r&d tax incentives : korea, 2019 · figure 3. direct government funding of business r&d and...
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Directorate for Science, Technology and Innovation www.oecd.org/December2019
For more information, please visit: http://oe.cd/rdtax Contact us at: [email protected]
R&D Tax Incentives : Korea, 2019 Design features
Table 1. Main design features of R&D tax incentives in Korea, 2019†
R&D tax credit R&D investment credit
Type of instrument Hybrid (volume or increment)* Volume-based
Eligible expenditures† Current Machinery & equipment, buildings
Headline rates Volume: 1-2 [1+0.5 R&D expense
ratio]**, 8 (HPE), 25 (SME)*** Increment: 25,
40 (HPE), 50 (SME)**** 1, 3 (HPE), 7 (SME)
Refund No
Carry-over (years) 5 (carry forward) [10 years for start-ups]
Thresholds & ceilings
Base amount R&D spending in the previous year. n.a.
Ceiling Tax credit capped at 2% of R&D spending (large firms) No
R&D expense ratio=R&D/revenue; HPE: High Potential Enterprise (do not qualify as SME, respect rules about being part of a group and have sales below KRW 500 billion); *: the R&D tax credit generally equals the greater of either 1) the volume-based tax off-set, or the 2) incremental tax off-set; **: 20~30 for large firms and HPE under the Growth Industry and Basic Technology scheme; ***: 30~40 for SMEs under the Growth Industry and Basic Technology scheme; 15/10 for firms losing SME status (see compendium); **** 40 for firms losing the SME status and HPE. Korea also offers an income-based tax incentive for outcomes of R&D activities. This incentive is beyond the scope of this note.
Recent developments and trends
Figure 1. Implied tax subsidy rates on R&D expenditures: Korea, 2000-19 1-B-Index, by firm size and profit scenario
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0.00
0.05
0.10
0.15
0.20
0.25
0.30
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
1-B-index Large, Profitable SME, Profitable Large, Loss-Making SME, Loss-Making
Directorate for Science, Technology and Innovation www.oecd.org/December2019
For more information, please visit: http://oe.cd/rdtax Contact us at: [email protected]
Public support for business R&D: the policy mix
Figure 2. Direct government funding of business R&D and tax incentives for R&D, 2017 (nearest year) As a percentage of GDP
Trends in government support for business R&D
Figure 3. Direct government funding of business R&D and tax incentives for R&D, Korea, 2007-17 As a percentage of GDP, 2010 prices (right-hand scale)
0.00
0.10
0.20
0.30
0.40
0.50
0.60
% Direct government funding Tax incentive support Subnational tax incentive support Total 2006 (excl. subnational tax support)
* Data on tax support not available, ** Data on subnational tax support not available
0
500000
1000000
1500000
2000000
2500000
3000000
3500000
0.00
0.05
0.10
0.15
0.20
0.25
0.30
0.35
0.40
0.45
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
2010KRWm
% Direct funding Tax incentive support Data on tax support not available R&D tax support (right-hand scale)
The cost estimate of tax incentive support for Korea covers the R&D tax credit and the R&D investment credit