After the implementation of the so-called’Kim Young-ran Act’, which limits the amount of meals and gifts related to job duties, it was found that corporate entertainment expenses have steadily decreased.
According to the National Tax Service on the 3rd, entertainment expenses for 4,125 large and mid-sized companies exceeding 100 billion won in income (sales) in the corporate tax return as of 2019 were totaled 2,626.5 billion won. Compared to 2016, three years ago, the number of corporations increased by 623 (17.8%), but entertainment expenses decreased by 26.9%.
Source: IRS
The average entertainment expenses per company also continued to decrease to 875 million won in 2016, 722 million won in 2017, 644 million won in 2018, and 639 million won in 2019.
For large corporations with imports exceeding 500 billion won, the average entertainment cost per company decreased by 30.0% from 2,431 billion won in 2016 to 1.8 billion won in 2019. The average entertainment expense per company for all companies that filed corporate tax was also reduced from 17 million won (for 2016) to 14 million won (for 2019).
Source: IRS
The Kim Young-ran Act (Act on the Prohibition of Unfair solicitation and receipt of money, etc.) came into effect in July 2016. Accordingly, after the Kim Young-ran Act was implemented, entertainment expenses are mainly reflected from the amount reported in 2017, and the entertainment expenses before the Kim Young-ran Act was implemented, until the report in 2016.
A government official said, “There are differences in entertainment expenses in terms of tax laws and corporate accounting standards, but the reduction in corporate entertainment expenses since 2016 seems to have been the most impacted by the enforcement of the Kim Young-ran Act.”
As consumption declined significantly due to Corona 19, there are voices asking to ease the Kim Young-ran law. The Korean Federation of Agricultural Entrepreneurs (Nongyeon Han) recently sent a proposal to amend the enforcement decree of the Kim Young-ran Act to promote the consumption of domestic agricultural and livestock products to the Prime Minister’s Office and the Civil Rights Committee. The goal is to promote the consumption of agricultural and livestock products stagnated by Corona 19 by raising the cap for agricultural and marine products and processed goods gifts from 100,000 won to 200,000 won, as in Chuseok.
“Last year, agricultural productivity has decreased significantly due to abnormal low temperatures, long rainy seasons, torrential rains, typhoons, etc., and agricultural and livestock consumption has contracted due to COVID-19,” said Han Nong-yeon in a statement. He said, “I have more expectations for the holiday special than before.
Sejong = Reporter Kim Namjun [email protected]