Hello, I'm Attorney Kyusung Lee from WeOn Law.

In my previous post, I provided an overview of the types of foreign-invested companies and the process of setting them up.

Today, I’d like to follow up by introducing the scope of tax exemptions available to foreign investors and detailing the procedures involved. This post contains information that will be helpful to those curious about the exact benefits, so please read to the end.

To promote foreign investment in Korea and facilitate the transfer of advanced technology for national economic development, a range of tax benefits are offered to foreign investors.

These benefits include exemptions from acquisition tax, property tax, customs duties, and value-added tax. Additionally, income tax reductions are available for foreign technical personnel, and there are special income tax provisions for foreign employees. You can find detailed information on these benefits in the [Tax Reduction and Exemption Control Act].

① Foreign-invested Companies

- Exemption from acquisition and property taxes on acquired and held real estate

- Exemption from customs duties, individual consumption tax, and value-added tax on capital goods

② Foreign Technical Personnel

- 50% reduction in earned income tax for up to 10 years

③ Foreign Employees

- Option to apply a flat income tax rate of 19% for up to 20 years

The scope of tax exemptions for foreign-invested companies is stipulated in Article 121-2 of the [Tax Reduction and Exemption Control Act] and Article 116-2 of its Enforcement Decree.

◆ New Growth and Core Technology Projects: Companies installing and operating facilities for projects directly related to new growth or core technologies (investment amount: USD 2 million or more)

◆ Foreign Investment Promotion Act Designated Areas: Companies located in foreign investment zones (individual type), free economic zones, Jeju Advanced Science and Technology Complex, or Jeju Investment Promotion Zones, subject to committee review and approval (investment amount: USD 2 million - 30 million or more, depending on the industry)

◆ Free Economic Zone Residents: Companies in industries like manufacturing, tourism, international conference facilities, logistics, and R&D (investment amount: USD 1 million - 10 million or more)

◆ Developers of Free Economic Zones: Projects with an investment of USD 30 million or more or with a foreign investment ratio of 50% or more, and with a total project cost of at least USD 500 million

◆ Enterprise City Development Zone Residents:** Manufacturing, logistics, R&D, and similar industries (investment amount: USD 2 million - 10 million or more)

◆ Other Essential Tax-Exempt Projects: Manufacturing, logistics, etc. (investment amount: USD 5 million - 10 million or more)

[Tax Exemption Application Process]

Pre-Confirmation of Eligibility (Optional) ▶ Reporting of Foreign Investment through Acquisition, etc. ▶ Tax Exemption Application ▶ Tax Exemption Decision ▶ Notification of Tax Exemption Decision

Foreign-invested companies eligible for tax exemptions must follow a series of steps.

To receive tax benefits or if there are changes to the details, you must apply to the Ministry of Economy and Finance. For companies in free trade zones, you can apply to the relevant free trade zone administrator.

Applications should be submitted to the External Economic Policy Bureau of the Ministry of Economy and Finance. If the foreign investor intends to file both the foreign investment report and the tax exemption application simultaneously, they can submit both to a designated foreign exchange bank or KOTRA.

[Required Documents for Pre-Confirmation of Tax Exemption Eligibility]

- Application Form

- Documents explaining or providing evidence for the reason for applying for tax exemption or amendment

[Required Documents for Tax Exemption or Amendment Application]

- Report Form

- Application Form

- Supporting documents providing specific reasons for the tax exemption or amendment

- Copies of Business Registration and Certificate of Registration for Foreign-invested Company

Once the application for tax exemption is complete, foreign-invested companies can benefit from reductions in acquisition tax, property tax, and exemptions from customs duties, individual consumption tax, and other related taxes.

Additionally, foreign technical personnel can receive a 50% reduction in earned income tax for up to 10 years, while foreign employees can apply a flat tax rate of 19% for up to 20 years.

Given the significant benefits, it is advisable to apply to receive appropriate exemptions. However, as the process is complex and requires a variety of documents, it is often more efficient to proceed with the help of a professional.

At WeOn Law, Attorney Kyusung Lee, who has extensive overseas study experience and has resolved numerous cases involving foreign-invested companies, is here to assist you with all steps tailored to your specific case.

If you need assistance, from preparing the necessary documents to navigating the process, please click on the banner below to schedule a consultation.