Reasons for Proposal and Major Provisions

The prolonged presence of COVID-19 has resulted in continuous extensions to the government’s social distancing measures, leading to poor sales and economic damage among micro enterprises and self-employed persons. 

The government amended the Act on the Protection of and Support for Micro Enterprises to introduce compensation for losses associated with COVID-19. Despite direct restrictions on business operations, however, the compensation only provides partial coverage of mainly operating losses and there is a time delay until the payment is received after losses are incurred. This has created a need to improve the system so as to reduce the burden of rent and other fixed costs.

Accordingly, the Amendment prescribes that where the government has banned or restricted gatherings or has designated a special disaster area in order to control the spread of an infectious disease, the lessor shall reduce the rent by up to 70%. It also prescribes that half of the reduced amount shall be borne by the State or local government (for a business category subject to restrictions on gatherings, the lessee pays 50% and the government and lessor each bear 25%), thereby helping to overcome the hardship through a collaborative effort by lessees, lessors, and the central and local governments. 

The Amendment also offers financial assistance and tax breaks to lessors who participate in the sharing of rental expenses, thereby aiming to promote the recovery of micro enterprises and self-employed persons whose survival has been threatened by COVID-19 (Article 12-8 newly inserted).