If you are running your own business, I think you have heard about the yellow umbrella deduction at least once.
The Yellow Umbrella Deduction is a deduction system designed for the retirement of small businesses and small business owners.
Today, we will take a closer look at the conditions for joining the Yellow Umbrella Deduction and other benefits such as interest and loans.
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What is Yellow Umbrella Deduction?
The Yellow Umbrella Deduction is a system operated by the Korea Federation of Small and Medium-sized Enterprises (SMEs) to provide severance pay for business owners.
When workers leave or retire, they receive severance pay, but business owners have no concept of severance pay. 노란우산공제 가입조건
Whatever the reason, there is no safety device in place when you quit your business. 좋은뉴스
If you join the Yellow Umbrella Deduction, you can save a lot of money during difficult times and enjoy various benefits during the business period, so it is a system with many advantages.
Yellow umbrella deduction rate
4 main benefits of yellow umbrella deduction
If so, let’s take a closer look at the benefits of joining the Yellow Umbrella Deduction.
raise money
The first thing you can do is raise money.
If you sign up for Yellow Umbrella and pay an amount (called installment) for a certain period of time, the paid principal will be fully credited and interest will also be accrued with compound interest.
All of this money can be returned as a lump sum or installment payment when the business is closed later.
The yellow umbrella interest rate is discussed in a little more detail below.
Conditions for joining the Yellow Umbrella Deduction
Loan financing
The yellow umbrella credit loan is a benefit that many people who have signed up for the Yellow Umbrella Credit Co., Ltd. use.
Members of the Yellow Umbrella Deduction can get a loan at 2.8% interest within 90% of the voluntary cancellation refund amount (as of 2022).
Although the loan term is one year, it can be extended and the interest rate is not high, so if used properly, it can be of great help in difficult times.
The details of the Yellow Umbrella Deduction Loan will also be looked at in a little more detail below.
tax savings
Tax benefits are not to be missed.
The amount paid to the yellow umbrella can be deducted from income up to 5 million won per year.
If you receive a tax deduction of up to 5 million won, you can save about 330,000 to 825,000 won in tax.
However, please note that the maximum deduction limit differs depending on the amount of income and individuals and corporations.
Conditions for joining the Yellow Umbrella Deduction
various welfare
It provides various welfare benefits such as education, medical care, travel/culture, shopping, and insurance.
Small business owners can also enjoy company benefits that only office workers can enjoy.
Yellow Umbrella Benefit Welfare is called Welfare Plus. For more information, please refer to the link.
> Learn more about Welfare Plus benefits (click)
In addition to this, there are other benefits such as providing a hope incentive and signing up for free accident insurance (the advantage of deductibles is that they are not seized).
Conditions for joining the Yellow Umbrella Deduction
The conditions for joining the Yellow Umbrella Deduction are not very strict.
If you are included in a small business or small business owner, both individual entrepreneurs and corporate representatives are eligible to join the Yellow Umbrella Deduction, and you can easily apply for membership through the Internet.
The conditions for joining the Yellow Umbrella Deduction vary depending on the industry in the scope of small businesses and small business owners, but the standard is that the average sales for 3 years is 1 billion won to 12 billion won or less.
Please refer to the table below for the base sales by industry.
3 year average sales in the industry
Manufacturing (15 products, including medical substances and drugs) 12 billion won or less
Electricity, gas, water business 12 billion won or less
Manufacturing (9 products, including pulp, paper, and paper products), mining, construction, transportation less than KRW 8 billion
Agriculture, forestry, and fisheries, finance, insurance business less than KRW 8 billion
Publication/video/information service 5 billion won or less
Wholesale/retail business 5 billion won or less
Professional/Science/Technical Services, Business Services Less than KRW 3 billion
Sewage/waste treatment business, arts/sports/leisure service, real estate rental business less than 3 billion won
Health and social welfare services less than KRW 1 billion
Personal service business, education service business, accommodation/restaurant business less than KRW 1 billion
However, some industries, including the pub business, are excluded from the conditions for joining the Yellow Umbrella Deduction.
