South Korea’s government has proposed ending both of the tax credits its esports industry uses on Dec. 31, the year before the country hosts the League of Legends World Championship again.

The 2026 tax reform plan, released Aug. 3 by the Ministry of Finance and Economy, addresses esports in exactly two places, and both are terminations. Article 104-35 of the Restriction of Special Taxation Act, which lets a domestic corporation deduct 10% of the cost of staging an esports tournament outside the Seoul capital region from its corporate income tax, is listed as expiring on schedule. Article 104-22, which lets a company that establishes a corporate sports team — esports teams included — deduct 10% of the team’s operating costs for three years, is listed as terminated outright. The plan gives the same reason for both: tax expenditure efficiency.

Neither measure was singled out. The ministry reviewed all 241 tax expenditure provisions and adjusted 115 of them, ending 20 outright, redesigning 64 and making 14 permanent. The two esports items sit in a fourth group of 17 being converted from tax relief into direct budget spending.

The timetable is short. The plan’s own schedule runs the statutory legislative notice period on the eleven accompanying tax bills from Aug. 4 to Aug. 20, a vice-ministerial meeting on Aug. 27 and a Cabinet meeting on Sept. 1, with submission to the regular session of the National Assembly due before Sept. 3. Until then the ministry can amend its own plan. After that, only the legislature can.

Five industry bodies are trying to force that amendment. A joint statement issued Aug. 14 by the Korea Association of Game Industry, the Korea Game Developers Association, the Korea Mobile Game Association, the Korea AI Game Association and the Korea e-Sports Association (KeSPA) asks the ministry to withdraw the termination of the tournament credit, extend it through 2030, apply it nationwide rather than only outside the capital region, and raise the rate to 20%. It also asks for a game production cost credit that South Korea does not have. The statement does not mention the team provision, and the window to act on either closes when the bill leaves the ministry.

The two credits cover different money. The tournament credit applies to prize money, venue rental, equipment leasing and payroll for staff assigned to running the event, and where a tournament spans two fiscal years the entire cost is claimed in the year it ends. It took effect in May 2025, giving it a working life of 20 months.

The team credit is older, and was never written for esports. In force since 2022, it is the general provision for corporate sports teams — athletics and other conventional sports at 10% for three years, or 20% over five years for a disability sports team — with esports teams added as an eligible category. It covers player, coach and manager salaries, tournament entry fees and training equipment for teams competing in the 12 esports titles designated by the Ministry of Culture, Sports and Tourism, and is clawed back if the team disbands inside three years. KeSPA’s own research lists that inheritance as a weakness, noting that esports teams are treated identically to conventional sports teams with no esports-specific tailoring.

The team provision carries a grandfather clause. Under the plan’s transitional rule, teams established on or before Dec. 31, 2026 continue under the existing regime; organizations founded after that date would have no equivalent relief.

The ministry’s summary table sorts the two differently. The team credit appears under the pursuit of selective and efficient support. The tournament credit appears under consolidation with similar budget programs. The plan does not name the program it would be consolidated into, and the question-and-answer briefing issued to reporters alongside it does not mention esports at all.

How much the tournament credit has paid out is not on the public record.

The National Assembly Budget Office, in its October 2025 analysis of the government’s tax expenditure budget, lists the provision at item 109 with no cost attached to it in any year: a dash for 2024, “newly established” for 2025 and “difficult to estimate” for 2026. Neighboring entries in the same table carry hard figures, including ₩221.9 billion KRW ($156.5 million USD) for the taxi value-added tax reduction and ₩267.4 billion ($188.6 million) for the electric vehicle excise cut, both 2024 actuals. The Budget Office’s conclusion criticizes precisely this pattern, noting that some items are presented as unestimable year after year despite continuous operation, and that of 132 mandatory in-depth evaluations of tax expenditures conducted between 2015 and 2025, only six provisions were ever abolished.

The industry’s own research says the credits were structurally incapable of paying out.

In a report titled “Study on the Economic Effects of Esports Tournaments and Measures to Expand Tax Benefits,” reviewed by The Esports Advocate and presented Feb. 20, KeSPA found that tournament organizers in South Korea, naming the LCK, are mostly Korean branches of foreign parent companies, and that for them a domestic corporate income tax deduction does not function as a real incentive. On the team side, the report found that esports clubs show a chronic deficit structure in which no corporate tax base is formed, and that with player salaries exceeding 70% of club budgets, the capacity for relief through ordinary expense deduction is already exhausted.

That assessment is consistent with what the operators disclose. Esports Insider reported that LCK Co., wholly owned by Riot Games, posted a net loss of ₩28.482 billion ($19.99 million) in FY2024, after losses of ₩13.2 billion ($9.3 million) in FY2023 and ₩8.1 billion ($5.7 million) in FY2022, with sales down more than 55% year over year. KeSPA’s report found separately that game publishers put ₩70.3 billion ($49.6 million) into esports in 2022 against ₩19.9 billion ($14 million) in related revenue, or 28% of what they spent — a ratio it reads as evidence that publishers treat esports as a marketing and ecosystem-building cost rather than a revenue business.

