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SMEs to enjoy 50% tax exemption for gains from tech transfer

SMEs to enjoy 50% tax exemption for gains from tech transfer

Posted October. 19, 2013 07:07,   


Small and medium-sized enterprises will get a 50 percent tax exemption from income earned by technology transfer from January next year at the earliest. A company that takes over or merges with a venture firm will also be exempted from corporate tax by a certain ratio.

The Science, ICT and Future Planning Ministry announced “Measures to galvanize private sector R&D investment” at the 3rd National Science and Technology Council meeting on Friday. The measures are meant to improve the current situation of lackluster R&D by SMEs, with the number of companies running affiliated R&D centers only accounting for 0.8 percent (26,381 firms) of the SMEs in Korea.

For starters, tax benefits will increase. SMEs will enjoy a 50 percent exemption in corporate tax or income tax for gains from technology transfer. If this policy, which was revoked in 2005, is reinstated, 540 SMEs stand to benefit.

If a company takes over or merges with a venture firm, or "technology innovation firm," which invests more than 5 percent of its sales in R&D, the former will enjoy corporate tax exemption amounting to 10 percent of the value of technology concerned. If the two firms are not in special relationship, the company that is taken over will be exempt from transfer tax.

Five service sectors, including publishing, film making and advertising, and R&D business will be listed on companies entitled to tax credit for R&D expenses. In addition, businesses involving intellectual property service and R&D assistance will also be eligible for special tax credit for SMEs, which is applied to about 40 types of industries. For instance, non-manufacturing SMEs with annual sales of less than 10 billion won (9.4 million U.S. dollars) operating in non-Seoul metropolitan areas will enjoy a 30 percent exemption of corporate tax. These measures are included in a revision bill for the Tax Act, and are awaiting deliberation and approval by the National Assembly.

The government will also assist SMEs in mobilizing funds. The government plans to enable the special guarantee system for R&D, which is currently implemented only by Korea Technology Credit Guarantee Fund, or Kibo, to use Korea Credit Guarantee Fund before the end of this year. It will also newly introduce an “intellectual property guarantee system,” in which Kibo and the Korea Institute for the Advancement of Technology will offer guarantee.

The government will also support recruitment of human resources. It is considering allowing professional researchers with master’s and doctorate degrees who are working as researchers with companies in lieu of their compulsory military service to only transfer to SMEs during the period corresponding to their military service.