Tax Law Amendment Including Increased Semiconductor Tax Credit Rate Passes Finance Committee

Seven Tax Law Amendments Passed, Including the Restriction of Special Taxation Act Amendment
Tax Credit Rate for Semiconductor National Strategic Technologies to Be Increased by 5 Percentage Points
AI and Future Transportation Sectors Newly Added as National Strategic Technologies
Application Period for R&D and Investment Tax Credits Extended by Two Years Until 2029
Additional Tax Benefits for SMEs and E-Sports Tournament Expenses Included

On the 18th, the Ministry of Economy and Finance announced at the plenary meeting of the National Assembly's Planning and Finance Committee that a total of seven tax law amendment bills, including the amendment to the Restriction of Special Taxation Act to increase the tax credit rate for investment in semiconductor national strategic technologies by 5 percentage points, were passed. The amendments passed that day include the Restriction of Special Taxation Act, the Corporate Tax Act, the Inheritance and Gift Tax Act, the Comprehensive Real Estate Tax Act, the Value-Added Tax Act, the Framework Act on National Taxes, and the Customs Act.

The Restriction of Special Taxation Act includes a proposal to add artificial intelligence (AI) and future transportation sectors to national strategic technologies. It also includes a proposal to raise the tax credit rate for investment in semiconductor national strategic technologies by 5 percentage points. For large and medium-sized enterprises, the rate will increase from 15% to 20%, and for small and medium-sized enterprises, from 25% to 30%.

Additionally, the bill applies the same tax credit rate for commercialization facility investments as for research and development (R&D) facility investments related to national strategic technologies and new growth and original technologies. It also includes a proposal to extend the application period of R&D tax credits related to national strategic technologies and new growth and original technologies, as well as the investment tax credit for national strategic technologies, by two years until 2029. The bill also extends the application period of temporary investment tax credits for small and medium-sized enterprises and medium-sized enterprises that invested last year and this year.

The Restriction of Special Taxation Act also includes a new tax credit (10% reduction rate) for publishing companies of medium-sized enterprises in the metropolitan area. It expands the scope of career interruptees eligible for tax support, such as the integrated employment tax credit, from women to men, and introduces a tax credit for e-sports tournament operating expenses. It also includes a temporary exemption of individual consumption tax for replacing old vehicles until June.

The Corporate Tax Act includes a provision to extend the grace period for applying the non-inclusion rate of dividend income in taxable income by three years until 2026. The Inheritance and Gift Tax Act adds capital transactions such as unequal capital reductions to the scope of deemed gifts through transactions with specific persons, and adjusts the scope of relatives eligible for gift property deductions from "blood relatives within the sixth degree and relatives by marriage within the fourth degree" to "blood relatives within the fourth degree and relatives by marriage within the third degree."

The Comprehensive Real Estate Tax Act includes a provision to include joint ownership spouses of one-household homeowners as eligible for deferred payment of comprehensive real estate tax. The Value-Added Tax Act expands the submission of data on sales and payment mediation of goods and services supplied by domestic businesses to include overseas platforms. The Framework Act on National Taxes introduces a system of enforcement fines for violations of tax audit data submission obligations, and the Customs Act extends the customs exemption for aircraft parts by one year.