The government has decided to consider adding hydrogen to the current national strategic technology limited to semiconductors, batteries, and vaccines.
If it is selected as a national strategic technology, the tax deduction rate for R&D and facility investment will increase significantly. The tax credit rate for facility investment rises to 6-16% depending on the size of the company, and the tax credit rate for R&D expenses rises to 30-50%.
The plan to include hydrogen technology as a national strategic technology was not included in this year’s tax law revision. However, the government decided to review the designation of national strategic technology next year, believing that hydrogen technology should be developed in terms of national economy and security.
On the 20th, in the ‘2022 economic policy direction’ confirmed and announced at the expanded National Economic Advisory Conference presided over by President Moon Jae-in, the government selected technologies that need to be strategically fostered in terms of national economy and security, such as hydrogen-related technologies, and selected national strategic technologies. We will continue to review ways to designate This was mentioned as the government plans to expand incentives for future-ready investments, such as strategic industries and carbon-neutral response, next year. According to the government, 65 technologies in three major fields, including semiconductors, batteries and vaccines, will be designated as national strategic technologies with the enforcement of the amendment to the Restriction of Special Taxation Act (hereinafter referred to as the Special Act) in February next year.
The National Assembly held a plenary session on the 2nd and passed the amendment to the Special Act, which provides tax benefits to new growth industries such as semiconductors, batteries, and vaccines. The bill includes provisions for designating technologies that have a significant impact on national security and economy as national strategic technologies, and applying a high tax credit rate for R&D and facility investment. It also includes a provision to extend the deadline for applying tax credits for R&D expenses by three years. The tax credit for facility investment for national strategic technology will increase from the current maximum of 3% to 6~16%, and R&D investment will also be able to receive tax credits of up to 40~50%.
When discussing the revision of the tax law this year, which designated semiconductors, batteries, and vaccines as national strategic technologies, there was no discussion about hydrogen technology. However, the claim that the tax support for hydrogen technology, which the Moon Jae-in government aims to foster as a key new growth engine, is too insufficient, has been raised mainly in the business community. In response, the government has started to consider ways to provide the same tax benefits to hydrogen technology as semiconductors, batteries and biotechnology in next year’s tax reform. Currently, hydrogen technology is receiving tax support for general technology, which is the lowest level of the integrated tax credit.
The government also decided to significantly strengthen tax support for carbon-neutral core technologies to support the transition to a low-carbon economy next year. Currently, the government has designated 12 fields, including future cars and bio/health, as new growth and source technologies. Here, carbon neutrality is newly established as a separate field.
Policy funds will also be intensively supplied to investments in national strategic technology and carbon-neutral response. The Korea Development Bank has prepared a special facility investment fund of more than 2 trillion won to promote new investment in the national strategic technology sector, and the ‘Carbon Spread Program’, which provides funds necessary for companies to expand greenhouse gas reduction facilities, etc. at a low interest rate, is also 5 trillion won. operated at scale. The ‘Carbon Net Zero Program’ worth 300 billion won to support the establishment of early carbon-neutral infrastructure such as renewable energy and hydrogen infrastructure, and the ‘Low Carbon Industrial Structure Promotion Program’ worth 35 trillion won to provide preferential interest rates according to the amount of carbon emission reduction are also being operated. .
A government-wide response system for closely managing the supply chain at the national level is also maintained. The government has identified protracted supply chain disruption as one of the global risks to be aware of in the course of economic normalization in 2022. In fact, according to the industrial activity trends announced by the National Statistical Office on the 30th of last month, Korea’s mining industry production in October this year fell by 3.0% from the previous month, which was due to a decrease in automobile production (-5.1%) due to disruptions in the supply and demand of semiconductors for vehicles and sluggish downstream industries. A decrease in primary metal production (-5.9%) was the cause. Moody’s predicts that supply chain disruptions could continue through 2023.
Accordingly, the government decided to continuously manage items with high external dependence, centering on the Task Force for Economic Security Core Items, which was formed under the Foreign Economic and Security Strategy Council in the fourth quarter of this year.
The TF operates the Early Warning System (EWS) to identify the supply trends of 4,000 items that are more than 50% dependent on imports from a specific country or that require monitoring. If an abnormality is detected, this fact will be shared with the relevant ministries, and if the matter is serious, an external economic and security strategy meeting will be held immediately.
The number of key economic and security items that require centralized management at the national level is also increasing. Selection criteria include economic impact, external dependence, short-term urgency, and the possibility of conversion and substitution.
The government will first select about 100 items from all industries, and then continue the selection process with a goal of 200 items. Recently, the government has selected 20 priority management items for which urgency is recognized. For key economic and security items, customized stabilization measures such as expansion of stockpiles, expansion of domestic production base, diversification of import sources, and international cooperation will be prepared.