Geography determines whatever value the tournament credit does carry.

Because eligibility stops at the capital region, it does not apply to LoL Park in Seoul, where the LCK plays most of its schedule, or to the KSPO Dome in the city’s Songpa district, where the 2026 LCK final is set for Sept. 13. KeSPA’s report describes the LCK as holding its summer final outside the capital region every year as a matter of policy, and analyzes the 2024 final in Gyeongju as a case study. This year the final is in Seoul.

The credit does cover the events South Korea has been landing. The Mid-Season Invitational ran at the Daejeon Convention Center from June 28 to July 12, the first MSI in the country since Busan in 2022, and the LCK staged its Road to MSI qualifier in Wonju on June 12–14, an event the city government expected to draw about 15,000 visitors.

Riot Games announced in January 2025 that South Korea would host the 2027 World Championship. A host city has not been named, and under current rules a Seoul venue would not qualify even if the credit survived.

The credit exists because of an argument made after a comparable event. Tax breaks for esports were proposed in the National Assembly in November 2023, following the World Championship in Seoul, which the Korea Times reported was projected to generate ₩200 billion ($153 million) in economic effect. KeSPA’s report revisited that figure with a model it built for the purpose and put the same event at ₩740 billion ($522 million). That number is KeSPA’s own: it applies a 1.8 regional multiplier, borrowed from a Seoul Institute tourism study, to a base that itself includes ₩150 billion in estimated media exposure value. It has not been independently verified.

Three bills are pending to preserve the tournament credit, all from the People Power Party. Rep. Kim Seung-soo, co-chair of the National Assembly Game Policy Forum, filed a five-year extension to Dec. 31, 2031 on Feb. 19, the day before KeSPA presented its research. In a statement quoted by Esports Insider, Kim said: “At a time when countries around the world are competing for leadership in esports, government backing is urgently needed to safeguard Korea’s position as the birthplace of esports and to maintain our leadership in the global market.”

Rep. Park Jung-ha, whose Wonju constituency hosted this year’s Road to MSI, filed a three-year extension to Dec. 31, 2029 the same day. Rep. Park Seong-hoon filed a broader bill on May 7 that would extend eligibility nationwide, raise the rate to as much as 30% where more than half of a tournament’s matches are held outside the capital region, and push the sunset to December 2029.

Public money chasing esports events is not new, and KeSPA’s report names Chinese local-government subsidies and Saudi sovereign-fund spending as the competition South Korea is losing ground to. As previously reported by The Esports Advocate, Shenzhen introduced a three-year subsidy package in 2023 intended to make the city an “international esports city,” including allowances of up to ¥8 million RMB ($1.11 million USD) for companies that bring large international competitions there. It pays organizers directly rather than through the tax code, which is close to the model South Korea’s finance ministry now proposes to adopt.

The game production credit is the associations’ larger request and the one with no foothold in the plan at all. Film, broadcast and streaming content qualify under Article 25-6 and webtoons under Article 25-8, at 15% for small and medium enterprises and 10% for larger ones, with an additional tier where domestic production spending exceeds 80%. Both were refined in this year’s package, which adds a 12.5% band for three years after a company grows out of SME status.

Games and music qualify for neither, and the finance ministry’s stated position has been that game companies already claim research and development credits. Games accounted for $8.50 billion of South Korea’s $14.08 billion in content exports in 2024, or 60.4%. The Korea Creative Content Agency projects a game production credit would generate ₩2.255 trillion ($1.59 billion) in production ripple effects and 15,513 jobs over five years, at a benefit-cost ratio of 1.26.

The Culture, Sports and Tourism Ministry has submitted a tax expenditure request for the credit to the finance ministry and is continuing to negotiate, etnews reported after an April 30 meeting of the ministry’s game policy advisory panel chaired by Minister Chae Hwi-young. The National Assembly Budget Office, in the same October 2025 analysis, recommended expanding direct corporate tax support for cultural content beyond video, and counted nine bills pending in the Strategy and Finance Committee as of late October to widen the production credit, four of which name games.

Still unknown are how many tournaments and teams claimed either credit and for how much, which budget program the tournament credit is to be consolidated into and what it would be funded at, whether the finance ministry will amend the plan before Sept. 3, where the 2027 World Championship will be staged, and whether any of the three extension bills survives committee.

The immediate consequence is that any organizer budgeting a 2027 event outside Seoul, and any company weighing whether to found an esports team before December, has to assume the deduction will not be there. The larger question is what either credit was ever worth. By the recipient industry’s own account, one could not reach the foreign-owned entities that stage Korea’s international events and the other could not reach clubs with no taxable income to offset — which makes the government’s decision to convert them into grants either an admission that the instrument was wrong, or the quiet removal of a subsidy that was never paid.