In late July, the Korean government unveiled its 2025 tax reform, a strategic package designed to elevate national competitiveness in strategic technologies and creative industries. These changes are not just incremental—they significantly expand the scale and scope of available tax credits, providing a unique opportunity for businesses that align with national priorities to gain a strategic advantage.
Among the headline measures:
- AI R&D tax credits increase to up to 50%, with five specific AI subfields recognized as national strategic technologies.
- AI data center investments can now qualify for up to 25% credits, making infrastructure directly linked to AI commercialization more financially attractive.
- Autonomous systems—both in shipping and driving—are added to the national strategic technology list.
- K-content industries gain new support, including tax credits for webtoon production and higher rates for large-scale video production.
See details here: [2025 세법] AI, 자율운항·주행 기술 R&D, 최대 50% 세액감면… ‘웹툰’ 세제 신설 - 조선비즈
For businesses, these incentives mean more than reduced tax liabilities. They open the door to accelerated R&D, stronger market positioning, and potentially faster commercialization—if companies can align their innovation activities with the law's definitions and requirements.
What the Reform Changes for Businesses
Before this reform, AI R&D tax credits in Korea ranged from 20% to 40%. Now, qualifying projects in designated AI subfields—such as generative AI, agent AI, advanced learning and inference, low-power computing, and human-centered AI—can receive up to 50% credits.
This fact is a significant shift in financial leverage. For example, a 10 billion KRW qualifying AI R&D investment could previously have reduced tax liability by up to 4 billion KRW. Under the new regime, the same project could yield up to 5 billion KRW in relief—effectively freeing capital for additional development cycles or market expansion.
The inclusion of AI data centers as strategic commercialization facilities is another significant change. It recognizes the role of infrastructure in enabling AI growth and rewards companies that invest in high-efficiency, low-power computing environments. With credits now up to 25%, data center development moves from being a pure cost center to a strategic asset with a measurable fiscal return.
Adding autonomous systems to the national strategic technology list expands the incentive reach beyond AI pure-play firms. Shipbuilders, automotive manufacturers, and technology providers in navigation, sensors, and passenger interfaces can now bring qualifying R&D under the credit umbrella.
Finally, for the K-content sector, the new credits for webtoon production and the increased base credit for large-scale video producers address a long-standing gap. While creative IP management is not as R&D-intensive as AI or engineering projects, it still benefits from structured IP protection, market expansion strategies, and licensing optimization—areas that can significantly influence the return on these incentives.
Lessons from Global Best Practice
Other countries have long used tax incentives to steer innovation toward national priorities. Canada's Scientific Research and Experimental Development (SR&ED) program channels over CAD 4 billion annually into R&D, with strong claim performance coming from companies that rigorously map projects to government definitions and maintain detailed documentation.
The UK's Patent Box shows how aligning IP with recognized technologies can significantly reduce tax burdens—some companies have lowered their effective rates by up to 10%.
Australia's R&D Tax Incentive illustrates the importance of continuous documentation. Firms that record and benchmark from project inception typically have a much easier time defending claims during audits.
These examples all underscore a crucial point: incentives reward readiness, not just eligibility. By being prepared and having the necessary documentation in place, businesses can ensure they are in control of their tax claims and can maximize their benefits.
Three Moves to Capture the Full Benefit
Korea’s 2025 reform offers the same kind of opportunity—but only if companies act with precision. Each significant policy change demands a corresponding strategic action plan. The following recommendations directly map the new incentives to practical business responses, ensuring no eligible benefit is left unclaimed.
1. Define R&D Scope with Precision
Incentives apply only to projects that match the government’s technical definitions. The best-prepared organizations:
- Audit all current and pipeline projects for alignment with designated AI subfields, autonomous systems, or K-content categories
- Adjust scopes where ambiguity exists
- Maintain technical narratives that link project outcomes directly to designated strategic technologies.
Executive reflection: If an audit landed tomorrow, could your teams produce proof for every qualifying project without pausing operations?
2. Strengthen the IP Foundation
A strong IP strategy makes a tax credit claim more credible and more valuable over time. Leading companies:
- Conduct freedom-to-operate (FTO) studies early
- Draft patents that match policy-recognized technologies in both form and substance—particularly in the 5 AI subfields or autonomous navigation systems.
- Structure IP portfolios to make the link between R&D and incentives self-evident
Executive reflection: Does your current IP portfolio actively support your eligibility, or is it only a defensive shield?
3. Maintain Continuous Documentation
Infrastructure credits, like those for AI data centers, require credible evidence over the project’s lifespan. Best practice includes:
- Recording performance metrics, procurement decisions, and operational data from day one
- Benchmarking against globally recognized standards for efficiency and capability
- Preparing for possible mid-project compliance checks without diverting innovation resources
- For K-content creators, this means tracking production timelines, licensing agreements, and IP registrations to substantiate claims.
Executive reflection: Could you withstand a compliance review mid-project without compromising your delivery timeline?
Where Third-Party Expertise Adds Strategic Value
From our work with IP and R&D leaders, the companies that consistently maximize these opportunities do not manage the process in isolation. They bring in specialized partners to:
- Map innovation portfolios to qualifying categories using data-backed analysis
- Accelerate IP searches, prior art reviews, and competitive benchmarking with AI-assisted workflows
- Scout technologies and partners that meet both market needs and policy requirements.
For many executives, the turning point comes when they realize that while their teams are excellent at developing technologies, extracting the full strategic and fiscal value from those innovations requires a different skill set.
The question worth asking is:
Suppose there is an opportunity to secure multi-year tax relief while strengthening market position. Can we risk leaving any qualifying project unclaimed because we lacked the proper insight at the right time?
Final Thought
Korea's 2025 tax reform is a rare moment where policy, technology, and business priorities align. The companies that move quickly—clarifying their R&D scope, fortifying their IP, and embedding robust documentation processes—will not only capture immediate financial benefits but also secure a stronger position in the technologies that will define the next decade.
