The Korean Business Association (KBA) has urged the National Assembly to enhance tax support to promote domestic production and investment in advanced industries. The KBA proposed adding future cars, biotechnology, and small modular reactors (SMR) to the domestic production tax credit eligibility and maintaining the employment tax credit for large corporations, among a total of 51 suggested improvements.
On September 9, the KBA announced that it had submitted its recommendations for the '2026 Tax Reform Plan' to the National Assembly. Key proposals include improving the eligibility and requirements for the domestic production tax credit, maintaining the application of the integrated employment tax credit for large corporations, expanding tax support for regions facing industrial crises and population decline, preserving customs duty exemptions for R&D materials, and extending the carryover period for tax credits related to R&D and investment.
The government plans to establish a 'domestic production tax credit' to strengthen the domestic production base for green transition and economic security, selecting six key sectors: solar energy, wind energy, secondary batteries, semiconductors, essential materials, and AI robot components. The KBA has requested that future cars, biopharmaceuticals, vaccines, and SMRs also be included in the support categories.
The KBA has called for a review of the proposal to exclude large corporations from the integrated employment tax credit, arguing that removing employment incentives for these companies could negatively impact the expansion of quality jobs.
To secure competitiveness in R&D for advanced industries, the KBA also argued for maintaining or adjusting the customs duty exemption rate for research and development materials. Industries such as future cars and autonomous driving often rely on research and development components, pilot parts, and overseas prototypes for performance evaluation and quality verification before mass production. The elimination of customs duty exemptions could increase R&D costs and weaken cost competitiveness.
Lee Sang-ho, head of the KBA's Economic Division, stated, 'It is necessary to rationally improve and supplement the eligibility and requirements during the regular National Assembly discussions so that companies can effectively utilize tax benefits to increase production, investment, and employment.'
* This article has been translated by AI.
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