Korean Tax Incentives for Start-up Businesses in Korea

Our friends at the Korean Tax Blog drafted a post on Korean Start-up Business Tax Incentives. We, at IPG Legal, have written other articles on other incentives, grants, and Korean free trade zones that can be found with a search of this blog, however, we have regrettably neglected many tax incentives.

With the increasing cost of doing business in Korea, the Korean government is stepping up and offering incentives for some startup businesses., mature businesses and also businesses wishing to establish regional offices in Korea.

quote board on top of cash bills

The post lists three major incentives.

1. Research and Development (R&D) Tax Credits

One of the most prominent incentives for start-ups is Research and Development (R&D) tax credits. These credits aim to encourage innovation by offsetting a portion of the costs incurred in research and development activities. Eligible expenses typically include wages, materials, and subcontractor costs directly related to R&D projects. Start-ups engaged in pioneering technological advancements or developing new products/services stand to benefit significantly from R&D tax credits.

2. Tax Holidays and Exemptions

Korea offers tax holidays or exemptions specifically tailored for start-ups, providing temporary relief from corporate income tax obligations. These incentives often target newly established businesses or ventures operating in specific industries deemed strategic for economic growth. By allowing start-ups to reinvest earnings into business expansion rather than allocating resources to tax payments, these incentives facilitate accelerated growth and innovation.

3. Loss Carryforwards and Tax Loss Refunds

Start-ups frequently encounter initial phases of losses as they navigate the challenges of market entry and product development. To mitigate the impact of these losses, many jurisdictions allow start-ups to carry forward losses incurred in early years to offset future taxable income. Additionally, some regions offer provisions for tax loss refunds, enabling start-ups to recoup a portion of their losses in cash, providing much-needed liquidity to fuel further growth initiatives.

Korean Tax Blog

The full article may be found at: Navigating Corporate Tax Incentives for Startup Companies

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