The Language of Taxation Fails to Capture Digital Creativity [Cracks in the Webtoon Industry]

② The Language of Taxation Fails to Capture Digital Creativity
A Tax System Stuck in Manufacturing Standards... Disconnect with Reality
Webtoon Production Left in the Blind Spot, Calls for Institutional Reform

On October 16, citizens were viewing the exhibition at the popup store of the "2025 World Webtoon Festival" held at Lotte World Mall in Songpa-gu, Seoul. Photo by Yonhap News

Despite the rapid growth of the webtoon industry, the current tax support system fails to reflect the unique characteristics of digital creative industries. This is because the tax system was designed with manufacturing in mind.

The Restriction of Special Taxation Act was established based on a research and development (R&D) concept that focuses on physical assets and facilities. The webtoon industry, which centers around ideas and outsourced creative processes, does not fit these criteria.

Yeom Jeongwan, Senior Researcher at the Future Policy Team of the Korea Creative Content Agency, stated, "The tax credit for research personnel development was created on the premise of manufacturing. For the content industry, which struggles to prove tangible outcomes before a visible product is produced, this system is structurally disadvantageous." He added, "Many companies give up applying for tax credits because it is difficult to prove activities at the idea stage."

CEO A of a production company also pointed out, "From story planning to character design, all of these are creative activities, but the tax office does not recognize them as R&D. Labor costs incurred over one to two years until a work is completed are excluded from the evaluation system."

The production cost tax credit is also mainly operated for video content. In this process, both webtoons and web novels have been excluded from support. The lack of quantitative evidence regarding their impact at the time the system was designed is cited as the main reason.

On October 16, citizens were viewing the exhibition at the popup store of the "2025 World Webtoon Festival" held at Lotte World Mall in Songpa-gu, Seoul. Photo by Yonhap News

The most significant structural limitation is the inappropriate industry classification. Legally, webtoon production companies fall under "publishing" or "online information provision," but their actual creative processes are based on personnel and project-centered structures that do not fit these categories. As a result, they are naturally excluded from eligible production cost deductions.

The narrow scope of recognized production costs is also an issue. Labor and outsourcing fees account for a large portion of webtoon production costs, but the current system does not sufficiently recognize these expenses. In particular, the rule excluding labor costs for personnel involved in multiple projects is inconsistent with the reality of the web content industry, which relies heavily on outsourcing and freelancers.

IP acquisition costs also fall into a blind spot. Upfront costs such as original work usage fees and advances are a significant burden for production companies, yet are not included in the deduction scope. Losses from unfinished or discontinued projects are also not recognized, highlighting the lack of institutional safety nets that consider the high-risk nature of the industry.

These institutional limitations are even harsher for small production companies. The post-deduction method does not help studios that need immediate cash flow, and due to the minimum tax rule, companies operating at a loss cannot benefit from the deduction at all. As a result, a significant number of small and medium-sized production companies, which make up the majority of the industry, are structurally excluded from support.

Major countries overseas have already strengthened tax support tailored to digital content production structures. France applies a refund-type tax credit for comics and animation production, while Spain provides differentiated support for domestic production and international co-productions. China operates a preferential tax system for author compensation.

On October 16th, a citizen is viewing the exhibition at the pop-up store of the "2025 World Webtoon Festival" held at Lotte World Mall in Songpa-gu, Seoul. Photo by Yonhap News

A recent report published by the Korea Creative Content Agency, titled "A Study on Improving Tax Support Systems for the Webtoon Industry," suggests that webtoons and web novels should be classified as separate industries and that the scope of deductible production costs should be expanded to include labor, outsourcing, and IP acquisition costs. The report also emphasizes that the introduction of a refund-type tax credit should be considered so that small production companies can also benefit.

The government will introduce a new tax credit for webtoon production costs next year. The tax credit rate will be established with reference to the existing tax support system for video content, and the specific application criteria will be finalized in the enforcement decree. Deductible items will include labor costs, copyright fees, and program expenses, while distribution platforms will be excluded from support.

Researcher Yeom stated, "A tax system suitable for the content industry is essential to maintain a stable creative foundation. Discussions reflecting the unique characteristics of the web content industry are necessary during the process of revising laws and enforcement decrees."