TITLE : FAQ on FDI in Korea 2023 (Q131~Q135)
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■ FAQ on FDI in Korea 2023 (Q131~Q135)
Factory Establishment and Location
Q131 | Is a foreign-invested company moving into a national industrial complex eligible for a reduction in land rent? |
- Cases where a foreign-invested company receives 100% rent exemption:
- Where a foreign investor makes an investment according to specificcriteria and the foreign-invested company operates in the areawhere the foreign investor wishes to invest in (individual-type foreigninvestment zone)
- Where a business has been approved for a tax reduction or exemptionunder Article 121-2 (1)1 of the Restriction of Special Taxation Act andits foreign investment amount is USD 1 million or more
- Where a business produces components or materials
- Where a business manufacturing materials and equipment pursuantto subparagraphs 1 or 2 of Article 2 of the Act on Special Measuresfor Strengthening the Competitiveness of Materials, Components andEquipment Industries is in an industrial complex created exclusively forlease to a foreign-invested company manufacturing materials, partsand equipment, and the amount of foreign investment in the businessis USD 5 million or more
- Where a business operates a business prescribed under subparagraphs1 through 3 or facility under subparagraph 4 of Article 25 of theEnforcement Decree of the Foreign Investment Promotion Act, hasforeign investment of at least USD 2.5 million, and employs 200 ormore full-time employees (for businesses with 150 or more full-timeemployees, the rent reduction rate shall be 90/100, and 75/100 forbusinesses with 70 or more employees)
- Where a business significantly contributed to expansion of socialoverhead capital, change of industrial structure or financialindependence of a local authority and has been prescribed by theMinister of Trade, Industry and Energy after the deliberation of theForeign Investment Committee
- Cases where the foreign-invested company receives a 75% reduction ofthe rent:
- Where a business intends to engage in the manufacturing sector andits foreign investment amount is USD 5 million or more
- Where a business determined by the Minister of Trade, Industry &Energy after the Foreign Investment Committee's deliberation to becontributing significantly to the social overhead capital, industrialrestructuring, or financial independence of the local government
- Cases where the foreign-invested company receives a 50% reduction of rent:
- For land in a national industrial complex under Article 6 of theIndustrial Sites and Development Act
- For land in a general industrial complex, urban high-tech industrialcomplex or agro-industrial complex under Articles 7, 7-2, and 8 of theIndustrial Sites and Development Act
* For other public land managed by a local government, land rentreduction is available according to the ordinance announced by therelevant local government.
Q132 | If a tenant company of a foreign investment zone (FIZ) that moved into the FIZ by establishing a joint venture with a foreign investor increased its capital to expand its business and its foreign investment ratio was lowered to below 30%, should the tenant company pay the market rent price due to non-compliance with the tenancy qualification? |
If the foreign investment ratio of a tenant company of an FIZfalls below 30% before implementing the project plan, thecompany should pay the market rent due to non-compliancewith the tenancy qualification. In this case, the company mayreinstate the tenancy qualification within two years afterconsultation with the Minister of Trade, Industry and Energy.
- The reduced rent shall continue to be applied if the tenant company failsto maintain its tenancy qualification by increasing domestic capital toinstall the plant or machinery, facilities, and devices without reducingthe amount of foreign investment after the project plan has beenimplemented. Even in this case, the foreign investment ratio should bemaintained at 10% or higher.
Q133 | How long is a tenant company of a foreign investment zone (FIZ) given for implementing the investment? |
The tenant company of an FIZ should complete its investment(implementation period of the project plan) within five yearsfrom signing the tenancy agreement. The investment'sfulfillment is determined based on the balance of foreigninvestment and the construction area after the five years.
Q134 | If a tenant company moved into a foreign investment zone (FIZ) by meeting the foreign investment requirements with a long-term loan and the loan matures, can the tenant company continue to stay in the FIZ? Also, is the company still eligible for a rent reduction? |
Long-term loans can be repaid to maturity under the Foreign Investment Promotion Act. If such repayment leads the tenant company to fail to meet the tenancy requirements per project plan, it can be a cause for the tenancy agreement's termination, and the market rent (5% of the land acquisitionprice) will be applied.
Q135 | How long is a tenant company of a service- type foreign investment zone (FIZ) given for implementing the investment according to the project plan? |
The tenant company of a service-type FIZ should implement the project plan (in terms of the foreign investment amount, building construction area, and minimum number of hires) within three years from the date of signing the tenancy agreement. However, for complex-type and individual-type FIZs, tenant companies should implement the project plan within five years.