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'K-Chips’ bill passed at the National Assembly

Posted March. 31, 2023 08:11,   

Updated March. 31, 2023 08:11

한국어

South Korea’s “K-Chips” law, which increases tax deductions for investment in national strategic industries including semiconductors, was passed at the plenary session of the National Assembly on Thursday. The law, which offers tax benefits for individual national bond investments, was also approved on the same day.

The Ministry of Economy and Finance announced Thursday that the revised “K-Chips” law, which expands tax benefits for companies’ investment in national strategic industries including semiconductors, was passed through the National Assembly. The scope of the strategic industries covers secondary batteries, vaccines, displays, and the areas of next-generation vehicles such as electric vehicles. Once the law takes effect, large and medium-sized companies in these sectors will increase their tax deductions from 8% to 15%, while small and medium-sized companies will see their deductions increase from 16% to 25%. The finance ministry explained that by providing a tax deduction of 25% for semiconductor investments, South Korea would have the highest level of tax support for semiconductors compared to other countries including the United States.

In addition, companies can receive a temporary investment tax credit of up to 10% this year for the increment of investments compared to the average investment value over the previous three years. This means large and medium-sized companies can receive a maximum of 25% in tax deductions, while small and medium-sized companies can receive up to 35%. The tax deduction rate for newly emerging growth and core technology investments will increase to 6% for large companies, 10% for medium-sized companies, and 18% for small and medium-sized companies. For instance, if a large company, say Company A, invests 1 trillion won in facilities for newly emerging growth and core technology businesses, makes an additional investment of 500 billion won, it can receive a tax deduction of 170 billion won this year and 120 billion next year, making it more advantageous to invest early.

The revised law also includes tax benefits for individual investment in national bonds. From now until 2024, investors who purchase individual investment bonds worth 100 million won a year and 200 million won in total and hold them until maturity will receive a separate 14% tax benefit.


Hye-Ryung Choi herstory@donga.com