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Key Implications of the “Yellow Envelope Act” on Labor-Management Relations (Part 1) With the launch of the new administration in Korea, there is growing attention on whether the Yellow Envelope Act, which includes amendments to Articles 2 and 3 of the Trade Union and Labor Relations Adjustment Act (the “TULRAA”), will be reintroduced and advanced in the legislative process. The Yellow Envelope Act is a legislative proposal that aims to: (i) expand the scope of “employee” and “worker eligible for union membership under the TULRAA,” (ii) expand the scope of “employer under the TULRAA,” (iii) widen the concept of “industrial disputes,” and (iv) limit or exempt unions from liability for damages resulting from industrial action. Although several versions of the bill have been introduced, it has not yet been enacted into law. Since this legislation could significantly reshape labor-management relations in Korea, it is important to closely monitor the legislative process and prepare for potential changes. In this two-part newsletter series, we will begin by discussing points (i) and (ii) above. 1. The Yellow Envelope Act: Introduction and Key Issues While it is difficult at this time to predict precisely which contents will ultimately be included in the Yellow Envelope Act, we can anticipate its likely direction by reviewing the bills currently proposed before the 22nd National Assembly. The main features of each bill are summarized in the table below: Issues The Expansion of the Scope of “Employee” Eligible for Union Membership The Expansion of the Scope of “Employer” Required to Engage in Collective Bargaining with Trade Unions Current Provisions A person who lives on wages, salary, or any other income equivalent thereto A business owner, a person responsible for the management of a business, or a person who acts on behalf of a business owner with regard to matters concerning workers in the business Proposed Bills (National Assembly members) Kim Tae-sun: A person who personally provides labor for another person’s business Lee Yong-woo: A person who organizes or joins a trade union Kim Tae-sun: Anyone who exercises substantial control over a worker’s duties, or who has significant influence over the worker’s working conditions and employment matters such as wages, benefits, or termination Park Hong-bae: Anyone who can substantially and specifically control or determine a worker’s working conditions Lee Yong-woo: Anyone who actually exercises or holds de facto influence or control over a worker’s working conditions, assigned tasks, or union activities; or a principal who assigns work to another business but has the work performed at the principal’s workplace 2. Expansion of the Scope of “Employee” under the TULRAA The Supreme Court has ruled that whether a person qualifies as an employee under the TULRAA should be determined based on the need to guarantee the three fundamental labor rights, rather than being limited by the definition of “employee” in the Labor Standards Act. As a result, many courts have allowed special-type workers and platform workers to form unions, engage in collective bargaining, and participate in industrial action, recognizing them as employees under the TULRAA. In this context, if the proposed bills are enacted to presume employees either as “a person who personally provides labor for another’s business” or “a person who organizes or joins a trade union,” it will become even clearer that labor providers, such as special-type workers and platform workers, will be recognized as employees under the TULRAA, regardless of how the Supreme Court rules in pending cases. 3. Expansion of the Scope of “Employer” under the TULRAA Recently, the Seoul High Court ruled that subcontractor workers may negotiate directly with the contracting entity, specifying that the contracting entity qualifies as an employer under the TULRAA if it exercises “substantial control” over specific collective bargaining issues. The court held that, in such cases, the contracting entity is obligated to respond to collective bargaining requests from the subcontractor’s union. However, the Busan High Court reached a different conclusion in a similar case. As both cases are now pending before the Supreme Court, whether a contracting entity can be considered an employer under the TULRAA in relation to subcontractor workers will ultimately depend on the Supreme Court’s forthcoming decisions. Against this backdrop, if the definition of an “employer” under the TULRAA is expanded to include “a person who can substantially and specifically control and determine working conditions,” a subcontractor’s union could request that a contracting entity participate in collective bargaining, regardless of how the Supreme Court rules on the current cases. This expansion could also give rise to new legal questions - for example, whether a contracting entity may replace striking subcontractor workers with its own employees or those of other subcontractors, or whether the contracting entity could hold the subcontractor liable for non-performance if a strike by subcontractor workers causes damage to the contracting entity. [Korean Version]
2025.07.02

