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03_CMS_Investment Guide
 Protection and Deregulation of Foreign Investment |
| Protection of Foreign Investment |
| Guarantee of External Remittances |
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External remittance is guaranteed for earnings from the shares acquired by the foreign investor, the proceeds from the sale of shares, the principal, interest, and fees paid under a loan contract concluded pursuant to the Foreign Investment Promotion Act, and any payments made under a technology introduction contract, as stipulated under the details of the foreign investment or technology introduction contract at the time of remittance or the details of the declarations. |
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Exceptions Applied to Safeguard Provisions on Foreign Exchange Transactions
When it is deemed inevitable as the result of a natural disaster, war, commotion, acts of force majeure, or grave and urgent changes to economic conditions at home and/or abroad, and any circumstances comparable to such events, the Finance and Economy Minister may temporarily suspend the payment
and/or receipt, in part or in whole, of those transactions subject to the Foreign Exchange Transaction Act, or may impose such duties as custody by or deposit with the Bank of Korea, the relevant government agencies, the Foreign Exchange Stabilization Fund, and financial institutions, or the sale by any means of payment Including
precious metals. However, the aforementioned safeguard-related provisions of the Foreign Exchange Transaction Act do not apply to foreign investors under the Foreign Investment Promotion Act. |
| Identical Treatment with Domestic Firms |
| Foreign investors and foreign-invested firms are treated in a manner identical to that of Korean nationals/corporations
in regard to their business operations, except in those cases where contrary provisions are provided under the law. |
| Exclusion of Differentiated Application of Tax Abatement Provisions |
| Tax abatement provisions of the tax laws applicable to the Korean national or corporation are equally
applied to foreign investors, foreign-invested firms, lenders of loans or providers of technology under the Foreign Investment Promotion Act, except for those cases where contrary provisions are provided under the law. |
| Deregulation of Foreign Investment |
| Foreign investors may carry out business related to their investment
in Korea without any restrictions, except for those cases where contrary provisions are provided under the relevant law(s). Foreign investment under this Act is not restricted unless the investment falls under any of the following: |
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When it results in an impediment to the maintenance of national security or public order; |
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When it damages public welfare or environmental preservation, or when it runs markedly contrary to commonly-accepted Korean standards of decency and morality; or |
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When it breaches Korean law
and/or regulations. |
| Announcement of Restrictions on Foreign Investment |
| The Ministry of Commerce, Industry and Energy will make an annual integrated announcement concerning details of proposed restrictions by relevant government agencies or departments on foreign investment in Korea under statutes or notices other than this Act, including unfavorable treatment toward foreign investors or foreign-invested firms compared to Korean nationals or corporations, or additional duties imposed on foreign investors or foreign-invested firms. Government agency or department heads must consult with the Ministry of Commerce, Industry and Energy whenever the intention to amend any such statute or notice is made or to impose additional duties. |
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Restriction or Prohibition of Foreign Investment |
| Foreigners may currently invest in 1,058 business types out of a total of 1,121 types under the Korean Standard Industry Classification (As notified by the Statistics Service notice), excluding 63 business types (excluded business types) as stipulated under Article 4 of the Foreign Investment Promotion Act, including public administration, educational organizations, and national defense, just to name a few. The investment ratio is restricted for 28 business types (restricted business types) from
those in which foreigners may invest. |
| In particular, special attention must be drawn to the fact that foreign
investment in a defense-related business through
the acquisition of its existing shares requires the approval (and consultation with the concerned ministers) of the Ministry
of Commerce, Industry and Energy. |
| Business Categories Where Foreign Investment is Restricted |
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Foreigner investment in restricted business categories are announced in accordance with the 'Regulations on Foreigner Investment and Technology Introduction'
or the 'Integrated Notice on Foreigner Investment'. |
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Due to their relation to public service, thus making application of the Foreign Investment Promotion Act difficult, certain categories of investment are restricted to foreign investment. |
| Categories Where Foreign Investment is Restricted |
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Postal service, central bank, personal or business mutual aid, securities and futures exchange, other financial service market control, clearance or exchange of notes. |
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Legislative, judiciary and administrative service agencies, foreign diplomatic missions in Korea, and other international or foreign organizations. |
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Economic research and development, and research and development of humanities or social sciences. |
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Educational institutions (kindergartens, elementary, junior and senior high schools, junior colleges, universities, graduate schools, and specialized schools). |
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Arts and cultural, religious, industrial, professional, environmental, political or labor movement
organizations. |
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| Business Categories Where Foreign Investment is Restricted |
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Foreign investment excluded business types are announced in accordance with the 'Regulations on Foreigner Investment and Technology Introduction' or the 'Integrated Notice on Foreigner Investment'. |
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Foreign investment is, as a rule, prohibited in these categories, however exceptions are sometimes made if certain criteria are met. |
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Two business types have not yet been opened (television and radio
broadcasting services). |
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26 business types have been partially opened (less than 50%). |
