Overview
In a software company most of the cost is people. That is why credits that subtract spending directly from tax — above all the R&D and workforce development credit — matter more here than anywhere else. But the requirements accumulate from the moment you spend, not at closing. Without research institute recognition, project-level records and a basis for allocating payroll, the spending happens and the credit does not.
VALUE Tax & Accounting starts by building a framework that splits development payroll by project. We check when and where the business was founded and whether venture certification is available, so we know which reduction routes are actually open, and we review things that create tax later — stock options, funding rounds — while they are still being designed. We separate overseas from domestic revenue to assemble zero-rating evidence, and align the timing of subscription and service revenue.
Key tax issues for IT and software
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01
The R&D credit is all about records
An SME may claim the general R&D and workforce development credit on whichever is more favourable, the current-year amount or the increase, and the rate rises further for new growth and base technologies or national strategic technologies. But without records showing which developers worked on which project and for how long, payroll is hard to get recognised. Research plans, reports and time records have to be kept from the moment the money is spent.
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02
Founding in Seoul narrows the reduction routes
The startup SME reduction rate depends on where the business was founded. In the Seoul metropolitan overconcentration control region only a youth startup SME qualifies, at 50%, and other startup SMEs are excluded altogether. Most of Seoul, Gasan Digital Complex included, sits inside that region, so the founder requirements and the location should be weighed together before founding.
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03
Venture certification has no location limit
A company certified as a venture business within three years of founding can claim the startup venture SME reduction, and unlike the startup SME reduction this carries no location restriction. For a company founded in Seoul it is in practice the most realistic route. It applies from the first tax year in which income arises after certification, so the timing of certification matters.
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04
Stock options bite on exercise, not on grant
Stock options are quiet when granted; the income tax problem arrives when an employee exercises them. Where the venture business requirements are met there is room to use the special treatment of exercise gains, so tax belongs in the design of the grant terms and exercise timing. Many of those terms cannot be changed afterwards.
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05
Overseas revenue has to be kept separate
Services supplied abroad, or supplied to a non-resident or foreign corporation with payment received in won through a foreign exchange bank, can be zero-rated. Revenue that passes through an app marketplace or overseas platform only stands up as evidence if settlement statements are matched against the foreign currency received. Whether subscription revenue is recognised across the contract period needs settling too.
How VALUE Tax & Accounting responds
Building the base for the R&D credit
We build project-level payroll allocation and an evidence system first, so spending is recorded in a form that can be claimed.
Diagnosing the reduction route
We weigh founding date, location, founder requirements and venture certification to find the reduction you can actually claim.
Stock option and overseas revenue review
We check the tax burden at exercise and the domestic-overseas revenue split while the structure is still being designed.
IT and software tax FAQ
Q Can we claim the R&D credit without a research institute? expand_more
Recognition as a corporate research institute or a dedicated R&D department makes the scope of payroll far easier to explain. Without it there is still room to claim qualifying R&D spending, but in practice claims are often denied because the company cannot show who worked on which project and for how long. If the credit matters, prepare the recognition process and the record system together.
Q We founded in Seoul — can we claim the startup SME reduction? expand_more
If the business was founded in the metropolitan overconcentration control region, only a youth startup SME qualifies, at 50%, and other startup SMEs are excluded. Much of Seoul, Gasan Digital Complex among it, is inside that region. However, certification as a venture business within three years of founding opens the startup venture SME reduction, which has no location restriction.
Q Does every information and communication business qualify? expand_more
Information and communication is an eligible industry for the startup SME reduction, but video viewing room operation, news provision, and virtual asset trading and brokerage are excluded. For the SME special reduction the eligible industries include computer programming, systems integration and management, information services and research and development. Start by checking that your industry code matches what you actually do.
Q Is revenue from an overseas app marketplace zero-rated? expand_more
It can be, where the requirements are met — the service is supplied abroad, or to a non-resident or foreign corporation with payment received in won through a foreign exchange bank. But once a platform sits in the middle, who the supply was made to and how payment arrived become the issues, so keep settlement reports and foreign currency receipts matched to revenue.
Q How should outsourced development costs be treated? expand_more
Outsourced R&D can fall within the credit where the requirements are met, but the contract, the deliverables and the payment records have to connect to the project. Ordinary service outsourcing and commissioned R&D are distinguished on the paperwork, so state the purpose and scope clearly at the contract stage.