The K-Chips Act is the popular name for a series of amendments to Korea’s Act on Restriction of Special Taxation, the 조세특례제한법. Its core provision is a corporate income tax credit for facility investment in national strategic technologies, semiconductors among them. Since 1 April 2025 the semiconductor rate has run at 20 percent for large and mid-sized companies and 30 percent for SMEs, with a sunset of 31 December 2029.
Where those credits land is mapped in the overview of Korea’s semiconductor industry.
Data current as of September 2026.
What Is the K-Chips Act?
A package of tax amendments to the omnibus law that carries Korea’s tax expenditures. The semiconductor provisions sit inside two of its mechanisms, the integrated investment tax credit and the research and development tax credit, both applied at an enhanced rate to a category called national strategic technologies, which now spans eight fields from semiconductors and secondary batteries to artificial intelligence, added by a March 2025 amendment, per KPMG Korea’s 2025 tax reform brief.
The National Assembly passed the round that made it stick on 30 March 2023, effective retroactively from January 2023, per Goodwin’s June 2023 client alert. The instrument matters as much as the rate: it is claimed on a Korean corporate tax return, while the cash grant program for foreign investors runs on a separate statute, covered below.
What Are the Current K-Chips Act Tax Credit Rates?
Facility investment in semiconductor production and research facilities carries a credit of 20 percent for large and mid-sized companies and 30 percent for SMEs. The amendment entered into force on 1 April 2025 and applies to investments made from 1 January 2025 through 31 December 2029, per the UNCTAD Investment Policy Monitor. Other national strategic technologies stay at 15 and 25 percent, per KPMG Korea.
Qualifying research and development on national strategic technologies is credited separately, up to 40 percent for large and mid-sized companies and up to 50 percent for SMEs, per PwC’s Korea corporate tax summary. The February 2025 amendment extended that credit’s sunset to 31 December 2029 for national strategic technologies generally and to 31 December 2031 for the semiconductor field, per PwC. Any summary giving semiconductor R&D a 2027 expiry is four years short.
Korean coverage of the 2023 package quoted headline totals of 25 and 35 percent, which stacked an incremental-investment credit on the base rate, per Goodwin. That stack survives. Article 24 still adds a credit of 10 percent of the amount by which a year’s investment exceeds the prior three-year average, capped at twice the basic credit, per PwC’s June 2026 summary, so a fab in a capex ramp claims more than the 20 percent headline and a supplier modelling a customer’s payback should account for it. The separate temporary investment tax credit, claimed in place of the regular route, covered fiscal years through 31 December 2025 and has now lapsed, per PwC. Read the sunset dates as the planning horizon.
Between the rate and the money sits a recognition step. The 20 percent attaches to a 국가전략기술사업화시설, a national strategic technology commercialization facility, and the government confers that status: under the Enforcement Decree of the same Act the finance and industry ministers recognize the facility jointly, on the deliberation of the R&D Tax Credit Technology Review Committee, whose ruling KOITA’s guidance treats as the gating document. Until it lands, the investment is worth the general rate.
The list of recognized facility types moves too, and it ran to 61 across eight sectors until 27 February 2026, when the Ministry of Finance and Economy announced Enforcement Rule amendments taking it to 64, adding next-generation multi-chip module materials and components manufacturing equipment and extending the energy-efficient semiconductor category to packaging, per Money Today and Aju Business Daily in February 2026.
What Does the Semiconductor Special Act Add, and What Got Left Out?
A separate statute doing a different job. The Special Act on Strengthening and Supporting the Competitiveness of the Semiconductor Industry passed the National Assembly plenary on 29 January 2026, per Asia Economy and the Korea Times.
It works through land, permits, infrastructure, and financing, while the tax credits stay in the K-Chips Act. Approval of a cluster development plan carries deemed approval of the permits required under related laws, and its Enforcement Decree, effective 11 August 2026, sets government coverage of cluster infrastructure cost at 50 to 100 percent of project cost and puts regions outside the capital area first, per Edaily, ZDNet Korea and Newspim.
Its dedicated semiconductor special account, the 반도체특별회계, stands up only in 2027, and 2026 support runs through dispersed ministry general accounts, per KoreaTechDesk. It is funded at 2.6 trillion won in the 2027 budget proposal the cabinet approved on 1 September 2026, per Asia Economy. One appropriation, often counted twice.
A carve-out from the 52-hour weekly working time cap for semiconductor research and development staff was stripped out to get the bill through, per the Korea Herald and Seoul Shinmun in January 2026. None is in force as of September 2026, so a foreign supplier planning a Korean applications engineering team should staff against the cap. The cluster build this funding underwrites is set out in the Yongin semiconductor cluster guide.
What Is the 2026 Domestic Production Tax Credit?
A proposal, announced on 3 August 2026 in the 2026 tax revision bill of the Ministry of Finance and Economy, the Korean tax ministry’s current English name since the former Ministry of Economy and Finance was split on 2 January 2026, per the Korea Times. It would be Korea’s first credit tied to production output instead of to investment or research spending.
