Korea, Republic of
On 2 December 2021, Korea’s National Assembly approved the government’s bill to amend 17 different tax laws, including the corporation tax law and the special tax incentive law. The latest amendments include changes to: (i) help drive recovery from the COVID-19 pandemic crisis, (ii) increase fiscal support to drive growth of designated strategic technologies and emerging industries to shape the future of growth, (iii) increase tax incentives to reduce the economic bipolarisation that has deepened during the COVID-19 pandemic, and (iv) reinforce anti-tax avoidance measures.
To support economic recovery, the latest amendments extend the existing tax credits to promote job creation by three more years and expand the tax incentives for small and mid-size enterprises (SMEs). To help lead a major economic transition for future growth, the amendments include further tax incentives for investment in research and development (R&D) and facilities to develop the government-designated strategic industrial technologies and new growth and core technologies. They also include changes that should affect foreign corporations with liaison offices in Korea and non-residents supplying electronic services to consumers in the Korean market.
The amended tax laws are expected to require a significant amount of additional revenue as fiscal expenditure is predicted to increase to finance the additional tax incentives for R&D and facility investments and other spending to drive recovery from the pandemic crisis. Tax revenue is, however, anticipated to grow, boosted by several factors, including the strengthened rules on taxation of controlled foreign corporations (CFCs).