Electric Vehicle Production Plants Also Receive Up to 35% Investment Tax Credit... Designated as National Strategic Technology

Legislative Notice on the Amendment of Enforcement Decree and Enforcement Rules of the Restriction of Special Taxation Act

Investment tax credits of up to 35% are now available for electric vehicle factory equipment investments. Previously, through amendments to the Restriction of Special Taxation Act, future transportation means such as electric vehicles were included in national strategic technologies, and this recent revision of the enforcement decree and enforcement rules specifies the detailed categories and targets.

On the 9th, the Ministry of Economy and Finance announced that the amendment to the 'Enforcement Decree of the Restriction of Special Taxation Act' will be publicly notified on the 10th, and the amendment to the 'Enforcement Rules of the Restriction of Special Taxation Act' on the 15th. These amendments are follow-up measures after the expansion of investment tax credits for national strategic technologies under the Restriction of Special Taxation Act.

First, the Ministry of Economy and Finance expanded the scope of national strategic technologies and commercialization facilities through the amendments. In the future mobility sector, five technologies and three facilities were selected as targets, including electric vehicle production facilities and electric vehicle charging technologies and facilities.

The tax credit rate is 15% for large and medium-sized enterprises and 25% for small and medium-sized enterprises. Additionally, for the increase in investment compared to the average annual investment amount over the past three years, an additional 10% credit (temporary investment tax credit) can be received only this year. Accordingly, when investing in electric vehicle production facilities, large and medium-sized enterprises can receive up to a 25% investment tax credit, and small and medium-sized enterprises up to 35%.

On the same day, Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho visited Hyundai Motor's Ulsan plant and stated, "We plan to provide investment tax credit benefits under the Restriction of Special Taxation Act for national strategic technologies, including investments in electric vehicle production facilities," urging the automotive industry to actively invest. In response, Hyundai Motor announced plans to establish a dedicated electric vehicle factory worth 2 trillion won at the Ulsan plant (construction to begin in the fourth quarter of this year) to secure global leadership in the future mobility sector.

In the hydrogen sector, five technologies including clean hydrogen production technology based on water electrolysis and their commercialization facilities will be added to national strategic technologies and commercialization facilities. Similarly, small and medium-sized enterprises investing in these technologies and facilities can receive up to a 35% investment tax credit.

Furthermore, to stimulate domestic demand, the Ministry of Economy and Finance added amusement facility usage tickets, arboretum and garden admission tickets, and cable car usage tickets to the list of expenses eligible for special tax deduction on cultural business promotion expenses.

Also, interest and dividend income generated from investments in public funds that include 45% or more BBB+ or lower corporate bonds in high-risk, high-return bond investment trusts, and private funds that include 45% or more BBB+ or lower and 15% or more A-rated bonds, will be subject to separate taxation at a 14% rate. Interest income from individual investment government bonds with a maturity of 10 years or more held until maturity will also be subject to separate taxation at a 14% rate within a purchase amount limit of 200 million won. This aims to diversify government bond demand and reduce market volatility.

The amendments are expected to be promulgated and enforced in early June after public notification, review by the Ministry of Government Legislation, and meetings of vice ministers and the Cabinet (for the enforcement decree).

(Photo) [Image source=Yonhap News]

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