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Amendments to the Commercial Code Passed by the National Assembly Since the new government came into power as a result of the June 3rd presidential election, the market has shown a great deal of interest in the new administration’s policies aimed at enhancing corporate governance and systems related to corporate law, as well as initial amendments to the Korean Commercial Code (the “KCC”) as a starting point to implement such policies. Shortly after President Lee Jae-myoung’s inauguration on June 5, 2025, the Stock Market Revitalization Task Force of the Democratic Party of Korea (the “DPK”) held a press conference to announce its position on various proposed amendments to the KCC. Subsequently, on June 27, 2025, the DPK established its “KOSPI 5,000 Special Committee” and further released a statement urging the swift passage of such proposed amendments to the KCC. As outlined in our previous newsletter (Link), the DPK has been discussing plans to (i) expand fiduciary duties of directors to include protection of shareholders’ interests, (ii) obligate listed companies to hold virtual general meetings of shareholders, (iii) adopt a system of independent directors, (iv) expand the separate election of audit committee members, and (v) mandate the implementation of cumulative voting for the appointment of directors. Shortly after the start of the new administration, the DPK submitted a separate legislative bill to amend the KCC to address (i) and (ii) above. Previously proposed amendments to the KCC (including the bill submitted by the DPK discussed above) were submitted to the National Assembly’s Legislation and Judiciary Committee on July 1, 2025 for its consolidated review. Through bipartisan discussions, these proposed amendments (collectively, the “Amendment”) were passed at the plenary session of the National Assembly on July 3, 2025. The Amendment is intended to (i) expand the fiduciary duties of directors to include protection of shareholders’ interests, (ii) obligate listed companies to hold virtual general meetings of shareholders, (iii) adopt a system of independent directors, and (iv) expand application of the “3% rule” (i.e., the rule under the pre-amended KCC which aggregates and limits the voting rights of the largest shareholder and related parties to 3% in the appointment of statutory auditors and members of the audit committee who are not outside directors) to audit committee members who are outside directors. The provisions of item (i) above will take effect immediately, without any grace period, from the date of promulgation, while the provisions of item (ii) will come into force on January 1, 2027, and the provisions of items (iii) and (iv) will take effect after a grace period of one year. As for the other amendments proposed by the DPK which are not reflected in the Amendment, including those to expand the separate election of audit committee members and to mandate the implementation of cumulative voting for the appointment of directors, the Legislation and Judiciary Committee will discuss them further by gathering opinions through public hearings. The provisions of the Amendment are summarized as follows (revisions of Articles 400(2), 524-4(3), 542-8(2) through (5), 542-11, and 635 are omitted from our summary below because they merely reflect the change of the term “outside directors” of a listed company to “independent directors”): Current Provisions Proposed Amendment Article 364 (Place for Convocation) Unless otherwise provided for in the articles of incorporation, a general meeting of shareholders shall be convened at the place of the principal office or at any place adjacent thereto. Article 364 (Place and Method of Convocation) (1) Unless otherwise provided for in the articles of incorporation, a general meeting of shareholders shall be convened at the place of the principal office or at any place adjacent thereto. (2) A company shall convene a general meeting of shareholders in such a way that requires shareholders to be present in person at the place of convocation. Article 368 (Methods of Adopting Resolutions and Exercise of Voting Rights) (1) (Omitted) (2) A shareholder may cause a proxy to exercise his/her voting rights. In such cases, the proxy shall submit a document proving his/her power of representation at a general meeting of shareholders. (3) (Omitted) Article 368 (Methods of Adopting Resolutions and Exercise of Voting Rights) (1) (Omitted) (2) A shareholder may cause a proxy to exercise his/her voting rights. In such cases, the proxy shall submit a physical or electronic document proving his/her power of representation at a general meeting of shareholders. (3) (Omitted) Article 382-3 (Fiduciary Duty of Directors) (1) Directors shall perform their duties in good faith for the interest of the company in accordance with statutes, and the articles of incorporation. Article 382-3 (Fiduciary Duty, etc., of Directors) (1) Directors shall perform their duties in good faith for the interest of the company and shareholders in accordance with statutes, and the articles of incorporation. (2) In performing their duties, directors shall protect the interests of all shareholders and treat the interests of all shareholders fairly. Article 542-8 (Appointment of Outside Directors) (1) A listed company shall ensure that outside directors comprise no less than one fourth of the total number of directors except in cases prescribed by Presidential Decree in light of the scale of assets; provided, that listed companies prescribed by Presidential Decree based on the scale of assets, etc., shall appoint three or more outside directors and the number of outside directors shall account for more than half of the total number of directors. Article 542-8 (Appointment of Independent Directors) (1) A listed company shall ensure that independent