Tax Exemption: Why Famous YouTubers Are Flocking to Songdo
"Many famous YouTubers and streamers are choosing Incheon's Songdo for a reason. They don't have to pay income tax for five years, and it's advantageous even when buying a house. There's no reason not to come," stated Lawyer Jung In-guk from Hansol Law Firm in a recent interview with <Hankyung.com>, referring to what he called "truly radical tax-saving methods."
The reason behind YouTubers gravitating towards Incheon's Songdo and other areas lies in the Special Taxation Law. This law provides benefits for youth entrepreneurship. The law defines youth as individuals aged 15 to 34, with exceptions for military service extending up to six years. Essentially, individuals up to the age of 40 are considered youth.
Entrepreneurs who start businesses outside congested areas receive a 100% income tax exemption for five years. Congested areas are regions densely populated or potentially requiring redevelopment for balanced urban development, mainly in Seoul and its metropolitan area.
Lawyer Jung noted that preferred locations for YouTubers include Incheon's Songdo International City and Yongin, Gyeonggi Province. He explained, "Songdo International City is the most developed and densely populated area in Incheon, but it's designated as an economic free zone to attract foreign investment, thus excluded from congested areas. Songdo International City's proximity to Seoul and well-developed infrastructure makes it attractive to YouTubers."
He further emphasized, "For example, assuming a YouTuber's net income is 1.1 billion won and only basic deductions are claimed, they would face a tax rate of 45% on income exceeding 1 billion won, resulting in approximately 430 million won in taxes annually. Saving around 400 million won in taxes each year for five years is an incredibly radical tax-saving strategy."
Receiving a 100% income tax exemption is a significant benefit, but it doesn't end there. Under local tax laws, small and medium-sized enterprises (SMEs) starting businesses outside congested areas receive a 75% reduction in acquisition tax for real estate and are exempt from property tax for three years, followed by a 50% reduction for the next two years, specifically for properties related to business.
Songdo International City's property prices have not fully recovered from their peak. According to the Ministry of Land, Infrastructure, and Transport's real estate transaction system, a 84-square-meter apartment in Songdo-dong, Yeonsu-gu, was recently sold for 1.097 billion won. This is lower than the peak price of 1.47 billion won during the housing boom in 2021 but has been gradually rebounding since then.
Lawyer Jung highlighted, "For instance, if a YouTuber purchases an apartment in Songdo and registers it as a business location for an SME, they only pay 25% of the acquisition tax. The acquisition tax rate varies depending on the property's value, ranging from 1% to 3% based on different price brackets. Purchasing a property below 600 million won results in an acquisition tax of just 0.25% of the standard tax rate of 1%."
He continued, "Moreover, they don't pay property tax for three years and only pay 50% for the following two years. If they sell the property after five years of streaming activities and the property's value increases, they can maximize tax benefits until the two-year period, which qualifies for tax exemption on capital gains."
It's not just YouTubers who can benefit from these incentives. Industries eligible for tax exemptions under the Special Taxation Law include manufacturing, construction, online retail, restaurants, information technology, and social welfare services, among others.
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