Ruling and Opposition Parties Reach Tentative Agreement on 'K-Chips Act'... Deduction Rate Increased by 5%p

Temporary Investment Tax Credit Extended for 2 Years Excluding Large Corporations
Full Meeting Scheduled by 29th to Approve Tax Law

The ruling and opposition parties have tentatively agreed on the 'K-Chips Act (Amendment to the Restriction of Special Taxation Act),' which aims to increase the integrated tax credit rate for semiconductor companies by 5 percentage points from the current rate. The temporary investment tax credit will be extended for two years but will be expanded only to small and medium-sized enterprises excluding large corporations.

On the 26th, Park Soo-young, a member of the People Power Party and ranking member of the National Assembly's Planning and Finance Committee, Jeong Tae-ho of the Democratic Party of Korea, and government officials held a closed consultation meeting of the Tax Subcommittee to review the tax law and agreed to raise the integrated investment tax credit rate for semiconductor companies by 5 percentage points from the current rate.

Yonhap News

The K-Chips Act is a system that provides tax credits of 15-25% for facility investment costs and 30-50% for R&D expenses for national strategic industries including semiconductors, and it was scheduled to expire this year. The sunset period has not yet been decided. Both ruling and opposition parties agree that the sunset period of the K-Chips Act should be extended to 10 years to ensure stable investment, but the government is reportedly proposing a plan to extend it by three years first and then decide on further extension at the time of sunset.

A ruling party official from the Planning and Finance Committee explained, "The three-year plan is too short," adding, "While the ruling and opposition parties are united in their stance, the government is opposing it citing tax revenue stability and predictability." The plan is to reach a consensus through further consultations by the 29th and then submit it to the full committee meeting.

The temporary investment tax credit will also be extended for two years. The temporary investment tax credit is a system that provides an additional 10 percentage points credit on the increase in investment amount when a company invests more than the average annual investment amount over the past three years.

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