directors (referring to outside directors under Article 382(3) that perform functions independently from inside directors, executive directors, and persons who instruct other individuals to conduct business; hereinafter the same shall apply) comprise no less than one third of the total number of directors except in cases prescribed by Presidential Decree in light of the scale of assets; provided, that listed companies prescribed by Presidential Decree based on the scale of assets, etc., shall appoint three or more independent directors and the number of independent directors shall account for more than half of the total number of directors. Article 542-12 (Composition, etc., of Audit Committees) (1) ~ (3) (Omitted) (4) In appointing or dismissing a member of the audit committee under paragraph (1), a shareholder (in the case of the largest shareholder, when appointing or dismissing a member of the audit committee who is not an outside director, the shares held by his/her related parties and other persons prescribed by Presidential Decree shall be aggregated) who holds more than 3/100 of the total number of issued and outstanding shares (a lower shareholding ratio may be determined by the articles of incorporation, and if a lower shareholding ratio is set forth in the articles of incorporation, such ratio shall apply) of a listed company, excluding non-voting shares, shall not exercise his/her voting rights with respect to such excess shares. (5) · (6) (Omitted) (7) Paragraph (4) shall apply mutatis mutandis to the appointment or dismissal of an auditor by a listed company. In such cases, if a shareholder is the largest shareholder, shares held by his/her related parties and other persons prescribed by Presidential Decree shall be aggregated. (8) (Omitted) Article 542-12 (Composition, etc., of Audit Committees) (1) ~ (3) (Omitted) (4) In appointing or dismissing a member of the audit committee under paragraph (1), a shareholder (in the case of the largest shareholder, the shares held by his/her related parties and other persons prescribed by Presidential Decree shall be aggregated) who holds more than 3/100 of the total number of issued and outstanding shares (a lower shareholding ratio may be determined by the articles of incorporation, and if a lower shareholding ratio is set forth in the articles of incorporation, such ratio shall apply) of a listed company, excluding non-voting shares, shall not exercise his/her voting rights with respect to such excess shares. (5) · (6) (Omitted) (7) Paragraph (4) shall apply mutatis mutandis to the appointment or dismissal of an auditor by a listed company. [Second sentence deleted] (8) (Omitted) [No Article 542-14 in current provisions] Article 542-14 (Virtual General Meetings of Shareholders) (1) Except as otherwise provided for in the articles of incorporation, a listed company may hold a general meeting of shareholders by a resolution of the board of directors, in such a way that some of the shareholders may participate in the resolution by electronic means from a remote location, without being present in person at the place of convocation (hereinafter referred to as “virtual general meeting of shareholders”). (2) A listed company prescribed by Presidential Decree based on the scale of assets, etc., shall hold virtual general meetings of shareholders. (3) Where a listed company holds a virtual general meeting of shareholders, shareholders may attend the general meeting only by either being present in person at the place of convocation, or by attending the meeting by electronic communication means. (4) Shareholders and others present at a virtual general meeting of shareholders shall be deemed to have been present in person at the place of convocation under Article 364. (5) Where a listed company holds a virtual general meeting of shareholders, the notice of convocation under Article 363(1) shall include the company’s intent to hold the virtual general meeting of shareholders, the method of attendance, and other matters prescribed by Presidential Decree. (6) Means of electronic communication, requirements for holding a virtual general meeting of shareholders under paragraphs (1) through (5), and other necessary matters shall be prescribed by Presidential Decree. [No Article 542-15 in current provisions] Article 542-15 (Operation, etc., of Virtual General Meetings of Shareholders) (1) Where a listed company holds a virtual general meeting of shareholders pursuant to Article 542-14, it shall properly operate the general meeting so that shareholders can participate in the proceedings and resolutions of the general meeting in real time. (2) In order to ensure the efficiency and fairness of the operation of virtual general meetings of shareholders, a listed company may designate an institution in charge of managing virtual general meetings of shareholders and entrust the institution with the operation of the procedures for participating in the proceedings and resolutions of virtual general meetings of shareholders, as prescribed by Presidential Decree. (3) The institution designated to manage virtual general meetings of shareholders in accordance with paragraph (2) and its officers/employees shall not use any information that they have become aware of in the course of performing their duties and is not disclosed to the public, for their own or a third party’s benefit without any justifiable reason. (4) A listed company shall preserve the records relating to the holding of virtual general meetings of shareholders, for five years from the closing date