Representative Shin Jeong-hoon Introduces Partial Amendment Bill to the Restriction of Special Taxation Act

Introduction of Korean-style Patent Box

[Asia Economy Honam Reporting Headquarters Reporter Yoon Jamin] Representative Shin Jeong-hoon (Industry, Trade, Energy, and Small and Medium Venture Business Committee · Naju Hwasun) announced on the 14th that he has taken the lead in proposing a partial amendment to the Restriction of Special Taxation Act, which includes the introduction of the ‘Korean-style Patent Box.’

The bill mainly provides for a reduction in corporate tax or income tax on income generated by small and medium-sized enterprises (SMEs) and mid-sized companies commercializing patents and other intellectual property (30% reduction for SMEs and 15% reduction for mid-sized companies).

The scope of tax reduction is limited only to SMEs and mid-sized companies to prevent large corporations and multinational companies from monopolizing the benefits of innovation.

In particular, the support targets have been narrowed to government R&D projects and new growth industry technologies, which have been criticized for their low commercialization rates, to ensure effective support for achieving policy goals.

If the amendment passes, it is expected that the utilization of R&D outcomes by SMEs and mid-sized companies participating in government R&D projects in fields such as materials and components will be greatly expanded.

The current law provides special cases for partial reductions in income tax or corporate tax on income generated from transferring or leasing patents.

However, the industry has pointed out that government tax support is limited only to the transaction stage of patented technology and does not extend to the actual commercialization of technology through investment.

On the other hand, major advanced countries such as the United Kingdom, France, and China provide tax benefits through the ‘Patent Box’ system on income generated by commercializing patents and other intellectual property, encouraging more active utilization of intellectual property created through R&D.

Accordingly, in South Korea, active discussions have been underway centered on the Presidential National Intellectual Property Committee regarding the introduction of a Korean-style Patent Box to promote technology commercialization and investment activation.

Representative Shin said, “For South Korea to achieve true innovative growth, it is most important that creative and advanced technologies and ideas directly lead to business and investment,” adding, “I will actively work to ensure that innovative startups and technology commercialization can spread explosively through the domestic introduction of the Patent Box system.”

He continued, “At the same time, we will push for amendments to the Subcontracting Transactions Fairness Act to ensure that SMEs can be safe from the risk of technology theft,” and said, “We will make every effort to lay the foundation for innovative growth by activating technology commercialization for SMEs and actively preventing technology theft.”

Meanwhile, on the same day, Representative Shin also proposed an amendment to the ‘Subcontracting Transactions Fairness Act’ to strictly punish cases where large corporations or primary contractors receive technical data and use it without consent before the contract between the primary and subcontractors is finalized.

The purpose is to eradicate unfair technology theft or the use of materials without compensation against SMEs.