Invest KOREA

A factory site consisting of several plot numbers can still be registered as one factory as long as the plots are adjacent, only divided by roads or drains, and connected physically or functionally by building or expanding manufacturing facilities and additional facilities. The precondition is that such plots are put on one tenancy contract, which will not cause trouble in industrial complex management. However, a factory that is not adjacent to the other should have a separate tenancy agreement and factory registration.

Factory registration means the act of an administrative institution recording in the official registry (the factory registration catalog) that the concerned place of business defined by Article 2 of the Industrial Cluster Development and Factory Establishment Act and Article 2 of the Enforcement Decree of the same Act is established and meets the legal requirements. Therefore, if the factory does not exist in Korea, it cannot be registered.

The standard factory area ratio is enforced to prevent factory establishment for the purpose of speculation. Therefore, the company needs to maintain the construction area equal to or greater than the standard factory area ratio even after reporting the construction and filing factory registration.

Under Article 40 of the Industrial Cluster Development and Factory Establishment Act, any person who has acquired an industrial site or a factory from a tenant company or support agency by auction or other associated laws should sign a tenancy contract within a year from the date of acquisition. Otherwise, the asset has to be transferred to a third party within the following year. ◎ However, if the acquirer is the Korea SMEs and Startups Agency, the Korea Land and Housing Corporation, the Korea Water Resources Corporation, a bank established under Article 8 of the Banking Act, the Korea Credit Guarantee Fund, the Korea Technology Finance Corporation, the Korea Asset Management Corporation, the National Agricultural Cooperative Federation, or a local government-invested public corporation set up under the Local Public Enterprises Act, the grace period may be further extended within another year.

A tenant company that wishes to sell its factory after construction should submit to the management agency documents prescribed by the Ordinance of the Minister of Trade, Industry, and Energy under Article 39(3) of the Industrial Cluster Development and Factory Establishment Act. ◎ If a company intends to sell the industrial land acquired under Article 39(2) of the Industrial Cluster Development and Factory Establishment Act or under Article 50 of Enforcement Decree of the same Act within five years from reporting the completion of the factory construction, the company should declare the ownership transfer to the management agency. ◎ In this case, the industrial complex's transfer price is the acquisition price multiplied by the producer price index from the date of acquisition to the transfer date plus the industrial complex's maintenance costs. The transfer value of the factory may be based on the market value appraisal.

The Seoul Metropolitan Area Readjustment Planning Act regulates the total number of factories established in the Seoul Metropolitan area, while the attached Tables of the Enforcement Decree of the Industrial Cluster Development and Factory Establishment Act define rules on the establishment, expansion, or relocation of factories in three zones: overconcentration control zone, growth management zone, and nature preservation zone. ※Note: Restrictions on factory locations in the Seoul Metropolitan Area ◎ The Seoul Metropolitan Area refers to Seoul Special Metropolitan City, Incheon Metropolitan City, and Gyeonggi-do (Article 2 of the Seoul Metropolitan Area Readjustment and Planning Act). ◎ For the appropriate dispersion of population and industries within the Seoul Metropolitan area, the Seoul Metropolitan area shall be divided into overconcentration control zone, growth management zone, and nature preservation zone (Article 6 of the Seoul Metropolitan Area Readjustment and Planning Act). ※Relaxation of the restrictions: Articles 26, 27, 27-2, 27-3, and attached Tables 1, 2, 3 of the Enforcement Decree of the Industrial Cluster Development and Factory Establishment Act

In the case of factory establishment approval under Article 13 of the Industrial Cluster Development and Factory Establishment Act, the construction permit is deemed to be obtained through the legal fiction of authorization or permission. (The legal fiction of authorization or permission is the system that collectively handles separate authorization and permit processes under different laws to improve administrative work efficiency and services for the public.) By doing so, the company can apply for factory establishment permit and construction permit for factory building concurrently, hence shortening the factory's construction period. ◎ According to Article 17(1) of the Foreign Investment Promotion Act, associated licensing and permit requests for factory establishment approval shall be deemed to have been granted through the legal fiction of authorization or permission, which effectively shortens the time taken for the administrative work.

A company does not need to have ownership over the land when applying for factory establishment approval. Only the right to use the land is necessary. Once it is confirmed a factory can be built on the site after examining the requirements for moving into the site, the company can apply for factory establishment approval after obtaining the land owner's permission to use it even before the land ownership is transferred.

You can find such information on the Korea Industrial Complex Corporation website. ◎ For information on FIZs, log on to the website and go to: Major Project ▶ Foreign Investment Zone ▶ Designation and Management Organization. For information on the current state of industrial complexes, go to: Major Project ▶ Research and Study of Industrial Location ▶ Industrial Complex Statistics & Periodicals.

If the total area of all the floors of buildings housing manufacturing equipment or machine plus the horizontal projected area of outdoor manufacturing structure is smaller than 500m² , factory establishment approval is unnecessary. However, even if the size is smaller than 500m² , the company may apply for factory establishment approval if it wishes to process all the factory related permits through the legal fiction of authorization or permission. – If a factory that is registered with a factory area less than 500m² is expanded and as a result the factory construction area increases to 500m² or larger, the factory should apply for the new establishment of a factory, not for the expansion of the factory. ◎ The following cases do not need a separate factory construction approval as it is regarded such approval has already been given: – Where a manufacturer signed the tenancy contract with the management agency of an industrial complex – Where a company develops an industrial complex upon the approval of implementation of an industrial complex development plan instead of moving into a free trade zone, obtaining approval on its venture business plan, or moving into an industrial complex