If you are running the following 6 industries, it is unfortunate, but it is difficult to join the Yellow Umbrella Deduction.
tavern
General entertainment pub business
Budo entertainment bar business
Danran pub business in accordance with Article 21 of the Enforcement Decree of the Food Sanitation Act
other industries
No painting operation
gambling establishment business
Massage, not medical practice
Also, if the yellow umbrella deduction is canceled due to overdue payment or illegal classes, you cannot re-subscribe within one year.
However, you should know that even if you have multiple businesses, you can join if you choose one, and even unregistered small business owners will be eligible to join the Yellow Umbrella Deduction if business is confirmed.
> Go to application for yellow umbrella deduction (open)
If you have difficulty applying online, you can call 1666-9988 or sign up at a nearby bank (below).
(Private, Enterprise, Nonghyup, Shinhan, Woori, Hana, Gyeongnam, Gwangju, Daegu, Busan, Jeonbuk, Jeju, Woojeon Business Headquarters, Saemaul Geumgo Federation, Suhyup Federation)
Yellow umbrella deduction payment limit
The yellow umbrella deduction can be paid in units of 10,000 won from 50,000 won to 1 million won per month (called installments).
Payment can be made monthly or quarterly, and payment can only be made by direct debit from an account in the name of a member registered with a major bank.
You can freely increase the yellow umbrella deduction installment, but you can apply for a reduction only after paying 3 or more installments.
You can change your installment payment at any time, and it is convenient to call 1666-9988 or apply for a change online.
Conditions for joining the Yellow Umbrella Deduction
Yellow umbrella deduction rate
If a member of the Yellow Umbrella Deduction has a cause such as business closure or death, an interest rate will be applied to the installment amount to pay a large sum of money.
As of 2021, the yellow umbrella deduction interest rate (annual standard interest rate) is 2.2%, and additional interest rates will occur depending on the subscription period.
> Check all past base interest rates (click)
As for the interest rate on deductions due to business closure and death, the standard interest rate + 0.3% per annum becomes the yellow umbrella deduction rate (for 15 years).
After that, the additional interest rate decreases in the order of 0.25% per year, not 0.3% for the first year, and 0.2% per year for the next year.
This is when the number of installment payments is 7 or more, and if it is 6 or less, only installments paid without interest rate will be deducted.
When receiving a deductible due to retirement or old age, the deductible is calculated at the standard interest rate without additional interest rate (similarly, if installment payments are made 7 or more times).
For more accurate information on how to calculate the yellow umbrella deduction rate and deductible, please refer to the link below.
> Deductible Payment Calculator (Open)
Yellow Umbrella Deduction Loan
Lastly, let’s take a closer look at the Yellow Umbrella Deduction Loan.
The yellow umbrella deduction loan includes medical loans and disaster loans in addition to general loans. The interest rate on general loans is currently 2.9% as of the first quarter of 2022.
For general loans, the limit is within 90% of the amount paid, and the loan amount cannot exceed the payment amount.
Therefore, if the subscription period is short, the loan limit may be small and the repayment period is short of one year.
If it is difficult to use the Yellow Umbrella Deduction Loan, it may be better to use other loans available to businesses.
Loan interest rate varies from quarter to quarter, so it is most accurate to know that it is determined within the base interest rate + 3% per annum, and to check it frequently.
> Yellow umbrella loan interest rate disclosure confirmation
Medical loans and disaster loans have a loan limit of 10 million won and 20 million won (or the lesser of the damage amount), respectively, and are interest-free.
General loans can be applied for online, mobile, counter, or call center, but please note that medical and disaster loans can only be applied in person or by mail.
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Expiration of yellow umbrella deduction
The yellow umbrella deduction does not have an expiration date.
As with severance pay for workers, the subscription continues until the business closes.
You can file a business closure report at any time, so if you apply for a deductible after the business closure report, you will be able to receive both the principal and interest.
If you are over the age of 60 and have paid 120 times, you can claim the deductible on the grounds of old age.
concluding
We learned about the conditions for joining the Yellow Umbrella Deduction, interest rates, loans, and benefits.
It is safe to say that there are no disadvantages, so it is recommended that you sign up for the yellow umbrella deduction and receive benefits.