Foreign Investment Zone in South Korea

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Foreign Investment Zone in South Korea

 

กแ Definition of Foreign Investment Zone System

The system of Foreign-investment Zones relates to areas designated by a mayor or a governor setting aside specific zones where foreign investors can locate and conduct their businesses and be provided with various incentives including special tax exemptions or reductions. These Foreign-Investment Zones are designed to induce large-scale foreign investments.

กแ Designation and Development of Foreign-Investment Zone

Each mayor and governor may designate a certain area of a National Industrial Complex or a Provincial Industrial Complex which it designates for the purpose of leasing or transferring exclusively to foreign investors (the "Foreign Company Exclusive Zone") as a Foreign Investment Zone upon consultations with the Foreign Investment Committee. Also, if necessary for promoting foreign investment meeting the following criteria, each mayor or government may designate a certain area which is sought for investment by foreign investors (the "Foreign Company Wishing Zone") as a Foreign Investment Zone upon consultations with the Foreign Investment Committee, and in such case, the criteria should be met within five (5) years after the designation..
In the case where constructing a new site is necessary to build a plant, etc., in a Foreign-Investment Zone, it can be developed as a Provincial Industrial Complex, which requires a development plan.


In order for a Foreign Company Wishing Zone to be designated as a Foreign-Investment Zone, new facilities should be installed by foreign investment. And, an area where more than two foreign investors invest can be designated as the Foreign-Investment Zone, provided that (a) total foreign investment is over US$30 million and (b) the site where their plants or research facilities are located in the same National Industrial Complex or Provincial Industrial Complex or adjacent to each other.

กแ Support for Foreign Investment Zones

The Korean government supports foreign-invested companies operating in Foreign-Investment Zones with tax reductions or exemptions and privileges such as construction costs and basic facility support and exemption of the traffic generation charge. Details of the available tax reductions and exemptions are as follows:


Corporate Tax, Income Tax

- Until the end of 2004, if a foreign-invested company reports and applies for a tax reduction/exemption from the Korean government, a 100 percent exemption for the initial 7 years and a 50percent exemption for the following 3 years will be available.
- From Jan. 1st 2005, if a foreign-invested company reports and applies for a tax reduction/exemption from the Korean government, a 100 percent exemption for the initial 5 or 3 years and a 50 percent exemption for the following 2 years will be available.


Property Tax, Acquisition Tax,
Aggregate Land Tax, Registration Tax

- Until the end of 2004, if a foreign-invested company reports and applies for a tax reduction/exemption from the Korean government, a 100 percent exemption for the initial 7 years and 50 percent exemption for the following 3 years will be available.
- From Jan. 1st 2005, if a foreign-invested company reports and applies for a tax reduction/exemption from the Korean government, a 100 percent exemption for the initial 5 or 3 years and a 50 percent exemption for the following 2 years will be available.

-A local government can increase the reduction/exemption period and percentage for the period up to 15 years.


The government will provide support in designated Foreign-Investment Zones in the form of infra-facilities such as harbors, roads, water facilities, railroads, communications and electrical power and 100 percent rent-free national properties. Foreign investors will also be exempt from traffic generation fee caused by necessary construction work. At the same time, all relevant restrictions on the foreign-invested companies' exports and imports will be alleviated.

 

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