S. Korea mulls at least 10% tax credit on chip facility investment

[Photo by MK DB]

The South Korean government will seek to increase the tax credit rate to more than 10 percent for semiconductor facility investment after a related bill passed last week disappointed many due to its lower-than-expected benefits.

Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho told reporters on Sunday that the government has started reviewing a new tax incentive plan for semiconductor investment, and details will be announced this week.

Choo said the new tax credit rate should be at least double digits, implying that the figure for semiconductor facility investment would be at least 10 percent.

The move comes after President Yoon Suk-yeol last week told government officials to consider raising tax incentives for local semiconductor manufacturers as a measure to further improve their global competitiveness.

Earlier, the National Assembly passed a revision to the Restriction of Special Taxation Act to entitle big companies to a tax credit of up to 8 percent from the previous 6 percent cap for investments in national strategic businesses such as semiconductor, battery and vaccine, but it was far below the 20 percent that the President’s People Power Party had proposed.

A change in the tax credit rate requires a revision to the law, and the government plans to submit a new bill to the National Assembly.