"Let's Create the Second Squid Game"... Up to 30% Tax Credit on K-Video Production Costs [2023 Tax Reform]

The government will increase the tax credit rate for video content production costs to a maximum of 30% starting next year. Small and medium-sized enterprises (SMEs) and mid-sized companies investing in video content production will be eligible for corporate tax credit benefits on their investments.

On the 27th, the Ministry of Economy and Finance announced the '2023 Tax Reform Bill' including these details. Considering the economic ripple effect of the content industry, the plan is to raise the tax credit rate for K-content to the level of major overseas countries such as the US and France (20-30%), Germany and the UK (20-25%), fostering it as a key strategic industry.

Specifically, the current basic tax credit rate for video content production costs, which ranges from 3% to 10% depending on company size, will be increased to 5% to 15%. For large corporations, the rate will rise from 3% to 5%, for mid-sized companies from 7% to 10%, and for SMEs from 10% to 15%. The basic credit includes all costs related to video content production such as actor fees, labor costs, and set production expenses for TV programs, movies, dramas, etc.

Separately, an additional tax credit of up to 15% can be received when producing video content with significant domestic industrial ripple effects such as investment and employment. For example, video content with a certain proportion of domestic expenditure in total production costs will receive an additional tax credit of 10% for large and mid-sized companies and 15% for SMEs. In fact, California in the US provides tax incentives when more than 75% of total production costs are spent within the state. Specific requirements will be finalized and announced through a follow-up revision of enforcement ordinances after consultation with relevant ministries and the industry.

A corporate tax credit benefit for investment in video content production will also be newly established. SMEs and mid-sized companies investing in film, TV programs, and online video service (OTT) content production through cultural industry specialized companies will receive a 3% credit on the costs used for production. However, expenses such as entertainment costs, advertising and promotion expenses, and retirement benefit reserves are excluded from the credit.

The reason for limiting the tax credit to investments through cultural industry specialized companies is the judgment that transparency can be ensured by managing assets solely for specific projects such as video content production. The timing of the credit application will be based on the fiscal year in which the earlier of the initial screening/public release date or the liquidation date of the cultural industry specialized company falls.

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