TITLE : FAQ on FDI in Korea 2023 (Q117~Q120)
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■ FAQ on FDI in Korea 2023 (Q117~Q120)
Factory Establishment and Location
A company that moves into an FIZ should completely carry out its business plan submitted at the time of signing of the tenancy contract within five years of the date of concluding the contract. In accordance with Article 26-2 (5) and (6) of theEnforcement Decree of the Foreign Investment Promotion Act, a company that failed to do so within five years is subject to termination of the tenancy contract.
- If the project plan is not implemented due to unavoidable reasons, agrace period of up to one year may be granted. During the grace period,a non-fulfillment rent (5% of the site price) is imposed on the excessarea compared to the project plan. If the company fails to attract foreigninvestment even after the grace period, the non-fulfillment rent ischarged on the entire site.
Individual sites (sites other than industrial complexes) refersto any site other than planned sites, and the investor developsthe factory site to establish a factory. The investor needs tocheck in advance whether a factory is allowed to be built onthe site and obtain approval from the relevant local government(city, Gun, or Gu). The next steps are: factory construction,installation of manufacturing facilities, registration of thefactory, and factory operation. If the factory construction areais 500 ㎡ or larger, the company should obtain approval for thefactory construction from the relevant local government. Acompany whose factory construction area is below 500 ㎡ mayobtain factory establishment approval, should the companyseek the legal fiction of authorization or permission for factoryestablishment.
If the total area of all the floors of buildings housingmanufacturing equipment or machine plus the horizontal projected area of outdoor manufacturing structure is smaller than 500 ㎡, factory establishment approval is unnecessary.
However, even if the size is smaller than 500 ㎡, the company may apply for factory establishment approval if it wishes to process all the factory related permits through the legal fiction of authorization or permission.
- If a factory that is registered with a factory area less than 500 ㎡ isexpanded and as a result the factory construction area increases to500 ㎡ or larger, the factory should apply for the new establishment of afactory, not for the expansion of the factory.
- The following cases do not need a separate factory constructionapproval as it is regarded such approval has already been given:
- Where a manufacturer signed the tenancy contract with themanagement agency of an industrial complex
- Where a company develops an industrial complex upon the approvalof implementation of an industrial complex development plan insteadof moving into a free trade zone, obtaining approval on its venturebusiness plan, or moving into an industrial complex
You can find information on FIZs and national industrialcomplexes in Korea at the website of Korea IndustrialComplex Corporation (www.kicox.or.kr).
- For information on FIZs, log on to the website and go to: Major Project ▶Foreign Investment Zone ▶ Designation and Management Organization.For information on the current state of industrial complexes, go to:Major Project ▶ Research and Study of Industrial Location ▶ IndustrialComplex Statistics & Periodicals.
* You can check more detailed information such as the basic managementplan for each industrial complex at the industrial site information systemwebsite (www.industryland.or.kr) operated by the Ministry of Land,Infrastructure and Transport.