Rep. Hwang Jeong-a of the Democratic Party of Korea [provided by the lawmaker's office]
Rep. Hwang Jeong-a of the Democratic Party of Korea [provided by the lawmaker's office]

Rep. Hwang Jeong-a of the Democratic Party of Korea, who represents Daejeon's Yuseong-eul district, said Tuesday she had introduced a bill to amend the Restriction of Special Taxation Act to create a new production tax credit for products using national strategic technologies.

The move comes as large-scale private investment in South Korea's advanced strategic industries has begun in earnest. President Lee Jae-myung and industry leaders recently unveiled the "Three Mega-Projects for Korea's Great Leap Forward" — a plan centered on semiconductors, physical AI and AI data centers with a combined investment target exceeding 4,000 trillion won ($2.6 trillion).

Critics have long argued, however, that the current corporate tax support system is designed primarily around research and development and facility investment, leaving production-stage activities underserved. That stands in contrast to the United States, China and other major economies, which have aggressively deployed production tax credits to expand domestic manufacturing of advanced industries.

Hwang's bill would allow companies that domestically produce goods using national strategic technologies — including AI, semiconductors and biotech — to deduct 15 percent of their production costs from their tax liability.

The bill also introduces a refund provision for venture firms and startups whose operating profit is too unstable to fully use tax credits. Under the provision, companies that cannot apply a tax credit arising from R&D, facility investment or production activities because they owe no tax would be able to receive a refund of 50 percent of the unused credit amount upfront, improving the timeliness of support for companies investing in advanced industries.

"The three mega-projects represent an entirely new paradigm for South Korea's future growth engine and balanced national development," Hwang said. "We must build the institutional foundation for a virtuous cycle — one that further encourages domestic production and investment, creates quality jobs and drives locally led growth — through the introduction of a production tax credit."

She added that countries around the world are engaged in an all-out competition to attract advanced-industry production bases. "Production tax credits must extend beyond manufactured goods to cover investment in and production by AI factories that produce and export AI and intelligence," she said. "Only then can South Korea become the leader of the 'AI production revolution.'"

Hwang said she plans to build on the new legislation by exploring, through forums and consultations, a broader tax support framework for advanced-industry investment and production — one that would eventually cover AI infrastructure responsible for the token economy and the "intelligence products" generated by AI factories.


bigroot@heraldcorp.com