Korea Semiconductor Investment Incentives 2026

Quick answer

Semiconductors are a “national strategic technology” under Korea’s Restriction of Special Taxation Act (RSTA). Investment in qualifying semiconductor facilities earns a tax credit of 20% for large and mid-sized companies and 30% for SMEs (through 2029), plus 10% of the amount by which investment exceeds the prior three-year average (RSTA Art. 24). Qualifying semiconductor R&D earns 30–40% (large/mid-sized) or 40–50% (SMEs) (RSTA Art. 10). Foreign-invested projects can also negotiate cash grants and claim customs and local tax relief, but the old corporate tax holiday for foreign investors no longer exists.

Table of Contents

Introduction: Korea’s Semiconductor Ambition

South Korea is home to Samsung Electronics and SK hynix and a deep supply chain of materials, parts and equipment companies. In July 2022, the government announced its “Semiconductor Superpower Strategy,” which aimed to support KRW 340 trillion of corporate investment in semiconductors through 2026 — a private-sector investment target backed by tax, infrastructure and talent measures, not a government spending budget (Newsis, July 21, 2022). Since then, the semiconductor tax credits have been raised several times, most recently by the March 2025 RSTA amendment that created a separate, higher rate for semiconductor facilities.

The main incentives for foreign semiconductor companies are:

• Facility investment tax credits: 20% (large/mid-sized) or 30% (SMEs) for qualifying semiconductor facilities, plus a 10% incremental credit
• R&D tax credits: 30–40% (large/mid-sized) or 40–50% (SMEs) for national strategic technology R&D
• Cash grants: negotiated under the Foreign Investment Promotion Act, within statutory caps
• Customs, VAT and local tax relief for qualifying foreign investment

This guide explains each incentive and the practical steps to qualify.

Korea’s Semiconductor Ecosystem Overview

Major Clusters

1. Gyeonggi Province — Samsung’s Giheung, Hwaseong and Pyeongtaek sites, SK hynix’s Icheon site, and the Yongin semiconductor cluster projects under development
2. North Chungcheong Province — SK hynix’s Cheongju operations
3. Other regions — materials, parts and equipment suppliers in regions such as Gumi and Daegu-Gyeongbuk, and back-end and packaging operations in several provinces

Proximity to Samsung and SK hynix fabs is usually the deciding factor for suppliers.

Facility Investment Tax Credits (Integrated Investment Tax Credit)

Rates under RSTA Article 24

Plus an incremental credit: 10% of the amount by which current-year investment exceeds the average of the previous three years (capped at twice the basic credit).

Source: Restriction of Special Taxation Act, Article 24 (version in force from September 18, 2026). Which facilities qualify as “semiconductor national strategic technology” facilities is set out in the Enforcement Decree and its annexes, so confirm eligibility for each asset class.

Practical Points

• New assets only: used assets and certain leased assets are excluded
• Recapture: if the asset is diverted to another use within the period set by decree (up to 5 years), the credit must be repaid with interest
• Carryforward: credits that cannot be used because of insufficient tax or the minimum tax can generally be carried forward for 10 years
• Minimum tax: the corporate minimum tax can limit how much credit is usable in a year — model this for loss-making or low-profit years

R&D Tax Credits

Rates under RSTA Article 10

The ”+ up to 10%” is an additional rate based on the ratio of the qualifying R&D spending to revenue. Source: Restriction of Special Taxation Act, Article 10.

So the headline 30–50% range for semiconductor R&D is accurate only for national strategic technology R&D: 30–40% for large and mid-sized companies and 40–50% for SMEs. General R&D credits are much lower for large companies.

Qualifying R&D Expenses

Typical qualifying costs include R&D personnel costs, materials used for research, and commissioned research with qualifying institutions. The R&D must be carried out by a recognized corporate research institute or R&D department, and strategic-technology, new-growth and general R&D costs must be accounted for separately (Article 10(4)).

