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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)
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·
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)
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·
- 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)
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.gif)
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)
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·
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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