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South Korea prepares tax breaks for chip makers.

Published: 2023-01-03

Recently, South Korean President Yoon Suk Yeol criticized local lawmakers for being stingy with giving tax breaks to semiconductor companies, so the bill will be redesigned so that large investments in the country's semiconductor industry can be accompanied by tax deductions of up to 25%.

Investments in major chip manufacturing enterprises, the Ministry of Finance of South Korea, will be able to qualify for a tax deduction of 15% instead of the original 8%. Smaller companies in the semiconductor sector will be able to claim a 25% tax deduction instead of the 16% originally envisaged in the bill. Additional investments throughout 2023 will be eligible for a 10% tax deduction. The expanded plan, which will be developed by the end of this month, will reduce the tax burden on companies in the industry by $2.8 billion.

The new version of the bill will still have to be approved by the South Korean parliament, the majority of which is occupied by representatives of the opposition party to the incumbent president. According to opponents of such measures, these benefits will increase the burden on the state budget, but at the same time will only help the development of large industry companies.

Another problem for the Korean authorities is the need to choose a compromise foreign trade strategy that would take into account the interests of both the United States and China. From the first of the countries, South Korean manufacturers of semiconductor components are technologically dependent, and the second is the largest trading partner. At the same time, the US authorities insist on reducing South Korea's trade ties with China as part of the sanctions restrictions being promoted. President Yoon Seok-yeol has formed a special committee of 13 representatives of the ruling party, which will work out a solution acceptable to the national economy.