of each general meeting, as prescribed by Presidential Decree. (5) A listed company shall keep the records under paragraph (4) at its principal office for three months from the closing date of each general meeting, and shareholders may request access to such records during business hours. (6) Matters necessary for the operation of virtual general meetings of shareholders, such as the method of and procedure for inquiries by shareholders and the proceedings of the chairperson, shall be prescribed by Presidential Decree. The Amendment will be forwarded to the government and, assuming the President does not request reconsideration, promulgated within 15 days after completion of deliberation by the State Council and receipt of Presidential approval. The Amendment may significantly impact companies’ corporate restructuring, investments, strategic planning, financial capabilities and investor relations (“IR”) decisions. In particular, considering the introduction of the duty of directors to protect shareholders’ interests, which is in addition to their existing duty to protect the company’s interests and is scheduled to take effect without a grace period, it is essential for companies to place a greater emphasis on establishing fairness and transparency in the decision-making process of their directors and management, thereby mitigating the risk of liability due to the breach of directors’ duties. From a legal perspective, in order to comply with the directors’ duty to protect shareholders’ interests for each type of transaction and decision-making, it may be important to identify and review the substance of shareholders’ interests under various circumstances, along with the matters requiring deliberation and consideration in relation to directors’ decision-making. As the Amendment requires listed companies to hold virtual general meetings of shareholders, minority shareholders’ participation in general meetings is likely to increase. Further, through the introduction of the system of independent directors, the requirements for independence in the composition of boards of directors will be strengthened. As a result, the Amendment has placed greater importance on the operation of general meetings of shareholders, execution of IR activities for shareholders, and solicitation of proxy voting. Companies should therefore consider improving their corporate governance structures to ensure compliance with these requirements. Companies and other market participants should pay close attention to the Amendment. [Korean Version]
2025.07.10

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KFTC Announces Proposed Amendment to Review Guidelines on Deceptive Labeling and Advertising The Korea Fair Trade Commission (the “KFTC”) has released a draft amendment (the “Amendment”) to the Review Guidelines on Deceptive Labeling and Advertising for public comments from June 19 to July 9, 2025. The Amendment aims to expand the scope of conduct involving the concealment or omission of material information that could significantly influence consumer purchasing decisions. This initiative seeks to enhance predictability for businesses and ensure consistency in enforcement. The key elements of the Amendment are as follows: 1. Prohibition of Concealment or Omission of Material Safety Information The Amendment explicitly classifies the concealment or omission of material information that may affect consumer safety in connection with the use of products or services as a type of deceptive labeling or advertising. Specific examples cited in the Amendment include: Advertising humidifier disinfectants as using “harmless antibacterial agents” or “safe ingredients for the human body,” while concealing or omitting that they contain toxic substances not objectively verified for safety. Advertising that a vehicle received a “top safety rating” in overseas evaluations, while concealing or omitting that the domestic version differs from the overseas model and does not meet the same safety criteria. Advertising “99% virus removal” performance for air purifiers, while concealing or omitting that test results were obtained under limited experimental conditions significantly different from actual use environments. 2. Prohibition of Concealment or Omission of Paid Endorsements or Recommendations The Amendment also includes the concealment or omission of economic compensation received from an advertiser for product endorsements or recommendations as a form of deceptive labeling or advertising. Specific examples provided are as follows: A marketing agency compensating influencers to promote products without disclosing the financial relationship. An employee of the advertiser posting product recommendations on major online communities without revealing their employment status. An advertiser using its official social media account to promote its own products, while presenting such promotion as third-party endorsements. 