S.Korea Hands Tax Breaks to Tech Startups

July 19, 2018 Taxation in South Korea

tax breaks on r&dSEOUL – South Korea is extending tax breaks to innovative startups doing research and development.

On July 18th the government of South Korea indicated that it will soon enact new tax breaks for businesses which make investments into research and development of new technologies.

So far 157 specific technologies across 11 operational areas have been defined as “new-growth technology” which will fall under the scope of the tax break.

Under current rules for tax breaks for R&D, companies are eligible for tax reductions if they allocate at an amount which is equivalent to 5 percent of the previous year’s sales to research and development, with at least 10 percent of the amount dedicated to new growth technology.

However, it has been suggested that the rules may be amended for this year to be tied to the current year’s sales, which would allow newly formed start-ups to access the tax break.

Full details of the tax are expected to be announced on July 26th, with the changes set to come into effect during the first quarter of the next year.

It has been indicated that the tax break will apply to foreign and domestic business, as long as they are based in Korea.