South Korea steers tax support toward domestic production and regional ventures

South Korea's 2026 tax rewrite uses credits to influence where companies manufacture and investors place capital, while recasting selected family and environmentally friendly-vehicle breaks as direct spending.

The Ministry of Trade, Industry and Resources set out a domestic-production tax credit for solar power, wind power, secondary batteries, semiconductors, core materials and AI robot components. The credit would be available to domestic taxpayers that directly manufacture and sell in Korea. It favors factories beyond the capital region, with a regional coefficient reaching 1.5 in designated preferential areas.

The Ministry of SMEs and Startups would extend regional preferences to startups and venture investment, including tax cuts for non-capital-region jump-up and new-industry SMEs. It would raise to 7 percent from 5 percent the credit for a domestic corporation's direct equity investment in venture companies in population-decline and population-decline-interest regions.

The overhaul "focuses on easing management burdens for SMEs and expanding innovative growth for startups and venture companies," the ministry's first vice minister said. Capital-gains tax exemptions tied to qualifying venture investment would become permanent rather than expire at end-2028.

The Ministry of Finance and Economy says the birth tax credit and individual consumption tax cut for environmentally friendly cars are slated to become budget spending, which can reach recipients with no tax payable.