3. Other Notable Amendments The KFTC has further incorporated recent enforcement cases as additional examples of deceptive labeling or advertising, while removing certain examples deemed less relevant in practice. Notable additions include: Advertising data speeds achievable only under specific technical conditions, while concealing or omitting that such speeds cannot be guaranteed in ordinary usage. Advertising claims such as “No. 1 test prep book,” “No. 1 in sales,” or “No. 1 in student enrollment,” while concealing or omitting material information by making the basis of these claims difficult for consumers to verify. Advertising an apartment with a lump-sum deposit-only lease (Jeonse-type) with no monthly rent, while concealing or omitting that monthly rent will be charged starting from the second year of residence. Advertising online content with terms such as “Offer ends today” or countdown timers, while concealing or omitting that the same offer remains available under identical conditions even after the indicated period. The KFTC will collect comments from stakeholders until July 9, 2025, finalize and implement the Amendment after a resolution by the plenary session. Once the Amendment is finalized and implemented, businesses will be required to clearly disclose material safety information and economic relationships in their advertising. Accordingly, companies are advised to carefully review their existing marketing and advertising content to ensure consistency with the Amendment’s intent and proactively make revisions as necessary. [Korean Version]
2025.06.20

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Outlook for the New Administration’s AI Policies and Regulations 1. Background In the 21st presidential election held on June 3, 2025, Lee Jae-myung of the Democratic Party of Korea was elected as the nation’s 21st president. President Lee formally began his term the following day on June 4, 2025, without a Presidential Transition Committee. During his campaign, President Lee unveiled the Democratic Party’s campaign Party Platform, titled “From Now On, the Real Republic of Korea” (the “Party Platform”), which is built around three core visions: recovery, growth, and happiness. These visions are supported by 15 policy tasks and 247 specific pledges. Among these, fostering new AI-related industries is one of the key policy tasks within the “growth” category. Below, we summarize the key details. 2. Key AI-Related Pledges by President Lee President Lee announced his vision to position South Korea among the world’s top three AI powerhouses through the AI Transformation (“AX”) initiative. His plan outlines key priorities such as (i) creating an AI-related industrial innovation ecosystem, (ii) building the world’s most advanced AI infrastructure, (iii) introducing legislations and systems to ensure secure and accessible data utilization, and (iv) establishing AI governance, as well as other important initiatives. (1) Creating an AI-Related Industrial Innovation Ecosystem The Party Platform outlines plans for government-led advancement of the AI industry with more investment. Central to this initiative is the creation of a large-scale national fund, which will be open to all economic stakeholders, to drive growth in Korea’s high-tech strategic industries such as AI, with a targeted investment of KRW 100 trillion. Additionally, key policy proposals include (i) supporting the development of next-generation AI semiconductors, (ii) providing assistance for the R&D and commercialization of large and small language models (LLMs and SLMs), and (iii) promoting the growth of the physical AI (humanoid robot) industry within both industrial and service sectors. The Party Platform further sets out plans to cultivate leading domestic AI companies, plans to establish a pilot city dedicated to AI, and plans to invest in “AI infrastructure for industries with regional strength” by leveraging private sector expertise in partnership with government support. These initiatives signal the new administration’s strong commitment to actively investing in and promoting AI-related industries. Furthermore, to ensure access for all citizens, the Party Platform proposes (i) developing a national LLM and releasing it as an open source, (ii) expanding level-based, customized education and providing digital devices and services to individuals disadvantaged in AI, and (iii) expanding and improving the quality of public Wi-Fi infrastructure in public places, such as public facilities and downtown areas. (2) Building AI Infrastructure The Party Platform includes promises to build AI infrastructure nationwide. Key policy proposals include (i) advancing the commercialization of next-generation (6G) AI-based networks by 2030 (with pilot services to be launched in 2028), (ii) developing an “AI highway” by building AI data centers equipped with the latest GPUs, and (iii) establishing specialized industrial AI clusters to serve as a foundation for a national AI innovation hub. In particular, the Party Platform provides goals to (i) actively promote the transition from public clouds to domestically operated private clouds and (ii) designate AI data centers as “next-generation national social overhead capital (SOC).” To support this initiative, the government will implement a comprehensive support system to streamline administrative processes. Collectively, these measures will create more opportunities for businesses operating in the AI sector. (3) Improving Laws and Systems to Facilitate the Use of AI The Party Platform includes plans to enhance the legal and regulatory framework to promote the development and utilization of AI. The National Artificial Intelligence Commission (“NAIC”), a presidential committee, will serve as an effective AI control tower. The new administration will establish (i) a position of Senior Secretary for AI Policy in the President’s Office, who will serve as the country’s Chief Artificial Intelligence Officer, and (ii) an AI strategic organization to devise and implement AX strategies. A key legislative milestone is the anticipated prompt enactment of the subordinate legislations under the Basic Act on the