Junggyeonryeon Proposes Expansion of Tax Support for R&D and Integrated Investment in Mid-sized Companies

Submission of Mid-sized Enterprises' Opinions on the 2022 Tax Reform Follow-up Enforcement Decree Amendment Proposal

[Asia Economy Reporter Kim Cheol-hyun] To maintain and strengthen the global competitiveness of mid-sized enterprises, there is an opinion that proactive measures are needed, such as expanding the scope of research and development (R&D) and integrated investment tax credits under the Enforcement Decree of the Restriction of Special Taxation Act to all mid-sized enterprises, or at least to mid-sized enterprises with an average sales revenue of less than 2 trillion won over three years.

The Korea Federation of Mid-sized Enterprises (KFME) stated this on the 7th through its "Opinions of the Mid-sized Enterprise Sector on the 2022 Tax Reform Follow-up Enforcement Decree Amendment" submitted to the Ministry of Economy and Finance. Considering the scale of investment in the materials, parts, and equipment sector, which is mostly composed of mid-sized enterprises, it argued that limiting the eligible mid-sized enterprises for R&D and integrated investment tax credits to those with an average sales revenue of 500 billion won and 300 billion won over three years, respectively, would make it difficult to expect effective results.

KFME said, "To enhance the competitiveness of the semiconductor industry as a national strategic industry, it is essential to add post-processing technology to the integrated investment tax credit national strategic technologies and actively drive innovation investment by mid-sized enterprises, which are core players in the materials, parts, and equipment sector."

Additionally, KFME expressed the opinion that to support the sustainable growth of mid-sized enterprises, the maximum shareholder stock premium evaluation subject during business succession, currently limited to mid-sized enterprises with an average sales revenue of less than 500 billion won over three years, should be abolished or at least expanded to all mid-sized enterprises. They suggested switching to a negative regulation method that only specifies excluded industries from the business succession tax deduction application target industries, and reflecting the reality that 83.4% of mid-sized enterprises are unlisted corporations by allowing installment payment of inheritance tax secured by unlisted stocks, thereby creating a smooth business succession environment.

Park Yang-gyun, Head of Policy at KFME, said, "Through R&D and integrated investment tax support as well as various tax innovations, we must maximize the innovation capabilities of companies overall, including mid-sized enterprises, as a foundation for overcoming crises and re-advancing the economy."