Influencers Flock to South Korea’s Songdo for Massive Tax Breaks

Recently, it has been confirmed that influencers, YouTubers, and internet broadcast streamers are predominantly living in Songdo International City in Incheon. Despite earning substantial income, they have chosen to live in Songdo to take advantage of the fact that their income tax amounts to zero if they reside there.

The fact that living in Songdo can result in zero income tax became widely known after a conversation among famous YouTubers like Kim Gye Ran, Gong Hyuk Jun, and Malwang on the Physical Gallery YouTube channel. In the video, they mentioned that “most people live near Seoul” and began the conversation by stating, “Many creators live in the outskirts of the metropolitan area,” initiating the conversation.

Former pro-gamer turned YouTuber Gong Hyuk Jun disclosed, “Because you have to cut taxes,” adding, “Ordinary people may not know this, but taxes are 100% exempted under the youth business scheme.”

Kim Gye Ran agreed with Gong Hyuk Jun’s revelation about the tax reduction, stating, “As far as I know, Incheon’s Songdo provides a lot of support,” making the video a hot topic.

The tax reduction benefit mentioned by the YouTubers is known as the Startup Small and Medium Business Tax Exemption System. The National Tax Service provides a maximum of 100% tax reduction on income tax and corporate tax for five years for young start-up SMEs. Anyone under the age of 35 at the time of starting a business is eligible for this reduction.

If the representative needs to serve in the military, the tax reduction period can be extended up to 6 years depending on the military service period. According to the current Special Taxation Restriction Act, YouTubers, BJs, and streamers operating corporations are classified as small and medium businesses. It is believed that famous influencers are utilizing this system to receive tax exemption benefits.

Furthermore, the tax reduction rate varies depending on where the entrepreneur’s address is located. However, even if young people start a business in an overcrowded control area, the tax reduction rate is only up to 50%.

Overpopulation control zones are areas designated by the government to prevent excessive concentration of population, buildings, and industries in specific regions. In other words, it means that you can get a 100% tax exemption in areas outside the overcrowded control areas. In Incheon, this includes Songdo, Cheongna, Yeongjong, and other free economic zones, and Namdong National Industrial Complex.

Songdo, where many YouTubers and celebrities live, is a region with a considerable population and developed infrastructure, and it is considered the best residential area in the Incheon real estate market. However, it was found to be excluded from the overcrowded control areas as a strategy to attract foreign investment.

With the growing online broadcasting market, including YouTube, the number of young entrepreneurs and the amount of tax they have reduced seem to be skyrocketing.

According to the National Tax Service’s National Tax Statistics Annual Report on Tax Reduction and Exemption under the Special Taxation Restriction Act released in 2022, the number of taxpayers who received the youth startup tax exemption in 2022 was estimated at 64,639.

Furthermore, the total amount of tax exempted for these taxpayers was reported to be $484.67 billion. Compared to about four years ago in 2018, the number of recipients increased by 333.5%, and the exempted tax amount increased by 472.2%.

Meanwhile, as these tax reduction benefits became known, the number of cases exploiting them has also increased. Some YouTubers falsely register their businesses in offices located in the outskirts of the metropolitan area to receive a 100% tax exemption, while operating in Seoul.

In April, the National Tax Service announced that it had launched a tax investigation into 21 suspects of new online-based tax evasion. Among them were four YouTubers who had received corporate and income tax reductions through unfair methods.

These YouTubers were found to have falsely registered their businesses in shared offices in areas with a 100% tax reduction rate while conducting their businesses in areas with a 50% tax reduction rate. The National Tax Service stated that it would rigorously investigate these cases of unjust tax reduction and exemption, income omission, and other tax evasion charges, and will refer them to investigative authorities in the future.