMEs to accelerate depreciation on industrial-accident and fire-prevention facilities, permitting a declared useful life as short as 50 percent of the standard period. It said such safety investments can burden businesses because they are intended to prevent risks rather than raise productivity.

The ministry said the measures would undergo public notice through mid-August before submission to the regular National Assembly session in early September.