Significant Improvements to Corporate R&D Investment Tax Credit System

Ministry of Science and ICT Announces Basic Guidelines for System Improvement This Year

Researcher at LG Chem Future Technology Research Center. Stock photo.

[Asia Economy Reporter Kim Bong-su] The government has announced plans to revise the tax credit system for companies' research and development (R&D) expenses.

On the 31st, the Ministry of Science and ICT held the 28th National Science and Technology Advisory Council Steering Committee meeting, where it reviewed and approved the '2021 Basic Guidelines for R&D System Improvement (Draft)' containing these measures.

These guidelines are established annually under the 'National Research and Development Innovation Act' enacted last year, with this year being the first. The main purpose is to set the basic direction for improving the R&D system by gathering opinions from related ministries and the research field. The final improvement plan will be confirmed in August.

Notably, the guidelines include the government's intention to enhance the tax benefit system for R&D expenses, which companies have long requested.

Since 1982, the government has provided corporate tax or income tax reductions based on a certain percentage of companies' R&D investments. Since 2020, a 'Pre-Review System for R&D Tax Credits' has been in place. However, frontline companies have expressed difficulties due to excessive documentation requirements, ambiguous criteria, and insufficient information.

In the guidelines released that day, the government stated it will promptly provide institutional support for policy issues, aiming to rationalize the burden criteria for companies' R&D expenses and support R&D-performing companies related to key policy issues such as SoBuJang (materials, parts, and equipment). It also pledged to pursue system improvements centered on the demands of ministries and the research field. This is interpreted as a positive consideration of companies' requests to improve the R&D tax credit system.

The Ministry of Science and ICT said, "After receiving opinions from related ministries (in April) and the research field (April to May), we plan to finalize the system improvement plan in August and promote amendments to relevant laws and administrative rules within the year to enable implementation from next year." It added, "We will also strive to enhance on-site responsiveness by checking the application status in research institutions where there is demand."

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