A Study on the Improvements of Tax Incentives Rules for the Software Industry
Asian Tax Journal Vol. 13 No. 4 (2012), pp. 343-381
Abstract
Most of software firms in Korea are small and medium－sized and are not competitive in global market. Foreign countries give tax incentives to software firms to incubate software industry. If there will be not tax incentives in Korea, it is expected that software firms in Korea will not survive in the future. The purpose of this paper suggests the improvement of tax incentive rules for software industry. We investigate about tax rules for software industry in Korea. In Korea, tax rules for software industry are in Special Tax Treatment Control Act(including enforcement decree and Enforcement Regulations), Corporation Tax Act(including enforcement decree and Enforcement Regulations),and Value－Added Tax Act(including enforcement decree and Enforcement Regulations). The most important rules are in Special Tax Treatment Control Act and we mostly propose the improvement of Special Tax Treatment Control Act. We introduce the tax incentive rules of United States, Japan, England, Canada, Holland, and China. And we carry out a survey targeting software firms on tax incentive rules of software industry. By the survey on software firms, the more they know tax incentives rules for software industry, the more they use them. This implies that not only the improvement of tax system but also public relations on it is important. And result of survey proposes that tax incentive from expenses for research and human resources development is most important. Based on survey results and tax incentive rules of foreign countries, we suggest five tax incentives for software industry；(1) tax incentive for merger and acquisition of software firms,(2) tax incentive for export and overseas expansion of software firms, (3) tax incentive for human training of software firms, (4) tax incentive for new services of software firms, and (5) tax incentive for small and medium－sized software firms. The survey results imply that because software firms don’t know tax incentive rules or the conditions for tax incentive rules are very complicated they don’t use them. So we suggest that the public relations on tax incentive rules for software industry and simplification of tax incentive rules are necessary. The examples of public relations are promotion by National IT Industry Promotion Agency(nipa) and the introduction of tax advisers system for software firms.
Keywords
- Software Industry
- Deduction of Tax Amount from Expenses for Research and Human Resources Development
- Merger and Acquisition
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