South Korea Expands 50% Regional SME Tax Credits, Ends Employment Incentives
Updated
Updated · asiae.co.kr · Aug 11
South Korea Expands 50% Regional SME Tax Credits, Ends Employment Incentives
2 articles · Updated · asiae.co.kr · Aug 11
Summary
South Korea's 2026 tax reform will introduce region-differentiated tax credits for SME R&D and investment from Jan. 1, with total deductions capped at 50% to steer more support outside the Seoul area.
The plan also deepens worker tax breaks at non-metropolitan SMEs, extending relief for young employees to 10 years and raising reductions for older, disabled and career-interrupted workers to as much as 90% for three years.
Regional SMEs welcomed the investment and hiring support but warned that ending the employment-retention tax break this year and abolishing the wage-increase credit after 2028 could raise labor-cost pressure.
The government says the older incentives have largely met their goals and should be restructured for fiscal efficiency, while SME groups argue weak domestic demand and regional labor gaps still require support for retention and pay growth.