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Tax incentives for FDI (Foreign Direct Investment)

 Tax reductions or exemptions on corporate, income, acquisition, registration, property and aggregate land taxes may be granted to FDI pursuant to the Special Tax Treatment Control Act. (Article 9 of the Foreign Investment Promotion Act)

(1) Business eligible for tax incentives 

1.   Businesses carrying advanced technology or service businesses supporting domestic industry (shall satisfy all of following requirements)    

   · Technology bringing substantial economic and technological effects on the national economy and that are critical to advance industrial structures and to strengthen international competitiveness of domestic industry  

 · Technology of which the induced period is less than three years from the date of FDI notification or of technology inducement contract; or technology of which induced period is more than three years but are evaluated as having greater economic and technological superiority than the previously induced technology

 · Technology of which processing of major components is mainly operated in Korea

  2.   Businesses operated by FDI company located in Foreign Investment Zone (FIZ)

3.   Other businesses stipulated in the Special Tax Treatment Control Act (Article 116-2 (4), (5) of the Enforcement Decree of such Act)

(2) Period and Amount of Tax Incentives 

Pursuant to the Korean Commercial Code, a branch office of a foreign corporation should be registered with the district court as a legal entity.  All operations would then be carried out under the name of the legal entity.  The documents required to register with the district court include the following: 

1.   Corporate tax / income tax of FDI companies (Article 121-2 (2) of such Act)       

  ·  - For seven years from the year in which the profit is first made: Exemption  - Three years thereafter: 50% reduction

If profit is not made after five years from the business commencement: - Exemption for seven years  - 50% reduction for next three years

                                                                                                                

2.   Corporate tax / income tax on dividends of FDI companies (Article 121-2 (3) of such Act)      

  Same as corporate tax or income tax

3.   Acquisition tax/ registration tax/ property tax/ aggregate land tax on building and land acquired by FDI companies (Article 121-2 (4) of such Act)     

  · Acquisition / registration/ property tax : - For first five years from the business commencement: Exemption  - Three years thereafter: 50% reduction 

Local governments may extend the period for tax incentives up to 15 years or increase the rates by enacting new local government regulations.             

※ For property acquisition made after decision on tax reduction:  -Acquisition/registration tax: Exemption - Property tax:  Exemption for five years from the date of property acquisition - 50% reduction for next three years

· Aggregate land tax: - For first five years from the business commencement: Exemption  - Three years thereafter: 50% reduction

Local governments may extend the period for tax incentives up to 15 years or increase the rates by enacting new local government regulations.             

※ For property acquisition made after decision on tax reduction:  -Acquisition/registration tax: Exemption - Property tax:  Exemption for five years from the date of property acquisition - 50% reduction for next three years

                                                                                                                 










 
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