Corporate Tax Rate on Samsung Higher than That on TSMC

Samsung Electronics is in a poorer business environment in terms of corporate tax, labor costs, and manpower supply than Taiwan’s TSMC, its foundry rival, according to a report released by the Korea Economic Research Institute affiliated with the Federation of Korean Industries on Aug. 10

The highest corporate tax rate in Korea is 25 percent, 5 percentage points higher than Taiwan’s 20 percent, the report says. The Yoon Suk-yeol administration is pushing for a tax reform to cut the top corporate tax rate to 22 percent, but even after the tax reform, the corporate tax rate applied to Samsung Electronics is still higher than that applied to TSMC.

In terms of tax credits, TSMC received a 15 percent tax credit for R&D investment, 40 percent for package process costs, and a subsidy for nurturing semiconductor engineers, while Samsung Electronics received a tax credit of 2 percent for R&D investment and 1 percent for facility investment.

However, as the National Advanced Strategic Industry Act, a special act on semiconductors, went into effect at the beginning of August, the tax credit rate for R&D expenses will rise from 2 percent to 30 to 40 percent and that for facility investment from 1 percent to 6 percent, making Korea’s investment conditions more favorable than those of Taiwan, the research center explains.

The report also shows that TSMC enjoys better conditions than Samsung Electronics in terms of labor costs and human resources supply. As of last year, the average wage of TSMC’s employees stood at about 95 million won, against about 144 million won at Samsung Electronics. In addition, the scale of semiconductor engineers trained every year was 10,000 engineers in Taiwan compared to 1,400 in Korea.

Electricity rates are higher in Taiwan (134.2 won per kWh) than Korea (110.5 won) but water costs less in Taiwan (486 won per ton) than Korea (719 won).