[Changes in 2022] Up to 50% Tax Credit for National Strategic Technologies... Eco-Friendly Vehicle Purchase Targets for Large Corporations

Government Publishes 'Changes in 2022'

[Sejong=Asia Economy Reporters Haeyoung Kwon and Sunhee Son] Starting next year, the government will designate core technologies in three major fields?semiconductors, batteries, and vaccines?as 'National Strategic Technologies' and provide tax credits of up to 50% on research and development (R&D) and facility investment costs. The 'Eco-friendly Vehicle Purchase Target System,' which was previously applied only to the public sector, will be expanded to include private sectors such as large corporations and rental car companies, and the obligation to install electric vehicle chargers will be strengthened.

On the 31st, the government summarized the changes in systems and regulations effective from next year in the booklet titled "Changes in 2022."

The newly established 'National Strategic Technology' tax credit aims to focus on nurturing core technologies directly linked to national economic security in response to global technological hegemony competition. Sixty-five technologies across three major fields will be designated as National Strategic Technologies by February, and tax credit rates for related R&D expenses will be applied at 30-40% for large and medium-sized enterprises and 40-50% for small and medium-sized enterprises. This is a 10 percentage point increase compared to the existing tax credit rates for new growth and original technologies (20-30% for large and medium-sized enterprises, 30-40% for small and medium-sized enterprises).

For facility investments related to National Strategic Technologies, tax credit rates of 6% for large enterprises, 8% for medium-sized enterprises, and 16% for small enterprises will be applied. This also represents a 3-4 percentage point increase compared to new growth and original technologies.

This National Strategic Technology tax support applies to R&D expenses and facility investments made from July 1 of this year through December 31, 2024. The government also plans to consider adding hydrogen-related technologies as National Strategic Technologies in the future.

To expand support for low-income households, the income criteria for the Earned Income Tax Credit will be raised by 2 million KRW per household starting from applications submitted after January 1 next year. The thresholds will increase from 20 million KRW to 22 million KRW for single-person households, from 30 million KRW to 32 million KRW for single-income households, and from 36 million KRW to 38 million KRW for dual-income households.

Measures to stimulate demand for eco-friendly vehicles will also be implemented. The 'Eco-friendly Vehicle Purchase Target System' will require private sector vehicle purchasers such as large corporations and rental car companies to purchase or lease a certain percentage of new vehicles as eco-friendly vehicles. The mandatory purchase rates for electric and hydrogen vehicles in the private sector are 13% for large corporations and rental car companies, 7% for taxis, and 6% and 20% for bus and freight operators, respectively. The government plans to provide acquisition tax reductions and new fuel subsidies aligned with the launch of new vehicles such as hydrogen trucks in April next year.

The obligation to install electric vehicle chargers, which had been imposed only on new facilities, will be extended to existing facilities. Starting next year, new apartment complexes must install electric vehicle chargers in at least 5% of total parking spaces, and existing apartments must install chargers in at least 2% of parking spaces. The rent reduction limit for building hydrogen charging stations on national and public land will be expanded from the current 50% to 80% next year.

The 'Special Act on Regional Industrial Crisis Response and Regional Economic Recovery,' which allows the government to proactively support when regional key industries show signs of crisis, will also be enforced. The stages of industrial crisis will be subdivided into pre-crisis, early, middle, and later phases, and depending on the situation, preventive measures, proactive responses, special response areas, and soft-landing support systems will be established.

The proportion of resident support projects around power transmission facilities will be expanded from the current limit of 50% of total support funds to up to 100% based on resident agreement. This measure aims to increase residents' satisfaction with support projects and enhance the acceptability of power transmission and transformation facility construction, contributing to stable power supply and demand.

Additionally, the Carbon Neutrality and Green Growth Basic Act to address the climate crisis will be enforced. This law provides the legal basis for transitioning to a carbon-neutral society by 2050 and includes an interim goal to reduce national greenhouse gas emissions by 40% by 2030 compared to 2018 levels.

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