Look, let's be honest. The South Korean gaming industry is currently shouting from the rooftops for the introduction of tax credits for game production costs. Following the fresh introduction of production cost tax credits for film and webtoons, the chorus arguing that games deserve the exact same treatment has grown deafening. Back in March of this year, a National Assembly debate was held precisely on this hot topic, and an amendment to the Restriction of Special Taxation Act has already been tabled in Parliament to officially rope game production costs into the tax credit bracket.

Down in the trenches of the related debate, the Ministry of Economy and Finance stubbornly insists that tax credit systems are already in place for game companies to use. However, the Ministry of Culture, Sports and Tourism—the ultimate overlord of the gaming industry—and the Korea Creative Content Agency (hereinafter KOCCA), tasked with fostering content, hold a completely different view. So, why are the Ministry of Culture and KOCCA arguing that game companies in South Korea desperately need production cost tax credits? Why aren't companies actually using the existing systems if they supposedly exist? I sat down with Jin Song, Head of the Content Industry Policy Research Center at KOCCA, to get the lowdown through a detailed interview.

As mentioned earlier, it is not as if South Korean game companies have zero tax credit options right now. However, realistically speaking, using them properly is an uphill battle, which is why KOCCA argues we need a practical system overhaul tailored for actual game developers.

Director Song Jin pointed out, "The general system was engineered with manufacturing in mind, making it bloody difficult to graft R&D concepts onto the content sector." They added, "Content planning and production rarely present neat technical milestones, and they heavily devour labor and service costs. Yet the existing R&D tax credit severely restricts the recognition scope for planning and production expenses."

They continued, "Outsourced labor costs, in particular, are completely shut out from being recognized as deductible items. Given the nature of the content industry where collaborations with external talent happen constantly, expanding the scope of commissioned and joint R&D—regardless of direct technical integration—is absolutely crucial."

To tap into the existing tax credit, companies must jump through hoops like establishing an in-house R&D lab, employing dedicated researchers who hold zero concurrent duties, separating accounting books, and maintaining painstaking research logs. Director Song Jin explained, "Given that ecosystem reality where small businesses with fewer than 10 employees make up a staggering 87 percent, these requirements are practically a brick wall."

So, what percentage of the South Korean gaming industry actually managed to squeeze out a tax credit as of 2026? Director Song Jin noted, "Since the National Tax Service does not transparently break down beneficiary sectors in detail, pinpointing the exact slice of the gaming pie is impossible. However, industry feedback and our own internal surveys suggest that game companies' actual uptake of R&D tax credits is miserably low." During that National Assembly debate back in March, the Ministry of Culture revealed that a pitiful 2.1 percent—fewer than 20 out of roughly 1,300 total surveyed companies—actually reported receiving R&D tax credits.

Tax credits are, at their core, a tax cut, meaning they need to prove some solid positive perks to justify their existence. Addressing this, Director Song Jin stated, "According to KOCCA's research, rolling out game production cost tax credits is projected to pump an additional 1.6 trillion won into production investments over a five-year span. Such investment boosts are analyzed to ripple out into economic shockwaves like increased added-value production, gross output, and employment numbers." They added, "When weighing these ripple effects against reduced tax revenues, the cost-benefit ratio hits 1.26, proving that societal welfare clearly outweighs the tax revenue dip."

Using tax perks like credits to beef up gaming industry muscle is a global trend anyway. Director Song Jin shared, "Because our domestic market is tiny, chasing overseas expansion is a non-negotiable survival tactic for sustained growth." They warned, "With the lightning-fast rise of China's gaming industry sharpening global competition, and major nations heavily backing games through tax breaks, we are seriously worried about South Korea's relative competitive edge slipping away."

In reality, everyone from European heavyweights like the UK and France, North American giants like the US and Canada, Asian powerhouses like Japan and China, down to emerging economies like Brazil and Thailand, are already running game production cost tax credit schemes. It is particularly fascinating that some of these jurisdictions dangle extra incentives for hiring local talent or supporting native languages, cleverly steering the system toward job creation and cultural growth.