Development of Artificial Intelligence and the Establishment of Foundation for Trustworthiness (the “AI Basic Act”), which is set to take effect on January 22, 2026. The government is also expected to promptly issue a presidential decree and guidelines outlining specific plans for the implementation of the AI Basic Act. The Party Platform also contains a variety of promises designed to promote the use of data in the private sector. To this end, the new administration plans to increase access to public data and, with particular emphasis on ensuring that such data is released in machine-readable formats to enhance the practical utility of the data. The Party Platform also proposes (i) establishing a cluster for integrating high-quality data for AI training and creating a Party Platform to make these datasets available, and (ii) purchasing and processing data from broadcasters, which will then be disclosed through designated data hubs. (4) Others The Party Platform presents a number of additional policies, including (i) education and research programs to nurture AI experts, (ii) measures to promote IT and SW exports, and (iii) policies to revitalize youth entrepreneurship, such as lowering corporate and personal income taxes. Through these policies, the government plans to concentrate its investments in AI-related industries and actively support the development of skilled professionals in this field. 3. Conclusion and Implications According to the Party Platform, the Lee Administration will fully mobilize all national resources to actively invest in AI-related industries. Given the direction of the policies aimed at developing and revitalizing the AI industry, the new administration’s stance on the enforcement of AI-related regulations remains to be seen. Moreover, with the rapid growth and evolution of the AI industry and related services, the Lee Administration may revise its policies in the Party Platform to keep pace with changing market conditions and emerging trends. We anticipate that the new administration’s approach will become clearer once it appoints a Chief AI Officer and key ministers of relevant ministries, such as the Ministry of Science and ICT and the NAIC, and releases more detailed plans. [Korean Version]
2025.06.10

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The 21st President’s Main Tax Related Pledges As a result of the 21st presidential election in Korea, held on June 3, Mr. Jae-myung Lee of the Democratic Party of Korea was elected. Although the announcement of his campaign promises came relatively late, Mr. Lee’s pledges and the Democratic Party of Korea’s platform include a variety of tax-related policies. These policies can be broadly classified into three categories: economic security and focus on new industries, establishment of a foundation for growth and stable living/balanced national development, and tax reform to address low birth rates and the aging society. The detailed pledges are as outlined below. 1. Economic Security and Focus on Developing New Industries (1) Major Structural Transformation of Advanced Industries Driven by Innovation This includes a plan to implement the “Future Advanced Manufacturing K-Quantum Jump Project” to secure global leadership in AI and other advanced industries. The project covers a wide range of new and advanced industries, such as advanced semiconductors/nanotechnology, future mobility, next-generation secondary batteries, renewable energy, next-generation displays, AI, quantum computing, advanced biotechnology/digital healthcare, intelligent robotics, green hydrogen, and aerospace. Furthermore, various support measures will be implemented to strengthen the industrial ecosystem, boost export and industrial competitiveness, and further stabilize supply chains, all aimed at bolstering economic security and securing future growth engines. While concentrating an investment of KRW 100 trillion in AI and other advanced strategic industries at home, bold tax benefits including individual income tax and corporate tax reductions/deductions will be granted for investments made by the general public and enterprises. Additionally, AI data centers will be designated as national strategic technology commercialization facilities, with additional tax reductions/deductions granted to corporate investors in private venture funds to promote the venture investment market. (2) Introduction of “Tax System to Promote Domestic Production in Strategic Industries” The “Tax System to Promote Domestic Production in Strategic Industries” offers corporate tax deductions based on domestic production and sales volume, to those who domestically manufacture and sell advanced products designated as national strategic or new growth/source technologies to end consumers in Korea. It also examines measures to refund a portion of tax deductions in cash under certain conditions when necessary to protect strategic industries. This is somewhat in line with the “Tax Incentive for Promoting Domestic Production of Advanced Strategic Industries” proposed by the five major economic organizations in May, including the Korea Chamber of Commerce and Industry, ahead of the 21st presidential election, although there appear to be differences in the specific targets and levels of support. In addition, related bills to amend the Restriction of Special Taxation Act have already been proposed by National Assembly members Jeong Il-young, Kim Tae-nyeon, and Jin Seong-jun. Therefore, if the details of the tax incentives for promoting domestic production of strategic