Cash Grants

Foreign-invested semiconductor projects can negotiate cash grants under the Foreign Investment Promotion Act. Key points:

• The government’s 2025 Economic Policy Direction said the maximum cash grant would be raised permanently from 30–50% to 40–50% of the foreign investment amount, with temporary 2025-only rates of 75% for regional headquarters and R&D centers in national advanced strategic industries and 60% for other R&D centers and national advanced technology projects (KPMG Korea).
• The 75% rate was not a general rate for fabs or manufacturing plants, and it applied to 2025 investments.
• For 2026, the government has announced at least 10 percentage points higher grant rates for investment outside the capital region (Newsis, Jan. 28, 2026).
• Grants are negotiated case by case, paid in installments against investment and employment milestones, and subject to clawback.

See our cash grant guide for details.

Customs, VAT and Local Tax Relief

The corporate income tax exemption for foreign-invested companies was abolished for applications filed from January 1, 2019, but customs duty, VAT and individual consumption tax relief on imported capital goods, and local tax (acquisition and property tax) relief, remain available for qualifying foreign investment (EY Tax News). Conditions depend on the industry, the investment and the local government, so confirm eligibility before importing equipment.

Land, Infrastructure and Permitting

• Industrial sites: national and local governments develop semiconductor industrial complexes and can offer land to foreign-invested companies on favorable terms in foreign investment zones and industrial complexes.
• Infrastructure: the 2022 strategy committed the government to consider funding power and water infrastructure for core semiconductor complexes such as Yongin and Pyeongtaek (Newsis).
• Permitting: large projects can receive coordinated permitting support, but environmental and utility approvals remain a common source of delay. Build buffers into the schedule.

Talent and Visas

• Talent programs: the 2022 strategy set a goal of training more than 150,000 semiconductor workers over ten years (Newsis).
• Foreign engineers: foreign specialists are typically hired on E-7 visas; investors and executives use D-8 visas.
• Working hours: the standard 52-hour weekly limit applies; any exceptions for R&D staff are narrow and require specific approvals, so plan staffing accordingly.

National Core Technology and Export Controls

Many semiconductor technologies are designated National Core Technologies. Foreign M&A of a Korean company holding them requires prior approval or notification, and exports of the technology are regulated. See our National Core Technology guide.

Application Strategy and Best Practices

Sequencing

1. Confirm technology classification: check whether your facilities and R&D fall within the national strategic technology lists in the RSTA Enforcement Decree.
2. Engage Invest KOREA and the local government early for cash grant and site discussions.
3. File the foreign investment notification before remitting capital — see our FDI remittance guide.
4. Set up separate R&D accounting from day one.
5. Plan customs relief before equipment arrives.

Common Mistakes to Avoid

❌ Assuming every asset qualifies for the semiconductor rate — eligibility is asset- and technology-specific
❌ Ignoring the minimum tax when modelling tax credits
❌ Treating “up to 75%” cash grants as the norm — that rate was category-specific and temporary
❌ Overpromising employment — grant clawbacks follow missed targets
❌ Forgetting NCT rules when bringing in foreign partners or exporting technology

Post-Establishment Compliance

• Tax credit recapture: keep assets in qualifying use for the required period
• Grant conditions: report on investment, employment and operations as the grant agreement requires
• Separate accounting: maintain the R&D cost split required by RSTA Article 10(4)

How SMA Lawfirm Can Assist

• Market entry and corporate structuring
• Foreign investment notification and cash grant negotiations
• Coordination with tax advisers on RSTA credits
• NCT, export control and employment law compliance

📩 Contact us at sma@saemunan.com to schedule a confidential consultation about your semiconductor investment project in Korea.

Conclusion

Korea’s semiconductor incentives are real and substantial, but they work through specific statutory rules: 20–30% facility credits plus a 10% incremental credit, 30–50% national strategic technology R&D credits, negotiated cash grants and customs/local tax relief. Check the current statute and decree before modelling returns, and treat headline percentages as ceilings that depend on company size, asset type and timing.

Official Sources

For authoritative reference, consult the following Korean government portals:

• Invest Korea (KOTRA)
• KOTRA — Korea Trade-Investment Promotion Agency
• National Tax Service of Korea (NTS)
• Hometax (Korea Tax Filing Portal)