SEOUL — South Korea’s government announced April 16 a measure to provide substantial tax breaks to entertainment companies on the condition that they set aside portions of their earnings for future projects.
Under the proposal, entertainment companies could designate up to 30% of their earnings as a “cultural business preparation fund” and slate it for future projects. The amount would then be deducted from taxable revenues.
A film company with earnings of $10 million last year would have its tax burden reduced from $2.7 million to as little as $1.9 million under the plan.
The money thus set aside must be expended within three to five years as investment or as cover for future losses. The measure is designed to reward successful companies by giving them a head start in financing subsequent works as well as cushioning potential losses.
Although the proposal covers a wide range of entertainment companies, from video and animation producers to theater and dance groups, the film industry is likely to be the greatest beneficiary of the envisioned tax breaks.
South Korea’s Ministry of Finance and Economy said it would submit the bill to the nation’s newly elected National Assembly shortly. If it passes, the plan would take effect immediately, starting this year.