Six sectors qualify: semiconductors, secondary batteries, core materials, solar power, wind power, and AI robot components. The credit is a fixed amount per unit, computed as qualifying sales volume times a per-item amount set by decree and capped annually at 50 percent of qualifying production costs or of cumulative investment in the relevant depreciable assets, whichever is lower, per Shin and Kim’s 2026 tax revision newsletter and Deloitte Korea’s 2026 tax newsletter. It applies from tax years beginning on or after 1 January 2027, then steps down to 75 percent of the computed credit in 2034, 50 percent in 2035 and 25 percent in 2036 before sunsetting on 31 December 2036, per Shin and Kim.
The conditions decide who can use it. Core manufacturing processes must run in Korea against a prescribed threshold for the domestic share of qualifying production cost, and the integrated investment tax credit cannot be claimed on the same assets, which makes this a choice between instruments and not a stack. The condition that matters most to a foreign supplier is the sale side: the goods must be sold domestically, by a domestic seller with the place of supply in Korea, in the year of production or the year after, per Shin and Kim and Bae, Kim and Lee’s 2026 newsletter. A foreign company manufacturing in Korea for export gets nothing here, and production inside the Seoul over-concentration control zone is excluded outright.
Regional weighting runs on four rungs, and every rung but the top pairs an ordinary region with a designated preferential district from the tier below, per Shin and Kim: 1.0 for the capital area outside preferential districts, 1.1 for preferential districts inside the capital area and for non-capital metropolitan cities outside theirs, 1.3 for preferential districts inside those metropolitan cities and for the rest of the non-capital area, and 1.5 for preferential districts in that remainder. Which districts qualify comes off the interior ministry’s regional preference index, weighted on distance from Seoul, population, and economic conditions. Those coefficients reach past this credit. The same bill applies them to the R&D credit and to the integrated investment tax credit, which is the K-Chips facility credit itself, on research spending and investment from 1 January 2027, per Shin and Kim and Bae, Kim and Lee. If it passes, the credit a fab claims on a tool purchase varies by site, and both firms write the formula against the base deduction rate without settling whether the enhanced 20 and 30 percent national strategic technology rates sit inside that term. The eligible goods list and the four region definitions both wait on an Enforcement Decree revision expected in February 2027, so nobody can model this line until the bill passes and that decree lands.
Which Support Is Budget, and Which Is Law?
Three different things get called Korean semiconductor policy.
Tax expenditure is the K-Chips credit above: statutory, rules-based, claimable by any qualifying Korean taxpayer without a ministry negotiation.
Fiscal and financing programs are appropriations needing National Assembly approval. The support package rose to 33 trillion won on 15 April 2025, including 3 trillion won of lending that took the chipmaker loan program to 20 trillion won through 2027, per the Korea Herald. The 2.6 trillion won special account counted once above sits here, and loan programs are credit, not grants.
Private capital announced alongside policy is the largest number and the most misread. The 911 trillion won plan of 29 June 2026 is mostly corporate investment: roughly 800 trillion won from Samsung and SK hynix for four fabs in the southwest and 81 trillion won for a Chungcheong packaging hub, per KED Global. The state contribution is infrastructure and incentives.
Can a Foreign Supplier Claim Any of This?
Seldom directly, and the more useful question is what the credit does to your customer.
The 20 percent attaches to whoever invests in the facility, the fab, packaging house, or materials plant, on the tools and materials it buys. A vendor selling into that fab claims nothing on the sale. What the credit does for the vendor is cut the customer’s after-tax cost of the purchase and pull capital expenditure forward, and price and payback models built for a Korean fab should carry that adjustment.
For the vendor’s own Korean entity the rules are narrower. Only enterprises established in Korea may claim, per Goodwin’s 2023 alert, and the Article 24 credit runs to a 내국인, defined in Article 2 as a resident or a domestic corporation, so an incorporated Korean subsidiary, a 법인, qualifies. A 지점, the Korean branch of the foreign parent, remains part of a foreign corporation despite its Korean fixed place of business, so confirm the branch position with Korean tax counsel before choosing a structure on the strength of the credit.
A Korean sales or service subsidiary keeps access to Article 24 as well, at the ordinary integrated investment rates on qualifying business assets: 1 percent for large companies, 5 percent for mid-sized and 10 percent for SMEs, per PwC. What it cannot reach without a recognized commercialization facility is the 20 percent national strategic technology rate.
Which rate applies turns on a test, not the parent’s nationality. Article 2 of the Enforcement Decree of the same Act imports the independence test in Article 3 of the Enforcement Decree of the Framework Act on Small and Medium Enterprises, under which a company fails the substantial-independence requirement where a corporation, foreign corporations included, holds 30 percent or more of its shares directly or indirectly and is the largest shareholder, and that holder has total assets of 500 billion won or more. A subsidiary of a large foreign parent therefore draws 20 percent; a subsidiary of a genuinely small parent can still reach 30 percent on its own sector, sales, and asset tests.
