S. Korea expands biopharma tax incentives to cover up to half of R&D expenses

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The South Korean government has decided to designate key technologies in the biopharmaceutical sector as “national strategic technologies” to expand tax support for R&D related to such technologies.

During a Cabinet meeting chaired by President Yoon Suk Yeol on Monday, the government approved plans to partially amend the Enforcement Decree of the Restriction of Special Taxation Act to reflect these developments. This enactment was formulated with the aim of promoting the biopharmaceutical industry, which is garnering attention as a national strategic sector. The amendment extends the scope of nationally strategic technologies that are recognized for their strategic importance to national security and significant influence on the overall national economy. As a result, small and medium-sized enterprises can benefit from a tax deduction of up to 50 percent of their R&D expenses, an increase from the previous limit of 40 percent, for technologies related to the discovery of novel drug candidates, clinical pharmacological evaluation of biopharma medicines, and manufacturing of raw materials for biopharmaceuticals.

Moreover, the benefits now encompass additional technologies such as non-clinical trial methods for novel medicines and clinical pharmacological evaluation of biosimilars, both newly recognized as nationally strategic technologies.

“President Yoon has led the meeting with the intention of fostering the biopharmaceutical sector as a key industry for the future, akin to the semiconductor and lithium battery industries,” said an official at the presidential office. “As part of this effort, measures have been devised to maximize tax incentives.”

The Cabinet meeting also approved amendments to the Enforcement Decree of a special law aimed at boosting corporate vitality. This legislation includes provisions to incorporate industries that leverage nationally strategic technologies into the scope of emerging industries.

Consequently, these changes are expected to expedite corporate restructuring in areas utilizing nationally strategic technologies like semiconductors and lithium batteries. Additionally, traditional internal combustion engine component manufacturers are anticipated to transition toward future vehicles such as electric, hydrogen, and autonomous vehicles.