Finance ministry says measures will save firms more than $2.85bn in tax payments for 2024.
South Korea will roll out large tax breaks for semiconductor firms and other technology companies that invest at home as part of efforts to ensure the security of supply chains.
Firms that invest in the East Asian country will be able to avail of a 35 percent tax deduction, helping companies save more than 3.6 trillion won ($2.85bn) in tax payments for 2024, the country’s finance ministry said in a statement on Tuesday.
The proposed tax relief comes as other economies, including Taiwan and the United States, roll out measures to boost their domestic chip industries.
Taiwan, home to the world’s largest contract chipmaker Taiwan Semiconductor Manufacturing Co Ltd, in November announced expanded tax breaks that will allow companies to lower their tax bill by up to one-quarter if their investment in domestic research and production hits a certain level.
In August, US President Joe Biden signed the CHIPS and Science Act, which provides billions of dollars in subsidies for US chip makers and limits support to firms that carry out production in China.
South Korea’s finance ministry said the proposed tax break plans were subject to approval by the parliament, which is dominated by the Democratic Party, the centre-left rival of South Korean President Yoon Suk-yeol’s People Power Party.
South Korea, Asia’s fourth-largest economy, is the world’s biggest producer of memory chips, with local firms Samsung and SK Hynix together controlling about 70 percent of the global market.
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