[Tax Amendment] Full Effort to Strengthen Competitiveness of 'So-Bu-Jang'... Increasing Tax Benefits for Corporations and Foreign Engineers

[Image source=Yonhap News]

[Asia Economy Reporter Kim Hyunjung] Starting this year, the government will provide tax credit benefits when acquiring foreign corporations related to the materials, parts, and equipment sector to strengthen competitiveness, and will also expand income tax reduction for foreign engineers. Additionally, technologies in this sector will be included in the tax credit targets for research and development (R&D) costs of new growth and original technologies to provide support.

On the 5th, the Ministry of Economy and Finance announced the "2019 Tax Law Amendment Follow-up Enforcement Decree Amendment." First, full efforts will be made to strengthen competitiveness related to materials, parts, and equipment. When acquiring a foreign corporation whose sales of materials, parts, and equipment items account for 50% or more of the total, a tax credit of 5% of the acquisition amount (7% for medium-sized enterprises, 10% for small and medium enterprises) will be given. Related foreign engineers, who had previously received a 50% income tax reduction for 5 years, will now receive a 70% income tax reduction for 3 years, followed by up to 70% reduction for 2 years.

Furthermore, when two or more demand companies jointly invest in research, human resource development, and facility investment for small and medium enterprises in this sector, they can receive a tax credit of 5% of the investment amount. However, joint investment must be based on an agreement between the investing company and the investee company, with each domestic corporation paying at least 25% of the paid-in capital increase of the investee company, and at least 80% of the capital increase amount must be spent on designated mandatory investment fields within 3 years.

In addition, when determining whether the obligation to maintain employment after business succession tax deduction has been met, one can choose between the criteria of the number of employees or total wage amount. Also, if the predecessor or heir of the business receives a prison sentence or a fine prescribed by Presidential Decree for tax evasion or accounting fraud related to business management, they will be excluded from the deduction benefits.

The government will also significantly increase tax credit benefits for innovative growth. First, the tax credit benefits for R&D costs of new growth and original technologies, which were applied to 173 technologies in 11 fields such as future automobiles and artificial intelligence, will be expanded to 223 technologies in 12 fields including advanced materials, parts, and equipment, and system semiconductor design and manufacturing technologies. Fintech industries will be added to the tax reduction targets for startup small and venture companies.

Tax benefits for human resource development will also be increased. Customized university education expenses and vocational training allowances paid to Meister High School students will be added to human resource development costs to apply R&D cost tax credits. Domestic outstanding personnel who have obtained degrees and have more than 5 years of research and technology development experience abroad will receive a 50% income tax reduction for 5 years when employed domestically.

Additionally, beverages such as craft beer manufacturing kits, which initially contain no alcohol at the time of sale but develop an alcohol content of 1 degree or more within the container without additional ingredient injection, will be recognized as alcoholic beverages under the Liquor Tax Act.

Amendments to promote consumption have also been prepared. Previously, at designated duty-free shops in Jeju Island, purchases were limited to 6 times a year with a maximum of $600 per purchase regardless of the type of duty-free goods, but starting from April this year, liquor (up to 1ℓ, $400 or less) and cigarettes (200 sticks) will be excluded from the calculation.

This content was produced with the assistance of AI translation services.