South Korea plans tax incentives for R&D, tech startups

The range of economic measures include include tax breaks for angel investors and venture capitalists, policy tweaks to make it easier to disinvest and reinvest capital, and a new exchange providing more access to funding.
Written by Ryan Huang, Contributor

South Korea has announced a range of measures, focusing on tech startups and research and development, to drive job creation and economic growth.

A focus on tech startups is part of South Korea's plans to revitalize the economy.

Some of the initiatives include tax breaks for angel investors and venture capitalists, according to a report Monday by Global Tax News. There will also be policy tweaks to make it easier for them to disinvest and reinvest their capital in new ventures.
Incentives include:

  • Tax deduction for investments of up to 50 million won (US$44,800) will be increased from 30 percent to 50 percent.
  • Deduction limit on annual earnings will be raised from 40 percent to 50 percent.
  • Tax breaks will be expanded beyond investments in high-risk ventures, to include companies that are three years old or younger and pass a technological evaluation.
  • 10 percent corporate tax deduction and elimination of the inheritance tax burden on the shareholders of the sold businesses. This is applicable in the case of a merger or buyout of high tech startups or small and midsized businesses, whose R&D investment is over 5 percent of their annual revenue, and that are purchased at a value 150 percent or higher than their tax-assessed value.

A Korea New Exchange (KONEX) is expected to be set up in July this year, added the news site. This will help facilitate access to the capital markets. Investors in KONEX-listed companies will also get preferential tax treatment.

According to Global Tax News, the new incentives are forecast to increase the number of angel investors from just over 2,600 in 2012 to 12,000 in 2017. Total venture capital is estimated to hit 2 trillion won in 2017, up from 1.2 trillion won in 2012. 

In February, South Korean president Park Geun-hye unveiled plans to foster technology startups, as part of wider plans to achieve a "creative" economy to revitalize growth and create more jobs.

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