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Foreigners may not invest in businesses that are engaged in areas where foreign investment is prohibited or partially prohibited. In the case where a foreigner intends to invest in a company that is engaged in more than two businesses where foreign investment is partially prohibited, the foreigner may not invest in excess of the investment ratio prescribed for the business with the lowest ratio for permitted foreign investment. |
| Business Category (Standard Industry Classification) |
Criteria for Approval for Foreign Investment |
Cultivation of grain and/or other food crops (01110) |
Permitted, except for rice and barley. |
Beef cattle raising (01212) |
Permitted when the foreign investment ratio is less than 50% of total voting shares or equity |
Near-sea fishing (05112) |
Permitted when the foreign investment ratio is less than 50% of total voting shares or equity |
Coastal fishing (05113) |
Permitted when the foreign investment ratio is less than 50 %of total voting shares or equity |
Newspaper publishing (22121) |
Permitted when the foreign investment ratio is less than 30% of total voting shares or equity |
Magazines and periodicals publishing (22122) |
Permitted when the foreign investment ratio is less than 50% of total voting shares or equity. |
Nuclear fuel processing (23300) |
Permitted except for the production or supply of fuel for atomic power generation |
Electric power generation
(40110) |
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Permitted, except for nuclear power generation. |
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Total power plant facilities that foreigners are allowed to acquire from KEPCO should be less than 30% of the total domestic power plant facilities . |
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Power transmission (40121) |
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Permitted when the foreign investment ratio is less than 50%of total voting shares or equity |
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Foreign investors may not become the largest shareholder |
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Power distribution and sales (40122) |
Permitted when the foreign investment ratio is less than 50%of total voting shares or equity
- Foreign investors may not become the largest shareholder. |
Meat wholesaling (51312) |
Permitted when the foreign investment ratio is less than 50%of total voting shares or equity |
Coastal passenger transportation (61121)
Coastal cargo transportation (61122) |
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Permitted types: Passenger and cargo transportation between South and North Korea. |
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Joint venture with Korean shipping companies is mandatory, Permitted when the foreign investment ratio is less than 50%of total voting shares or equity |
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Regular air transportation (62100) |
Permitted when the foreign investment ratio is less than 50%of total voting shares or equity |
Charter air transportation (62200) |
Permitted when the foreign investment ratio is less than 50%of total voting shares or equity |
Lease of power or communication circuit facilities
(64211) |
Permitted when the sum of shares (limited to voting right shares, including DR, share equivalents or equity shares with voting rights) held by a foreign government and foreign investors (including fictitious foreign corporations) is less than 49%. (Permitted for KT only when the FDI ratio is 5% or less)
Fictitious foreign corporations: Corporations where 15% or more of total issued shares are held by a foreign government or foreign investors (including specially related parties under the Securities Exchange and Transaction Act Article 36-3) who are the largest shareholder of the corporation |
Telephone and other communication services (64129) |
Permitted when the sum of shares (limited to voting right shares, including DR, share equivalents or equity shares with voting rights) held by a foreign government and foreign investors (including fictitious foreign corporations) is less than 49%. (Permitted for KT only when the FDI ratio is 5% or less)
Fictitious foreign corporations: Corporations 15% or more of its total issued shares are held by a
foreign government or foreigners (including specially related parties under the Securities Exchange and Transaction Act Article 36-3) who are the largest shareholder of the corporation. |
Mobile phone services (64221) |
Permitted when the sum of shares (limited to voting right shares, including DR, share equivalents or equity shares with voting rights) held by a foreign government and foreign investors (including fictitious foreign corporations) is less than 49%. (Permitted for KT only when the FDI ratio is 5% or less)
Fictitious foreign corporations: Corporations where 15% or more of total issued shares are held by a foreign government or foreign investors (including specially related parties under the Securities Exchange and Transaction Act Article 36-3) who are the largest shareholder of the corporation |
Pagers and other mobile communication services (64229) |
Permitted when the sum of shares (limited to voting right shares, including DR, share equivalents or equity shares with voting rights) held by a foreign government and foreign investors (including fictitious foreign corporations) is less than 49%. (Permitted for KT only when the FDI ratio is 5% or less)
Fictitious foreign corporations: Corporations where 15% or more of total issued shares are held by a foreign government or foreign investors (including specially related parties under the Securities Exchange and Transaction Act Article 36-3) who are the largest shareholder of the corporation |
Other telecommunication services
(64299) |
Permitted when the sum of shares (limited to voting right shares, including DR, share equivalents or equity shares with voting rights) held by a foreign government and foreign investors (including fictitious foreign corporations) is less than 49%. (Permitted for KT only when the FDI ratio is 5% or less)
Fictitious foreign corporations: Corporations where 15% or more of total issued shares are held by a foreign government or foreign investors (including specially related parties under the Securities Exchange and Transaction Act Article 36-3) who are the largest shareholder of the corporation |
Domestic banks
(65121) |
Permitted for investment in commercial banks or local banks only. (Investment in special banks or farming, fishery and livestock raising cooperative banks is prohibited.) |
Radio broadcasting
(87211) |
<Not permitted > |
Television broadcasting (87212) |
<Not permitted > |
Broadcasting channel use (87221) |
Permitted when the foreign investment ratio is less than 49%of total voting shares or equity
(General program and news program specialized services are prohibited.) |
Integrated cable and other cable broadcasting (87222) |
Permitted when the foreign investment ratio is less than 50%of total voting shares or equity
(Cable relay broadcasting service is still prohibited.) |
Satellite broadcasting (87223) |
Permitted when the foreign investment ratio is less than 33%of total voting shares or equity |
News provision (88100) |
Permitted when the foreign investment ratio is less than 25%of total voting shares or equity |
Nuclear waste collection, transport and processing (90230) |
Permitted except for Nuclear Waste Management Service under Power Service Act Article 82. |
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