Start-up SME Tax Reduction Calculator for Young Founders

What is the start-up SME tax reduction for young founders?

The start-up small-and-medium enterprise (SME) tax reduction, under Article 6 of Korea’s Restriction of Special Taxation Act (RSTA), cuts the income tax or corporate tax of an SME that was founded before 31 December 2027 in an eligible industry.
The reduction runs for five tax years, starting from the first tax year in which the business earns income.

It is especially powerful for a young start-up SME — one whose representative was 34 or younger at founding.
Depending on the founding location, a young founder can have up to 100% of the tax on the business income waived for five years, dramatically lowering the tax burden in the critical early stage.

Korea-based rules (2026). This calculator reflects Korean tax law (RSTA Article 6, Enforcement Decree Article 5, and the minimum-tax rule in Article 132) and is a simplified estimate. It does not reproduce every bracket, exemption, local surtax, industry classification, or eligibility decision. Local income tax is separate and is not automatically linked to this national-tax reduction. Confirm current Korean rules with the National Tax Service (Hometax) or a licensed tax adviser before founding, filing, or restructuring.

How is the reduction rate decided?

The rate depends on three axes: the founding period, the founding region, and whether the founder is “young” (or qualifies for the small-scale special case).
A 2026 amendment split the founding period into before/after 2026 and added a fourth regional tier (Seoul-metropolitan depopulation areas) for companies founded from 2026 onward.

Founded on or before 31 Dec 2025 (RSTA §6(1)1-a, §6(6)1)

• Young founder, outside the over-concentration control region: 100% reduction
• Young founder, inside the over-concentration control region: 50%
• General founder, outside the control region: 50%
• General founder, inside the control region: no reduction (50% under the small-scale case)
• Small-scale case (revenue ≤ KRW 104 million): 100% outside / 50% inside the control region

Founded on or after 1 Jan 2026 (RSTA §6(1)1-b, §6(6)2)

• Young founder, outside Seoul-metropolitan area or in a metropolitan depopulation area: 100%
• Young founder, Seoul-metropolitan area (excluding control & depopulation areas): 75%
• Young founder, over-concentration control region: 50%
• General founder, non-metropolitan / depopulation area: 50%
• General founder, Seoul-metropolitan (excluding control & depopulation): 25%
• General founder, over-concentration control region: no reduction (50% under the small-scale case)

The over-concentration control region covers all of Seoul plus major cities in Incheon and Gyeonggi, and it carries the lowest rate.
Because the same young founder gets 100% in a rural region but only 50% in Seoul, it is worth weighing the tax effect of the founding location.

Who counts as a young start-up SME?

Under RSTA Enforcement Decree Article 5, the representative must meet an age test measured at the time of founding, with military-service time deducted.

• Sole proprietor: aged 15 to 34 at founding
• Military deduction: active-duty and equivalent service is subtracted from age, up to 6 years
• Formula: assessed age = age at founding − min(service years, 6)
• Corporation: the age test plus being the controlling, largest shareholder of the company
• Joint business: the partner with the largest profit-share ratio is treated as the representative

For example, a founder who is 38 at founding but served 6 years in the military has an assessed age of 32 and therefore qualifies as a young founder.
Enter the age and service years and the calculator immediately shows whether the young-founder test is met.

Special cases and limits you must know

Minimum tax (RSTA §132)

If the tax after the reduction falls below the minimum-tax amount, the shortfall portion of the reduction is disallowed.
However, a 100% reduction year and the employment-increase add-on are excluded from the minimum tax, so tax can fall to zero.

• Corporate minimum tax: 7% of the tax base (for an SME)
• Income-tax minimum: 45% of the computed tax on business income (35% on the portion up to KRW 30 million)
• 100% reduction & employment add-on: exempt from the minimum tax (full reduction possible)

Employment-increase add-on (RSTA §6(7))

If the company employs at least the industry minimum and its year-end regular-employee count rises versus the prior year, an extra reduction equal to the growth rate is added.
The add-on is capped at 50% (25% in a 75%-reduction year), and fractions below 1% are dropped.

• Mining, manufacturing, construction, logistics: at least 10 regular employees
• Other industries: at least 5 regular employees
• Excluded: no add-on in a year that already receives a 100% reduction

Eligible industries (RSTA §6(3))

Not every industry qualifies; only those listed in the law are eligible.
The main eligible industries include:

mining, manufacturing, construction, mail-order retail, logistics, food service, information & communications (excluding video rooms, news provision, and virtual-asset trading/brokerage), fintech (electronic finance, online small-amount investment brokerage, small overseas remittance), professional/scientific/technical services (including engineering, but excluding law, patent, judicial-scrivener, CPA, tax-accountant, veterinary, administrative-agent, and architecture offices), social welfare services, vocational-skill academies, tourist accommodation / convention / theme-park businesses, elderly-welfare facilities, and the exhibition industry.

How to use the calculator

Step 1: Enter business type and founding details

Choose sole proprietor or corporation, then the founding year and region.
The applicable rate matrix changes automatically with the founding year.

Step 2: Enter the representative’s age

Enter the age at founding and any military service; the young-founder result appears in real time.
Service years are deducted from age, up to six years.

Step 3: Enter tax base and revenue

Enter the income-tax or corporate-tax base in units of KRW 10,000 (manwon).
For a non-young founder, entering annual revenue checks the KRW 104 million small-scale special case.

Step 4: Add the employment-increase option

Enter the industry and prior/current regular-employee counts to compute the add-on.
The result summarizes the annual reduction, the five-year cumulative saving, and the tax payable after the reduction.

Frequently asked questions (FAQ)

Q. For how many years does the reduction apply?

A. It applies for effectively five tax years — the first income-earning year plus the tax years ending within four years of the next year’s start.
The clock runs even in a year with no income, so plan the founding and income-timing accordingly.

Q. How does military service affect age?

A. Up to six years of service is subtracted from the age at founding.
A founder who is 37 but served three years has an assessed age of 34 and qualifies as a young founder.

Q. Is there no reduction if the founder is not young?

A. There still can be.
A general founder outside the control region gets 50%, and even a non-young founder with annual revenue of KRW 104 million or less can receive the same 100% / 75% / 50% under the small-scale special case.

Q. Is local income tax also reduced?

A. This calculator covers only national tax (income tax or corporate tax).
Local income tax is separate and applies a reduction only where the Restriction of Special Local Taxation Act provides one, so check your local government’s rules.

Check your start-up tax reduction now

Enter the founding period, region, and age to see how much you can save over five years.

This is a 2026 estimate under Korea’s RSTA; the actual reduction requires confirmation by a tax adviser or the competent tax office.

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