With the election of Lee Jae-myung as the 21st president of South Korea on June 4, 2025, changes are expected in the country's economic and industrial policies. Based on the new government's key pledges and current policy direction, RSM Korea summarizes two key areas that may impact foreign-invested companies:
1. Industrial and economic policy direction
2. Tax policy direction

1. Industrial and Economic Policy Directions

Centered on a three-phase vision of "Recovery – Growth – Welfare," President Lee Jae-myung's new government is working to restore the country's competitiveness by rebuilding the economic base, transforming the industrial structure, and focusing on new industries.

Key Directions:

  • ABCDEF Strategic Industry Focus
    Designate AI, Bio, Contents, Defense, Energy, and Factory as the six major growth engines, and promote focused investment in technology and capital through the National Growth Fund (100 trillion won).
  • Strengthening Supply Chain Stability
    Independence of key materials, components, and equipment for the K-semiconductor, secondary battery, and future vehicle industries, stabilization of key minerals, and the establishment of a national supply chain control tower are emerging as major challenges.
    Expanding subsidies for core supply chain investment for related companies is under consideration.
  • Fostering the AI Industry
    The government will also encourage private investment by developing AI semiconductors, expanding data center infrastructure, and securing a budget to create an AI ecosystem.
  • Active Fiscal Policy
    A budget of KRW 13.8 trillion has been finalized for the first half of 2025, and additional package measures to revitalize local currencies and stimulate domestic demand are underpinning the recovery.

Foreign Investment Entity Perspective Implications:

  • Foreign companies in the government's strategic industry sectors (especially AI, bio, semiconductor, energy, etc.) need to develop a positioning strategy to prepare for the possibility of utilizing investment incentives.
  • Being recognized as a strategic investor aligned with supply chain policies can pre-empt opportunities for government subsidies and project participation, so it is important to monitor and consult on these policies.

2. Tax Policy and Tax Reform Directions

The new government's tax policy is based on fairness and sustainability, focusing on expanding tax support in line with industrial policy, while ensuring tax transparency and implementing global tax trends.

Key Directions:

  • Future Industries Tax Credit Enhancement
    Expanded R&D tax credits for ABCDEF strategic industries, investment tax credits, and enhanced capital investment incentives are on the horizon.
  • Applicable Corporate Tax Rates
    As of today, no policy-significant discussions of specific corporate tax rate changes have been formalized to date, so the current rate is likely to remain in effect for the foreseeable future.
  • Continued Implementation of OECD Pillar Two (Global Minimum Tax)
    Under Pillar Two, which has been in effect since 2024, multinational corporations with revenues of €750 million or more will be required to report their effective tax rate (ETR) in Korea.
    The first filing is currently expected to be due by the end of June 2026 for FY2024. However, recent policy changes in the US have left the future of the global minimum tax uncertain. Upon taking office, President Trump declared that the "Global Minimum Tax has no place in the United States," making it clear that he intends to repeal it. If the U.S. withdraws its application of the global minimum tax, the Korean government or National Assembly may also weaken the rationale for continuing the Pillar Two system, which could lead to reverse discrimination issues for domestic companies. Therefore, it is necessary to review the continuation of the law currently in place.

Foreign Investment Entity Perspective Implications:

  • Foreign companies that are expanding their R&D and manufacturing infrastructure need to evaluate the favorability of tax incentives and make strategic choices.
  • In addition to analyzing ETRs, establishing tax reporting structures, and preparing for GloBE alignment, foreign subsidiaries subject to Pillar Two should continue to monitor domestic policies for possible future legislative changes.

If you have any further questions/comments, please contact Michael Min of RSM Korea at [email protected].