Incentives on foreign investment in Korea
The Korean government supports foreigninvested companies operating in ForeignInvestment Zones with tax reductions or exemptions and privileges such as construction costs, basic facility support, and exemption of the traffic generation charge. Details of the available tax reductions and exemptions are as follows:
Corporate Tax, Income Tax:
for the initial 7 or 3 years and a 50% exemption for the following 3 or 2 years was available.
Property Tax, Acquisition Tax, Aggregate Land Tax, Registration Tax:
For dividends received by foreign investors from a foreign-invested corporation that is engaged in businesses and eligible for corporate or income tax reduction or exemption, tax will be reduced or exempted based on the rate of income generated by the foreign-invested corporation from its operation of business that is eligible for corporate or income tax reduction or exemption.
The initial date in reckoning for tax reduction or tax exemption of dividends generated by new investments and capital increase through paying actual money, actual shares and dividends is same as the initial date in reckoning the corporate tax. During the period when the corporate tax is exempted 100%, the dividend income tax will also be exempted 100%. During the period for 50% reduction on the corporate tax, the dividend income tax will also be reduced 50%.
In the case where a foreign investor takes over the shares of a foreign-invested company from a local individual or a local corporation, it is regarded as acquisition of existing shares. Therefore, it is not eligible for the tax reduction or tax exemption. However, in the case where a foreigner or a foreign corporation takes over the shares of a foreigner or a foreign corporation, the original period and rate for tax reduction and tax exemption remain effective.
Where highly advanced technology, which is judged critical for enhancing Korea’s global competitiveness, is introduced following an agreement, the provider’s (individual, corporation, international organization) corporate tax and income tax will be exempted for seven years from the date which the initial compensation for introducing the technology is to be made.
A foreign technician will be exempted from earned income tax if he/she renders his/ her service to Koreans in Korea pursuant to the technology introduction agreement stipulated in the FIPA. However, the privilege shall remain effective only for two years to the month of the issuing date of certificate of report for the technology introduction agreement under the condition that the agreement is observed.
The recipient of this benefit can choose to pay either income tax on 17% of their gross salary or 6% to 38% of their salary which is the tax rate applicable to Koreans.