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Foreign investors

Standard of tax reduction

Standard of tax reduction

Reduction of corporate tax or income tax

- Corporate tax or income tax will be exempted for income generated by a foreign-invested company operating a foreign investment business subject to tax reduction as follows (refer to Article 120-2 (2) of the Act On Restriction Of Special Taxation).

The period of reduction or exemption of corporate tax, etc. on foreign investment (Article 121-2 (2) of the Act On Restriction Of Special Taxation)
▪A business accompanying new growth engine and original technology (Subparagraph 1) ▪A business operated by enterprises occupying foreign investment zones and enterprises occupying free economic zones, Jeju Science Park, Jeju investment promotion zones, Jeju free trade zones, and Saemangeum business areas under Subparagraph 2 of Article 18 (1) of the Foreign Investment Promotion Act, which undergoes deliberation and resolution by each committee (Subparagraph 2)	▪Exemption for 7 years √ For the first 5 years, 100% √ For the next 2 years, 50%
▪ Located companies in free economic zones (Subparagraph 2-2) ▪ A business of the free economic zone development project operator (Subparagraph 2-3) ▪A business of the Jeju investment promotion zone development project operator (Subparagraph 2-4) ▪ Companies occupying foreign investment zones under Subparagraph 1 of Article18 (1) of the Foreign Investment Promotion Act (Subparagraph 2-5) ▪ Located enterprises in the Enterprise Cities Development Zone (Subparagraph 2-6) ▪ A business of enterprise cities development project implementer (Subparagraph 2-7) ▪ A located enterprise in the Saemangeum project area or a project implementer under the Special Act on Saemangeum Support (Subparagraphs 2-8 and 2-9) ▪ Other businesses where tax reduction is inevitable (Subparagraph 3)	▪ Exemption for 5 years √ For the first 3 years, 100% √ For the next 2 years, 50%

The period of reduction or exemption of corporate tax, etc. on foreign investment

(Article 121-2 (2) of the Act On Restriction Of Special Taxation)

▪A business accompanying new growth engine and original technology (Subparagraph 1)

▪A business operated by enterprises occupying foreign investment zones and enterprises occupying free economic zones, Jeju Science Park, Jeju investment promotion zones, Jeju free trade zones, and Saemangeum business areas under Subparagraph 2 of Article 18 (1) of the Foreign Investment Promotion Act, which undergoes deliberation and resolution by each committee (Subparagraph 2)

▪Exemption for 7 years

√ For the first 5 years, 100%

√ For the next 2 years, 50%

▪ Located companies in free economic zones (Subparagraph 2-2)

▪ A business of the free economic zone development project operator (Subparagraph 2-3)

▪A business of the Jeju investment promotion zone development project operator (Subparagraph 2-4)

▪ Companies occupying foreign investment zones under Subparagraph 1 of Article18 (1) of the Foreign Investment Promotion Act (Subparagraph 2-5)

▪ Located enterprises in the Enterprise Cities Development Zone (Subparagraph 2-6)

▪ A business of enterprise cities development project implementer (Subparagraph 2-7)

▪ A located enterprise in the Saemangeum project area or a project implementer under the Special Act on Saemangeum Support (Subparagraphs 2-8 and 2-9)

▪ Other businesses where tax reduction is inevitable (Subparagraph 3)

▪ Exemption for 5 years

√ For the first 3 years, 100%

√ For the next 2 years, 50%

※ Tax reduction for capital increase

·When a foreign-invested company increases its capital, the reduction regulations such as corporate tax and customs duty will be applied to the capital increase (refer to the main body of Article 120-4 (1) of the Act On Restriction Of Special Taxation).

·However, the following stocks, etc. shall be reduced according to the remainder of the reduction period and the reduction rate of the remaining period according to the example of reduction (Article 121-4 (2) of the Act On Restriction Of Special Taxation).

1. Stocks, etc. acquired by foreign investors as reserves, revaluation reserves, and other reserves under other Acts and subordinate statutes are transferred into capital under Subparagraph 2 of Article 5 (2) of the Foreign Investment Promotion Act.

2. Stocks, etc. acquired by investing proceeds (limited to stocks, etc.) generated from stocks, etc. acquired by foreign investors under Subparagraph 5 of Article 5 (2) of the Foreign Investment Promotion Act

Reduction of acquisition tax and property tax

- The acquisition tax and property tax on property acquired and held to run a foreign investment business reported by a foreign-invested company that has filed an application for tax reduction or exemption under Article 121-2 (6) of the Act On Restriction Of Special Taxation by December 31, 2019, shall be reduced or exempted, or a certain amount shall be deducted from the tax base as follows (refer to Article 121-2 (4) and (5) of the Act On Restriction Of Special Taxation).

