Special cases for the lease and sale of state and public properties
Free contract- Foreign-invested companies may use, make profits from, lease, or purchase land, factories, and other properties (hereinafter referred to as “land, etc.”) owned by the State or local governments, public institutions, or local public enterprises (hereinafter referred to as “state, etc.”) through free contracts (Article 13 (1) and 13-3 (1) of the Foreign Investment Promotion Act).
- A foreign-invested company eligible to lease land, etc. shall be limited to an enterprise in which a foreign investor owns at least 30% of the total number of stocks with voting rights or the total amount of investment of the relevant foreign-invested company. After the lease, the minimum foreign investment ratio shall be maintained for five years from the date of the lease or the date of the private contract conclusion (excluding cases where temporary maintenance is not possible) (the main body of Article 13 (2) of the Foreign Investment Promotion Act and the former part of Article 19 (1) and (2) of the Enforcement Decree of the Foreign Investment Promotion Act).
- However, this shall not apply if a foreign-invested company with a large contribution to the national economy such as the size of job creation, the amount of foreign investment, and the effect of technology transfer falls under any of the following (proviso to Article 13 (2) of the Foreign Investment Promotion Act and Article 19 (3) of the Enforcement Decree of the Foreign Investment Promotion Act).
1. Where a company reports a foreign investment within 3 years by creating new employment in excess of the number of regular employees under Article 20-2 (4) of the Enforcement Decree of the Foreign Investment Promotion Act
2. Where a company reports a foreign investment within 5 years by investing at least the amount of investment under Article 25 (1) of the Enforcement Decree of the Foreign Investment Promotion Act
3. Where a decision on tax reduction or exemption is made pursuant to Subparagraph 1 of Article 121-2 (1) of the Act On Restriction Of Special Taxation
4. Where the Ministry of Trade, Industry and Energy deems it necessary after a deliberation by the Foreign Investment Committee, as a business that contributes significantly to the expansion of social overhead capital, adjustment of industrial structure, financial independence of local governments, etc.
※ Cancelation of the sale contract of state and public property
· The State, etc. may terminate or cancel the sale contract when a foreign-invested company that has purchased land, etc. under a free contract falls under any of the following (the main body of Article 13-4 (1) of the Foreign Investment Promotion Act).
1. If the company fails to pay the purchase price
2. Where it is discovered that a contract has been concluded by false statement, submission of false evidentiary documents, or other improper means
3. Where he/she fails to commence his/her business without any special reason by the scheduled date of the business under the contract
4. Where the requirements under Subparagraph 1 through 4 of Article 13 (2) of the Foreign Investment Promotion Act are not fulfilled
5. Where the minimum foreign investment ratio is not maintained during the period under Article 13-3 (2) of the Foreign Investment Promotion Act
6. Other cases where the State, etc. and a foreign-invested company, etc. deems it necessary to terminate or cancel a contract after consultation
· However, in cases of Subparagraphs 1 or 3 above, where foreign-invested companies purchased within the period prescribed by the Enforcement Rules of the Foreign Investment Promotion Act after the State, etc. issues an order for correction, this shall not apply (proviso to Article 13-4 (1) of the Foreign Investment Promotion Act).
Construction of permanent facilities, etc.- Where a foreign-capital invested company leases State and public land, etc., a factory or other permanent facilities may be built on the land. In this case, there is a condition of donating the facility to the State or a local government or returning it to its original state at the time of the completion of the lease in consideration of the type of factory or other facilities concerned (Article 13 (4) of the Foreign Investment Promotion Act).
- If a foreign-invested company builds permanent facilities on properties leased, Article 18 (1) of the State Properties Act and Article 13 of the Act on the Management of Public Properties and Public Goods shall not apply (refer to Former part of Article 13 (4) of the Foreign Investment Promotion Act).