10% for Small Businesses, 7% for Medium-sized Enterprises, 3% for Large Corporations
30% Income Deduction Rate for Movie Tickets, Starting July Next Year
The scope of production cost tax credits, previously limited to broadcast programs and films, will be expanded to include online video service (OTT) content starting next year. Income tax deductions for movie ticket purchases will also become available.
On the 24th, the Ministry of Culture, Sports and Tourism announced that with the passage of the tax reform bill (Amendment to the Restriction of Special Taxation Act) in the National Assembly, tax support aimed at revitalizing the production and enjoyment of video content, a key driver of the spread of K-culture, will be significantly expanded.
Until now, production cost tax credits applied only to broadcast programs such as dramas, animations, documentaries, and entertainment shows, as well as films. From next year, OTT content will also be eligible for these benefits. For production costs incurred domestically and internationally, small and medium enterprises can receive a 10% tax credit, mid-sized companies 7%, and large corporations 3%. The sunset date for the video content production cost tax credit has been extended to 2025, which is expected to lead to increased production and investment, as well as the activation of OTT platforms. The Korea Culture and Tourism Institute recently analyzed the economic ripple effects of expanding the tax credit application. According to their analysis, by 2027, investments in OTT and total video content production investments will increase by 41.4 billion KRW and 283.9 billion KRW, respectively.
The income tax deduction for movie ticket purchases will be introduced from July next year, considering the preparation period for businesses and others. Similar to the existing cultural expense income deduction, the target group includes wage earners with a total annual salary of 70 million KRW or less, whose credit card and other usage exceeds 25% of their total salary. The deduction rate is 30%, and the deduction limit is a combined total of 3 million KRW for income deductions on traditional market, public transportation, and cultural expenses. A Ministry of Culture, Sports and Tourism official expressed expectations that "the expansion of cultural enjoyment for the public, which was contracted due to COVID-19, will increase, and the film industry will be further revitalized."
The Ministry also extended the special VAT refund period for accommodation fees for foreign tourists staying 30 days or less at hotels eligible for special treatment until 2025. The special tax treatment for entertainment expenses (corporate business promotion expenses) will also be applied until 2025 to promote consumption in the fields of culture, arts, sports, and tourism.
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