Government will subsidize $75 million to lure industries back to Korea

A construction site for the world's largest semiconductor cluster to house Korean chipmakers, including Samsung Electronics and SK hynix, in Yongin, Gyeonggi. [Yonhap]

The government will spend 100 billion won ($75 million) this year to support Korean companies' bringing their production facilities back home from overseas.

Korea raised the corporate investment subsidy by 75 percent from last year in a bid to encourage the reshoring of production facilities for high-tech industries and key segments of the supply chain, the Ministry of Trade, Industry and Energy said Tuesday.

Companies investing in chips, displays, batteries and vaccines will receive a subsidy of 45 percent for investments made outside of greater Seoul. Those investing in the capital area will be granted a 26 percent in subsidy, where they previously received zero.

The government is also extending the life span of the discount on corporate tax, which was previously set to last seven years, to 10 years.

“Returning businesses for high-tech industries are crucial in revitalizing the regional economy, including investment and employment, as well as securing export momentum,” said the ministry’s Park Duk-ryul, the director-general for cross-border investment policy.

The government also announced plans to expand the scope of research and development (R&D) projects that are eligible for tax credits in a bid to secure new growth engines.

Korea will offer tax credits for R&D projects in 66 areas of the country's seven strategic industries, compared to the previous 62, according to a revised enforcement ordinance released by the Ministry of Economy and Finance.

The seven industries are chips, batteries, vaccines, displays, hydrogen, future transportation and pharmaceutical.

The government will also provide tax credits for separate batches of technologies under 14 categories categorized as future businesses, which includes the defense sector for the first time.

To foster the development of the Korean content, Korea will provide a five percent tax credit to conglomerates, a two percentage points on-year increase, for expenses related to the production of entertainment.

Firms can qualify for an additional 10 percent if they meet certain conditions, such as if more than 80 percent of their production budgets are spent in Korea.

The scope of foreign technicians and researchers subjected to a 50 percent income tax reduction for a decade will be expanded to include professors hired at research centers and hightech medical complex.

For a soft landing of the struggling property sector, unsold units located outside greater Seoul will not be counted as house when calculating capital gains tax and comprehensive real estate holding tax.

Households living in so-called villas, generally a less popular type of home than traditional apartments, who shift their mortgages to internet-only banks will qualify to deduct their interest payments for income taxation purposes, which was not possible before this revision.

BY JIN MIN-JI [jin.minji@joongang.co.kr]