industries are finalized, it is likely that they will be discussed together with the already proposed amendment bills as early as this year’s regular session of the National Assembly. (3) Expanded Tax Incentives for the “Contents Industry” As the Korean cultural contents industry becomes more competitive and gains greater influence worldwide, a number of pledges have been made to increase tax incentives as part of the expanded national support system for the cultural contents industry. First, the tax deduction system for video content production cost, currently set to expire at the end of this year, will be extended, with tax deductions newly applied to music and various other performing contents and webtoon production, currently not eligible for tax deductions. Also, measures to increase tax deductions for published content will be examined, taking into account the unique nature of the publishing industry, alongside measures to further apply tax deductions to fields prescribed under the Framework Act on the Promotion of Cultural Industries as well as production, investment, and equity participation in platforms. Support is also expected to be provided for investments and equity participation between large corporations and small/medium sized enterprises (“SMEs”) in companies specializing in the cultural industry and cultural content companies. Additionally, to strengthen support for content R&D, the scope of new growth/core technology support will be expanded to include AI content, content platforms, music, publishing, characters, performances, etc. Additional Tax support for OTT content production will also be implemented. The pledge also includes supporting reimbursement-type incentives when the purpose is reinvestment in the contents industry, but the specific method and details of support are expected to be clarified during the subsequent review process. 2. Establishment of Foundation for Growth and Balanced National Development (1) Compliance with Statutory Limit on National Tax Reduction/Exemption Rates The National Finance Act stipulates that the national tax reduction/exemption rate for the current year should be maintained at no more than 0.5 percentage points above the average reduction/exemption rate of the previous three years. Meanwhile, the Special Tax Treatment Control Law includes provisions on the performance evaluation of tax expenditures and the improvement of related systems to ensure the efficient management of tax expenditures. That said, the national tax reduction/exemption rate for each year currently exceed the national tax reduction/exemption limit stipulated in the National Finance Act. In light of these circumstances, actively managed tax expenditure items that meet the substitutability and abolition standards and subject to tax exemption/reduction adjustment will be adjusted to ensure compliance with the statutory national tax reduction/exemption limit. Meanwhile, exemption requirements will be tightened for preliminary feasibility studies necessary for large-scale tax expenditures exceeding KRW 30 billion, with the results of these studies required to be reported to the National Assembly. (2) Strengthening Tax Incentives for a Stable Everyday Livelihood At the same time as strengthening the ultimate safety net for daily livelihood, such as the National Basic Livelihood Security System, the policy promises to expand both the eligibility and payment amounts of the Earned Income Tax Credit (“EITC”) and the Child Tax Credit (“CTC”), thereby supporting the self-sufficiency of low-income working households. The income threshold for monthly rent tax deductions will also be raised to reduce the monthly rent burden on urban workers, while at the same time strengthening oversight of tax sources related to rental income. For families with multiple children, the eligible housing size and related benefits will be increased. The policy also includes the creation of new tax credits for mobile phone expenses paid by workers themselves, their children, and parents aged 65 or older. The “Good Landlord” tax credit will be made permanent, and measures such as the extension of VAT exemptions to lower dormitory/housing costs and restructuring the education tax burden borne by financial companies (to alleviate interest burdens for consumers, as education taxes are commonly paid by borrowers in financial loans) will be pursued. (3) Support for SMEs and Balanced National Development To boost SMEs’ competitiveness through digital transformation, the budget for SME smart factories will be greatly increased while providing tax benefits and other incentives to large corporations and SMEs participating in mutually beneficial smart factory projects. Also, investment-related tax support will be expanded to prevent industrial accidents and ensure workplace safety to make SMEs safer workplaces. Meanwhile, to support a balanced national development, companies will be encouraged to relocate their headquarters to provincial regions outside the greater Seoul metropolitan area through expanded corporate tax reductions/exemptions, prioritized housing provision for employees, etc. Additionally, improvements will be made to the “Hometown Love Donation” system, such as increasing the amount of tax deductions, improving donation procedures, and diversifying use, to strengthen local provincial finances. 