Whether the credit is worth cash is separate, because a subsidiary in its first years usually owes little Korean tax. Unused credits carry forward for up to ten years, per PwC and Goodwin’s 2023 alert, and a claimant with no tax to offset has no route to a cash refund. Article 132 of the same Act lists the Article 24 credit among the reliefs the minimum tax can claw back, so put annual absorption to Korean tax counsel and treat the credit as a deferred reduction in Korean tax.
The instruments built for foreign investors sit elsewhere, and both of those windows have now closed. The tax reduction for qualifying foreign direct investment, formerly Article 121-2 of the same Act, was abolished from 1 January 2019, per the UNCTAD Investment Policy Monitor. Local tax relief ran longer: Article 78-3 of the Restriction of Special Local Taxation Act abates acquisition tax and property tax for a foreign-invested company on property used directly in its notified business, in full for five years and by half for the two years after, each scaled to the foreign investment ratio, but only where the reduction application was filed by 31 December 2025.
The cash grant under the Foreign Investment Promotion Act behaves nothing like a tax credit. It needs a foreign investment ratio of 30 percent or more through new shares, and it is negotiated with the ministries and the host local government under Article 14-2, per Invest KOREA. Its caps move year to year: measures announced on 2 January 2025 set them at 75 percent of eligible investment for R&D centres in national advanced strategic industries and global regional headquarters, 60 percent for other R&D centres and for national advanced strategic technologies, 55 percent for materials, parts and equipment, and 50 percent for large-scale employment projects, per Kim and Chang. Those were a 2025 uplift over standing caps of 50, 50, 45 and 40 percent, so confirm the current-year figure with KOTRA or InvestKOREA. The wider set is in Korea FDI incentives.
What Does the Incentive Regime Change for a Korea Strategy?
Three consequences follow for a foreign equipment or materials company. The regime is aimed at capital formation inside Korea, and every instrument in it rewards a supplier that builds locally over one that ships from home, in the same direction as the 50 percent self-sufficiency target for 2030 under Korea’s 2022 Semiconductor Superpower Strategy. That target and the programme funding it are covered in the guide to Korea semiconductor localization under the sobujang policy.
Geography is written in, and the ladder is finer than the headlines suggest. The 1.5 top rung in the 2026 bill reaches only preferential districts outside the metropolitan cities, and Gwangju draws 1.1 as a non-capital metropolitan city, or 1.3 if the specific fab site sits inside a preferential district the February 2027 decree designates. Two sites an hour apart can land two rungs apart, so read the multipliers against an address, not a region.
Timing runs against qualification cycles. The facility credit sunsets at the end of 2029 and qualification into a Korean fab commonly takes 12 to 18 months, as the Korea semiconductor market access guide sets out, with demand sized in the Korea semiconductor equipment market breakdown.
Frequently Asked Questions
What is the K-Chips Act? The informal name for amendments to Korea’s Act on Restriction of Special Taxation that raise tax credits for investment in national strategic technologies, semiconductors included. The National Assembly passed the best-known round on 30 March 2023, effective retroactively from January 2023, per Goodwin. It sits inside an existing statute.
What is the current K-Chips Act tax credit rate? Semiconductor production and research facility investment draws 20 percent for large and mid-sized companies and 30 percent for SMEs, in force since 1 April 2025 and running to 31 December 2029, per the UNCTAD Investment Policy Monitor. Qualifying R&D draws up to 40 and 50 percent, running to 31 December 2031 for semiconductors, per PwC.
Can a foreign company claim K-Chips Act credits? Only through an enterprise established in Korea, per Goodwin’s 2023 alert, and the 20 percent belongs to whoever invests in the facility, which on a tool sale is the fab. A Korean subsidiary qualifies; confirm the branch position with Korean tax counsel. Unused credits carry forward ten years, per PwC.
Is the Semiconductor Special Act the same as the K-Chips Act? No. The Special Act on Strengthening and Supporting the Competitiveness of the Semiconductor Industry passed on 29 January 2026 and covers cluster designation, deemed permits, and government funding of 50 to 100 percent of cluster infrastructure cost under its Enforcement Decree of 11 August 2026. The 52-hour exemption for R&D staff was cut before passage.
Where to Take This
Korea’s incentive regime is legible and rules-based, and it pays for capital that lands inside the country. The practical questions are what a Korean entity would let you claim and what the credit is already doing to your customer’s purchasing math.
Inquivix Technologies represents global semiconductor equipment, materials, and clean-process companies inside Korea, covering distribution, representation, technical localization, and qualification support. Its guide to the Korean semiconductor ecosystem holds the execution layer, and the Inquivix Technologies page explains the model. To discuss how the regime affects your Korea plan, contact Joon K Lee at joon@joonklee.com.