Division		Reduction (deduction) period
Property acquired and held after the business starting date	Acquisition tax and property tax	Reduction for 7 years -For 5 years: 100% reduction -For the next 2 years: 50% reduction
Property acquired and held after the business starting date to conduct the business under Subparagraph 2-2 through 2-9 and 3 of Article 121-2 (1) of the Act On Restriction Of Special Taxation	Acquisition tax and property tax	Reduction for 5 years -For 3 years: 100% reduction -For the next 2 years: 50% reduction
Land acquired and held after the business starting date	Property tax	Deduction for 7 years -For 5 years: 100% deduction -For the next 2 years: 50% deduction
Property acquired and held after the business starting date to conduct business under Subparagraph 2-2 through 2-9 and 3 of Article 121-2 (1) of the Act On Restriction Of Special Taxation	Property tax	Deduction for 5 years -For 3 years: 100% deduction -For the next 2 years: 50% deduction
Property acquired after the date of receipt of a tax reduction or exemption decision and before the business starting date	Acquisition tax	-100% reduction
Property acquired and held before the business starting date	Property tax	-For 5 years: 100% -For the next 2 years: 50%
Property acquired and held before the business starting date to conduct the business under Subparagraph 2-2 through 2-9 and 3 of Article 121-2 (1) of the Act On Restriction Of Special Taxation	Property tax	-For 3 years: 100% reduction -For the next 2 years: 50% reduction
Land acquired and held before the business starting date	Property tax	-For 5 years: 100% -For the next 2 years: 50%
Property acquired and held before the business starting date to conduct business under Subparagraph 2-2 through 2-9 and 3 of Article 121-2 (1) of the Act On Restriction Of Special Taxation	Property tax	-For 3 years: 100% reduction -For the next 2 years: 50% reduction

Exemption from the tariff, special consumption tax, and value-added tax

- If all of the following requirements are met, tariff, special consumption tax, and value-added tax will be exempted (refer to Article 120-3 (1) and (2) of the Restriction of Special Taxation Act and Article 116-5 (1) and (2) of the Enforcement Decree of the Act On Restriction Of Special Taxation).

The business referred to in Subparagraphs 1 and 2 of Article 121-2 (1) of the Act On Restriction Of Special Taxation

Among the following capital goods necessary for the businesses referred to in Subparagraphs 1 and 2 of Article 121-2 (1) of the Act On Restriction Of Special Taxation, capital goods introduced pursuant to the provisions of Article 5 (1) and (2) of the Foreign Investment Promotion Act are the following.

① Capital goods introduced by a foreign-invested company as a means of foreign payment or domestic payment invested by foreign investors

② Capital goods introduced by foreign investors as investment objects falling under Subparagraph 8 of Article 2 (1) of the Foreign Investment Promotion Act

The business referred to in Subparagraphs 2-2, 2-3, 2-4, 2-5, 2-8, 2-9, and 3 of Article 121-2 (1) of the Act On Restriction Of Special Taxation

Among capital goods required for the projects referred to in Subparagraph 2-2 through 2-5 and 3 of Article 121-2 (1) of the Act On Restriction Of Special Taxation, where the capital goods of ① and ② above are introduced in accordance with the details reported pursuant to Article 5 (1) and (2) of the Foreign Investment Promotion Act to make foreign investment under Item A (ⅰ) of Subparagraph 4 of Article 2 (1) of the Foreign Investment Promotion Act

※ The capital goods shall be used directly in the business for which the corporation (income) tax is exempted pursuant to Article 121-2 of the Act On Restriction Of Special Taxation, and an import declaration is completed under Customs Act within five years (where it is impossible to complete a revenue report within such period because of a delay in the establishment of a factory or other unavoidable reasons, and if he/she files an application for extension with the Ministry of Strategy and Finance before the expiration of such period, it shall be six years) from the date on which a foreign investment report is made under the Foreign Investment Promotion Act (Article 121-3 (1) of the Act On Restriction Of Special Taxation and Article 116-5 (1) of the Enforcement Decree of the Act On Restriction Of Special Taxation).

· However, if a foreigner intends to make a foreign investment with the acquisition of stocks or shares already issued by a Korean national or an enterprise managed by a Korean corporation, the exemption provisions of customs duties, individual consumption tax, and value-added tax prescribed in the Restriction of Special Taxation Act shall not apply to the foreign investment (Article 121-3 (4) of the Restriction of Special Taxation Act).