Tax Credits for Research and

Human Resources Development Expenses

I. General Research and Human Development Expenses

1. Overview

The tax credits are applied for general research and human resources development expenses as a tax benefit of tax deduction on the Corporate Tax (or Individual Income Tax on the business income) at a rate prescribed by the relative law, when a national has expenses incurred for research and human resources development. (Article 10 Restriction of Special Taxation Act)

2. Scope of Application

The scope of the tax credit for ‘research and development' and ‘human resource development' expenses are as listed in [Table #6] in the Enforcement Decree of the Restriction of Special Taxation Act.

3. Tax Credit Rate

(1) Small and Medium-sized Enterprises (SMEs): Tax Credit Amount Max[①,②]

① Based on the incurred expense:  

Incurred expense for the taxable year × 25%*

② Based on the increased expense:  

[(Expense for the taxable year) – (Expense for the previous taxable year)] × 50%*

* 15% tax credits for 3 years from graduation from SME designation, and 10% credit for the following 2 years.

(2) Enterprises of Middle Standing:  Tax Credit Amount [①,②]

① Based on the incurred expense:  

Incurred expense for the taxable year × 8%

② Based on the increased expense:  

[(Expense for the taxable year) – (Expense for the previous taxable year)] × 40%

(3) Large Enterprises:  Tax Credit Amount ① or ②

① Based on the incurred expense:  

Incurred expense for the taxable year × (2~3%)*

② Based on the increased expense:  

[(Expense for the taxable year) – (Expense for the previous taxable year)] × 40%

* Tax credit rate for the incurrent expenses for the taxable year (capped 3%, base 2% + ‘additional rate' defined as 50% of ‘research and human resources development' expense divided by revenue'

* The ceiling rate of tax credit is 3%, and the revenue is the amount which is calculated based upon the business accounting standards.

4. Calculation of Annual Average Expense

(1) The annual average of general research and human resources development expenses incurred for four preceding years.

: the amount computed under ‘based on the incurred expense for the taxable year' is to be applied where general research and human resources developments expenses incurred in the immediately preceding taxable year is less than the average annual amount of general research and human development expenses occurred in the four preceding years retroactively from the commencement date of the relevant taxable year

(2) Application of the calculation based on the increased expense for the research and human resources development incurred for the first time

: the amount computed under ‘based on the incurred expense for the taxable year' is to be applied where general research and human resources developments expenses do not incur for four years retroactively from the commencement date of the relevant taxable year

(3) ‘Number of months' is to be calculated according to a Calendar

① the month to which the beginning of a taxable year belongs is less than one full month: counted as one month

② the month to which the last day of a taxable year belongs is less than one full month: disregarded

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Ⅱ. Research and Development Expenses for New Growth Engine and

Research and Development Expenses for Original Technology

1. Overview

The tax credits are applied for the research development expenses on new growth engine/original technology as tax benefit of tax deduction on the Corporate Tax (or Individual Income Tax on the business income) at a rate prescribed by the relative law. (Article 10 Restriction of Special Taxation Act)

2. Scope of Application

(1) New Growth Engine area

① personnel expenses for researchers engaged in the duties of development and research of technology in the field of new growth engine listed in [Table #7] in the Enforcement Decree of the Restriction of Special Taxation Act.

② expenses incurred in purchasing samples, parts, raw materials and reagent used for the duties of research and development of technology in the new growth engine industry.

(2) Original Technology area

① personnel expenses for researchers engaged in the duties of development and research of technology in the field of original technology listed in [Table #8] in the Enforcement Decree of the Restriction of Special Taxation Act.

② expenses incurred in purchasing samples, parts, raw materials and reagent used for the duties of research and development of original technology.

(3) Tax Credit Rate

① Small and Medium Enterprises: Incurred expense for the taxable year × 30%   

② Large Enterprises: Incurred expense for the taxable year × 20%