3. Tax Amendments to Respond to Low-Birthrate/Aging Society (1) Phased Implementation of “Our Children’s Independence Fund” The policy pledge is a phased introduction where the government creates a fund account in the name of a child and makes regular deposits. For this fund, parents will also be allowed to make matching contributions, and tax benefits will be provided on financial income generated by the fund. To achieve the policy’s goals, withdrawals will be prohibited until the account holder becomes an adult, and the use of the funds will be restricted to purposes such as educational expenses or start-up business costs. In addition, the program will be linked with schools’ financial and economic education programs to enhance the educational effect. (2) Improved Individual Income Tax System with a Family-friendly Approach The administration will promote the introduction of a married couple-based tax system. Through the couple-based individual income tax, various deductions—such as basic deductions for dependents, deductions for credit card spending for household expenses, and deductions for education and medical expenses—will be applied to the entire income of the married couple. Therefore, this will eliminate the need for determining which income-earner to assign such deductions, thus increasing convenience for the public. In designing the system, measures will be taken to ensure that progressive taxation does not arise from combining the couple’s incomes, and taxpayers will be allowed to choose between individual-based and couple-based taxation. In addition, the administration plans to develop a new tax system that comprehensively considers both spouses’ incomes and the number of children, and to establish a plan to revise various tax exemption and deduction items in line with the transition to this new system. (3) Enhancing Tax Benefits for Child Rearing In consideration of the increasing living expenses that come with raising children, the administration plans to expand tax benefits based on the number of children and to broaden the scope of those eligible. First, the plan includes an increase in both the individual income tax credit rate and the deduction limit for credit card use, based to the number of children. Specifically, the administration plans to raise the credit card deduction rate by five percentage points for each child, up to a maximum of 20% per child, and increase the deduction limit by KRW 1 million. Additionally, the administration will include expenses for elementary school children’s participation in arts, music, and sports academies or facilities in the education tax credit scheme, thus strengthening tax support for working parents who may have difficulty providing direct childcare. 4. Other Pledges Enactment of the Carbon Neutrality Support Act to define the scope of carbon reduction support projects and introduce tax benefits for joint R&D among industries Including solar and wind power as national strategic technologies for tax support Promoting the expansion of the outstanding shipowner/shipper certification system to the coastal shipping industry The recent election was a presidential election held to fill a vacancy, and the President’s term begins once the election results are confirmed. Since there will be no period for developing and reviewing the new government’s policies through a Presidential Transition Committee—which typically assists the president-elect and is responsible for transition tasks after the election—the Presidential Office and relevant ministries will set priorities for the various policies presented as election pledges. Reviews on how to implement each pledge are expected to proceed swiftly, including determining and adjusting policy details and scope of application, while taking into account the potential need for coordination with other policies and overall feasibility. During this process, the details of the announced pledges may be adjusted or changed. Pledges that need to be promptly reflected in policy or rapidly concretized for implementation are expected to be included in the “2025 Second Half Economic Policy Direction,” to be announced in late June, or in the “Proposed Tax Law Amendments,” to be announced in mid-to-late July. Proposals for legislative changes are expected to be discussed during this year’s regular session of the National Assembly, where their adoption will be decided. [Korean Version]
2025.06.04

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Key Developments and Outlook in Korea Korea Legal Insight 2025 Explore key legal trends and regulatory developments shaping Korea's business environment. VIEW MORE

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Named “South Korea National Law Firm of the Year”

Kim & Chang was recognized as the “South Korea National Law Firm of the Year” at the Chambers Asia-Pacific & Greater China Region Awards 2025. Since the first awards ceremony in 2010, our firm has been honored with this title ten times.
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“Tier 1” in All Ten Practice Areas

In the 2025 edition of Benchmark Litigation Asia-Pacific, a guide that recognizes leading litigation law firms and lawyers in the Asia-Pacific region, Kim & Chang once again received “Tier 1” (top tier) rankings across all ten practice areas surveyed.
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“Jurisdictional Firm of the Year: South Korea”

Kim & Chang was awarded the “Jurisdictional Firm of the Year: South Korea” recognition at the IFLR Asia-Pacific Awards 2025. This award is given to one law firm in each jurisdiction that has engaged in the most innovative cross-border transactions in the Asia-Pacific region.
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