[Amendment to Tax Enforcement Decree] HBM Added to National Strategic Technologies... Additional Deduction for 80% Domestic Spending on Video Production Costs

Ministry of Economy and Finance's 'Follow-up Enforcement Decree Amendment after Tax Law Revision'
New Addition of Defense Industry Sector to 'New Growth and Core Technologies'

The government has added High Bandwidth Memory (HBM) to the 'National Strategic Technologies,' which apply a higher tax credit rate compared to general research and development (R&D) tax credits, and has newly established the defense industry sector under 'New Growth and Core Technologies,' which also apply a high tax credit rate. When producing video content, if more than 80% of the expenses are incurred domestically and the proportion of wages paid to domestic writers and staff exceeds 80%, among other quantitative indicators, an additional tax credit (up to 5 percentage points) will be applied.

The government announced the 'Amendment to the Enforcement Decree Following the Tax Law Revision' including these details on the 23rd. It expands the detailed technologies in the semiconductor, display, and hydrogen sectors among the national strategic technologies eligible for tax credits. In the semiconductor sector, HBM and others are added and expanded under 'Next-generation memory semiconductor design and manufacturing technology,' and in the display sector, organic light-emitting diode (OLED) pixel formation and encapsulation process equipment and component technologies are added.

In the hydrogen sector, ▲hydrogen gas turbine design and manufacturing technology ▲hydrogen reduction steelmaking technology ▲hydrogen storage efficiency technology, among others, are added. As a result, the national strategic technologies have expanded from 62 to a total of 66 across seven fields. National strategic technologies apply a higher tax credit rate of 40-50% (30-40% for medium-sized and large enterprises) compared to general R&D.

Additionally, for the 258 new growth and core technologies across 13 fields, which apply a maximum tax credit rate of 40% (20-30% for medium-sized and large enterprises), the defense industry sector is newly established, increasing the total to 270 technologies across 14 fields. The defense industry sector adds three technologies: ▲gas turbine engine and other propulsion system technologies ▲military satellite system technologies ▲manned-unmanned complex system technologies. Furthermore, a total of 15 new technologies are added, including large nuclear power plant manufacturing technology, nano-silicon anode material manufacturing technology, and ammonia power generation technology.

The government is also promoting the activation of the K-content industry such as movies and dramas. When producing video content, if the proportion of filming and production expenses spent domestically is over 80%, and among the following conditions?▲80% or more of wages for writers and key staff paid to domestic personnel ▲80% or more of actors' appearance fees paid to domestic personnel ▲80% or more of post-production expenses spent domestically ▲ownership of three or more major copyrights (IP)?three or more are met, an additional tax credit of up to 15% (10% for medium-sized and large enterprises) can be applied.

With this amendment to the enforcement decree, it is expected that over 80% of domestic movies and dramas will benefit. Jeong Jeong-hoon, Director of the Taxation Office, said, "More than 80-90% of movies, broadcasts, and dramas produced domestically will be subject to the regulations created this time," adding, "This is a groundbreaking tax support. Some may argue that providing tax benefits to 80-90% of all movies is excessive."

Regarding concerns that the 'domestic personnel' condition applies only to Korean nationals, making it difficult to cast actors like Ma Dong-seok or other foreign actors with foreign nationality, potentially leading to a decline in content quality, Director Jeong responded, "Providing more tax credits to movies with significant domestic investment does not diminish the possibility of producing excellent films."

Following the Ministry of Land, Infrastructure and Transport's report on the 10th, which announced plans to exclude capital gains tax and comprehensive real estate holding tax for purchases of small new houses or unsold houses after completion in local areas, criteria for these small new houses and unsold houses after completion have been established. Small new houses are defined as ▲exclusive area of 60㎡ or less ▲acquisition price of 600 million KRW (300 million KRW outside the metropolitan area) or less ▲completion date from January 10 this year to December 31 next year ▲excluding apartments. Unsold houses after completion are defined as ▲exclusive area of 85㎡ or less ▲acquisition price of 600 million KRW or less ▲located outside the metropolitan area. The acquisition period is from January 10 this year to December 31 next year, and the transfer must occur by May 9 next year with a holding period of at least two years. The deadline for excluding capital gains tax surcharges for multi-homeowners transferring houses in regulated areas has also been extended by one year to May 9 next year.

To expand seafarer manpower and support overseas construction orders, the tax exemption limit for deep-sea fishing vessel and foreign voyage seafarers and overseas construction workers has been increased from 3 million KRW to 5 million KRW per month. To attract excellent foreign talent domestically, income of foreign engineers appointed as professors at schools within research and development special zones and advanced medical complex districts will be reduced by 50% for 10 years. To activate the hydrogen economy, a flexible individual consumption tax rate (-30%) on liquefied petroleum gas (LPG) for hydrogen production will be applied from April. Accordingly, the individual consumption tax per kilogram (kg) for propane gas will decrease from 20 KRW to 14 KRW, and for butane gas from 275 KRW to 176.4 KRW.

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