SMEs to keep tax benefits for 5 years even after becoming mid-sized firms

2024.06.04. The Fair Economy — Small and medium-sized enterprises (SMEs) that have 'graduated' to become mid-sized companies will be able to maintain their SME tax benefits for five years.

The government announced the 'Corporate Growth Ladder Building Plan' at a ministerial meeting on economic affairs on the 3rd.

This measure is the first growth ladder initiative to restore economic dynamism, focusing on supporting the transition from SMEs to mid-sized enterprises.

Support for graduated SMEs will be expanded. The grace period during which companies can continue to receive SME tax benefits even after exceeding the SME threshold will be extended from three to five years, and SMEs listed on the KOSPI or KOSDAQ will receive an additional two-year grace period, allowing them to enjoy SME benefits for up to seven years in total. For companies that enter mid-sized status after the grace period, a higher R&D and investment tax credit rate will be applied for the first three years to enhance growth incentives.

A new 'Growth Ladder Jump-up Program' (tentative name) will be established to select 100 promising SMEs and support them for three years. A pool of private experts, including former entrepreneurs and private investment institutions (VCs, CVCs, etc.), will be formed, and dedicated directors will be matched to develop customized scale-up strategies. Support will include vouchers for various growth services and preferential treatment in existing government support programs such as exports and R&D.

The government will also address obstacles to SME growth and support entry into new markets and businesses. SMEs that used policy financing will be linked to dedicated low-interest loans for mid-sized companies (6 trillion won from KDB and commercial banks) and dedicated funds (5 trillion won from commercial banks and private sector), and next year, 600 billion won in P-CBOs and 500 billion won in guarantees will be supplied to support the scale-up of promising SMEs. A 50 billion won fund co-invested by the Fund of Funds and private capital (CVC) will be created this year under Scale-up TIPS to strengthen R&D support for companies attracting private investment.

Starting next year, a dedicated M&A center will be set up at KIBO, which will work with the Industrial Bank of Korea's M&A platform to support companies' entry into new businesses. The government also plans to consider giving incentives under the family business inheritance deduction system to scale-up companies whose growth in investment and other indicators exceeds a certain level.

The government will strengthen infrastructure for using public information. It plans to open up SME technology assessment data held by KIBO and financial analysis data held by Korea Credit Information Services so that private financial institutions can use them, and to build an integrated policy finance platform by next year to make it easier for companies to access policy financing.

Starting with this measure, the government plans to roll out further policies — such as industry-specific scale-up measures and a venture investment promotion plan — to build a corporate growth ladder and foster an innovation ecosystem, and will continue to monitor and refine them in connection with the Dynamic Economy Roadmap.