[Yoon Administration Tax Law] Single Tax Rate Applied to Foreign Workers... Expansion of Tax Credits for Film and Drama Production Costs

Encouraging Long-Term Domestic Employment of Outstanding Foreign Talent
Extension of Income Tax Reduction for Foreign Engineers to 10 Years
Three-Year Extension of Tax Credit for Video Production Costs

Deputy Prime Minister for Economy Choo Kyung-ho is seated attending the plenary session at the National Assembly in Yeouido, Seoul on the 21st.
[Photo by Yonhap News]

The government is significantly increasing income tax incentives for foreign workers to support talented individuals working long-term in Korea. Additionally, a new tax credit will be established to nurture talent in key sectors such as semiconductors, and the tax burden on film and drama production costs will be reduced.

On the 21st, the Ministry of Economy and Finance announced the '2022 Tax Reform Plan' containing these measures.

First, the Ministry decided to strengthen incentives for attracting outstanding foreign talent to Korea.

The special single tax rate application period for foreign workers, which was limited to five years from the start of domestic employment, will be abolished to encourage talented individuals to work in Korea for longer periods. Foreign workers benefit from a single tax rate of 19% instead of the comprehensive income tax rate (6~45%), thereby reducing their tax burden.

Furthermore, the income tax reduction of 50% for five years, previously granted to foreign engineers and technical experts, will be extended to ten years. Similarly, the 50% income tax reduction for five years for Korean workers who return to Korea after working for more than five years at foreign research institutions will also be extended to ten years.

Tax incentives for workers with increased wages will also be expanded.

The government provides tax credits of 20% for small and medium enterprises, 10% for mid-sized enterprises, and 5% for large enterprises on wage increases exceeding the average wage growth rate over the past three years. To further reduce the tax burden on wage increases, the application period for the earned income increase tax incentive will be extended by three years.

However, considering the wage gap between large and small-to-medium enterprises, large enterprises are excluded from the application.

To support talent development in core industries such as semiconductors, contract department operation expenses paid by companies will be included in the tax credit targets for research personnel development expenses.

Also, to encourage the return of overseas companies to Korea, the deadline for completing new or expanded domestic business facilities after transferring or closing overseas business sites will be extended from the current two years to three years.

Considering the cultural and economic ripple effects of video content such as films, dramas, and entertainment, the application period for tax credits on production costs will be extended by three years. Currently, production costs receive tax credits of 3% for large enterprises, 7% for mid-sized enterprises, and 10% for small and medium enterprises.

Additionally, to promote video content production using new media platforms, production costs for online video services (OTT) content will be added to the tax credit targets.

The Ministry of Economy and Finance plans to consolidate individually operated employment-related tax support systems into an integrated employment tax credit.

Accordingly, the employment increase tax credit, social insurance premium tax credit, career-interrupted women tax credit, regular employee conversion tax credit, and childcare leave returnee tax credit will be unified into the integrated employment tax credit.

When employing one regular worker, small and medium enterprises will receive a tax credit benefit of 8.5 million KRW (9.5 million KRW in provincial areas), and mid-sized enterprises will receive 4.5 million KRW. If employing young regular workers, persons with disabilities, those aged 60 or older, or career-interrupted women, the tax credit amounts increase to 14.5 million KRW (15.5 million KRW in provincial areas) for small and medium enterprises, 8 million KRW for mid-sized enterprises, and 4 million KRW for large enterprises.