Seoul moving to cut corporate tax for chip companies

A bill to support the local semiconductor industry being considered by the ruling Democratic Party of Korea (DPK) — a Korean version of the Special Chip Act — will include a corporate tax rate cut and various deregulation measures to encourage firms to invest more in production facilities, according to sources from the party and government officials, Wednesday.

“We are preparing to propose a bill to cut taxes and loosen regulations for semiconductor manufacturers, with possible submission to the National Assembly scheduled for August,” a lawmaker from the ruling party said

“We fully understand that calls are growing for the government to revise some regulations pertinent to the punishment for workplace disasters, the chemical substances control act, the registration and evaluation of chemical substances, and the occupational safety and health act, which are major factors causing companies to hesitate in investing in production facilities,” he added. “The party will recommend the government to accept the requests for amelioration.”

The need to enact various support measures for the semiconductor industry surfaced after U.S. President Joe Biden began to strongly push forward with his “CHIPS for America Act” that offers an investment tax credit of 40 percent on equipment and facility costs.

Since the industry is also central to Korea’s economy, the DPK is working on legislating a local equivalent of this support measure by August.

The move is in line with President Moon Jae-in’s commitment to help companies here become leaders in the global semiconductor supply chain. During a meeting with economy-related ministers April 15, he pledged that the government would come up with various support measures.

“The semiconductor industry is a key national strategic industry that can determine the present and future of our economy. We should continue to lead the global semiconductor supply chain. We will vigorously support our country’s emergence as a comprehensive semiconductor powerhouse by using the semiconductor super cycle now facing the world as an opportunity to take a new leap forward. Diverse support measures will be formulated to maintain our current No. 1 global ranking and increase our lead further,” President Moon said at that time, according to Cheong Wa Dae press pool reports.

An official said, “The special act will reflect opinions of the local chip industry as much as possible as there is a consensus among the presidential office, the government and the ruling party that support measures are needed.”

“At a time when chips have become a strategic item, a consensus has been formed that the government needs to provide more support to solidify the country’s status as a semiconductor powerhouse,” the official added.