South Korea National Assembly ignoring call from Semiconductor Sector

The National Assembly finalized a Restriction of Special Taxation Act amendment on Dec. 23. According to the amendment, the tax credit rate applied to a large corporation investing in a national strategic industry is 8 percent and the rates are 8 percent and 16 percent in the case of medium-sized and smaller enterprises, respectively. Compared to the pre-revision figures, only the first has been raised by two percentage points.

In other words, South Korea failed to come up with a new law comparable to the U.S. CHIPS and Science Act. Four months ago, the ruling party proposed adjustment of the first two to 20 percent and 25 percent by 2030, and then opposition parties and the Ministry of Economy and Finance objected, mentioning that the adjustment is a preferential treatment for conglomerates and that it will result in a 2.69 trillion won decrease in corporate tax revenue in 2024, respectively.

Independent lawmaker Yang Hyang-ja, who led the process, expressed her disappointment immediately after the finalization. “The global standard tax credit rate for semiconductor investment is 25 percent and the level of 8 percent is a serious backward step that will drive global semiconductor companies out of South Korea,” she said.

According to the U.S. CHIPS and Science Act, semiconductor companies investing in the United States can get a tax credit of 25 percent. In Taiwan, a bill was recently tabled so that the rate applied in it can be adjusted to 25 percent from the current level of 15 percent. The Chinese government is planning to provide one trillion yuan for Chinese semiconductor companies from 2023 to 2027. BusinessKorea