AI Training Data Now Eligible for Tax Credits... Easing the Burden on Companies

Amendment to the Enforcement Decree of the Restriction of Special Taxation Act approved...
Applies to R&D expenses incurred on or after January 1

The government has expanded the scope of tax support to build an ecosystem where the AI industry and the content industry can grow together. As the cost of purchasing training data, which is essential for artificial intelligence (AI) development, has been included in the research and development (R&D) tax credit, the burden on companies is expected to be further eased.

The Ministry of Science and ICT announced on the 24th that a revision to the Enforcement Decree of the Restriction of Special Taxation Act was approved at a Cabinet meeting, thereby including the cost of purchasing AI training data in the scope of R&D tax credits. The revised decree is scheduled to be promulgated and enforced in February, and it will apply to R&D expenses incurred on or after January 1, 2026.

Photo to aid understanding of the article. Provided by Yonhap News.

AI training data is a key factor that determines model performance. A substantial cost is incurred in the construction process, including collection, refinement, and labeling, which has placed a heavy burden on companies. According to the National Information Society Agency (NIA), about 75% of the total cost of building training data is spent on collection, refinement, and labeling.

As global competition intensifies, major countries are also moving to expand the scope of tax benefits. The United Kingdom recognizes data licensing costs as R&D expenses, and Canada likewise includes data costs for research purposes in the scope of tax credits.

Previously, the Korean government designated AI as a national strategic technology R&D field and has expanded the scope of support by including cloud usage fees in the R&D tax credit. For national strategic technology R&D, small and medium-sized enterprises (SMEs) can receive tax credits of up to 50%, while medium-sized and large enterprises can receive up to 40%.

With this revision of the Enforcement Decree, the cost of training data purchased for AI development will also be subject to the same tax credit rates. SMEs can receive up to 50%, and medium-sized and large enterprises can receive up to 40% as a deduction from corporate tax or income tax.

Stimulating the data trading market... Virtuous cycle expected for AI and content industries

This measure reflects the proposals that major AI companies such as Naver, KT, and Kakao have been continuously raising. The explanation is that the need for tax support has grown as competition to secure large-scale training data has intensified.

The expansion of tax credits is expected to both enhance companies' capacity for R&D investment and serve as a catalyst for activating the distribution and trading of data and copyrighted works. Analysts say that if demand for data purchases increases, it could create a structure that leads to overall growth in the content industry and the data industry.

Kim Kyungman, policy chief for artificial intelligence at the Ministry of Science and ICT, said, "Data is the starting point of AI competitiveness," adding, "Following cloud services, the expanded application of tax credits will provide practical help for AI companies' innovation and the securing of high-quality data."