New auto insurance plan launched

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New auto insurance plan launched

Starting April, companies in Korea are allowed to benefit from the tax breaks for maintenance spending on corporate cars only when they sign up for employees-only auto insurances.

All indemnity insurers in Korea are scheduled to launch the new auto insurance starting on the first day of next month, said the Financial Supervisory Service (FSS) on Tuesday.

All new passenger cars that a company newly purchases or leases are required to subscribe to the new employee insurance.

The policy only covers accidents that occur where the actual driver was an employee of the company or those at the supplier companies.

Companies that are already subscribed with regular corporate auto insurances can get the tax benefit only after documenting driving history. The tax authority will still offer breaks on car maintenance spending of up to 10 million won ($8,279) a year, even if the companies failed to record driving records.

The annual premium will be 0.7 percent cheaper than existing ones.

Currently, a company that owns car priced 15 million won has to pay 840,000 won a year. With the new insurance, it will be able to save 5,000 won annually.

The new insurance is launching as a follow-up measure for the corporate tax act revision bill, which passed the national assembly last month.

The Ministry of Strategy and Finance suggested the bill last year aimed at stopping high-level executives and employees from abusing corporate cars on personal occasions to pay less on fuel and auto taxes, and taxes on maintenance and rental fees.

Last year, the ministry introduced the bill as some executives were caught dodging tax by registering imported cars they personally own as a corporate car.

Once registered as a corporate car, non-employees like family members and friends were able to enjoy the tax cuts and the same insurance coverage when they got into an accident, because existing corporate auto insurances offered compensations to all accidents regardless of who was actually driving.

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