When you stack this up domestically, films and webtoons are already pocketing production cost tax credits, making it a glaring fairness issue to leave games out in the cold from a content support perspective. Director Song Jin remarked, "Even though the content sector urgently needs specialized tax support precisely because general tax credit systems don't fit, the current Restriction of Special Taxation Act stubbornly keeps its doors locked to film and webtoons alone."

South Korea has yet to lay the groundwork for game production cost tax credits. If such a system were to materialize, what would the fine print look like? The ultimate power to decide sits squarely with the Ministry of Culture, Sports and Tourism and the Ministry of Economy and Finance. However, we did manage to catch a glimpse of the blueprint ideas cooked up by KOCCA.

Director Song Jin revealed, "Through our relevant research, we've proposed 'production preparation, art production, and game production' as the recognized boundaries for production costs." They elaborated, "Production preparation includes scenarios, planning, and producing. Art production covers design and animation. Game production ropes in architecture design, tech development, computer graphics, visual effects, subtitle-related expenses, sound expenses, and playtesting."

The gaming industry relies heavily on outsourcing, and developers also have to factor in commercial engine licensing fees like Unreal, alongside the recent explosive surge in generative AI usage costs. Director Song Jin answered, "I reckon the nitty-gritty eligible items are matters to be thrashed out through separate enforcement decrees and rule-making procedures after production cost tax credits are actually introduced. Still, those mentioned items definitely deserve a seat at the table."

On top of that, the implementation decree stage will need to iron out several other puzzles: whether to extend tax credits to live-service maintenance costs for online games updating over long periods; whether to introduce refundable tax credits keeping in mind that game studios often bleed money in pre-launch deficits (where any leftover amount exceeding tax dues is handed back in cash); and tiered tax credit rates based on company size.

Director Song Jin explained, "Much like existing film and webtoon production cost tax credit systems, the framework will likely be designed to shovel maximum benefits toward small and medium-sized enterprises by sliding tax relief rates based on company scale." They added, "KOCCA has proposed applying baseline tax credit rates of 10 percent for large and mid-sized enterprises, and 15 percent for SMEs, matching the existing system framework."

How to handle the gaming industry's massive wave of co-productions is also bubbling up as a hot topic. Director Song Jin explained, "The current enforcement rules for film production cost tax credits explicitly state that 'co-ownership of rights is recognized only if the party pockets 50 percent of the profits generated from exercising those rights.'" Under current law, grabbing film production cost tax credits demands ticking off these exact boxes: ▲ being in charge of signing contracts with writers, ▲ handling contracts with major cast members, ▲ securing contracts with department heads across two or more major crew fields, and ▲ holding absolute command over all decision-makingtied to executing and managing production costs.

Building safety guardrails to choke off tax credit abuse is also a must. First off, government handouts like KOCCA's game production support funds are booted straight out of the deductible pool. Director Song Jin stated, "Under Article 127 of the Restriction of Special Taxation Act, double-dipping is banned by default. Since the enforcement decree for film production cost tax credits tosses out government subsidy expenses, we fully expect the exact same standard to clamp down on games as well."

What happens to games whose development flatlines before seeing the light of day? Director Song Jin noted, "This part will also likely become a talking point during separate enforcement decree and rule-making procedures once tax credits are officially greenlit." They added, "However, if it rolls out in a format similar to films and webtoons targeting already-published content, projects kicking the bucket before an official launch are dead in the water for eligibility."

Discussions will also need to address rolling out a 'cultural merit evaluation' to block massive multinational gaming corporations from abusing the system by merely slapping localizations onto games via their South Korean branches. Director Song Jin answered, "We anticipate reviews covering whether the gaming sector actually needs this mechanism and how overseas precedents handle it." They noted, "Current film and webtoon frameworks do not demand extra hoops like cultural merit evaluations."

Sadly, the 2026 tax code revision package rolled out in early August left game production cost tax credits completely out in the cold. Director Song Jin concluded, "KOCCA's job is to play the policy support role by digging up evidence and crunching data to build the case for introducing production cost tax credit systems. We will keep chatting closely with related government branches and the industry to push this reform across the finish line."