Free Trade Zones

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Free Trade Zones

Free trade zones are locations designated to attract manufacturing and logistics companies in industrial complexes, airports, ports, distribution complexes, and cargo terminals and create synergic effects by connecting businesses. National and local tax reductions or exemptions are granted depending on the types and sizes of businesses. Tariffs on foreign goods and certain domestic goods imported into the free trade zones are reserved, and a zero-tax rate of value-added tax is applied.

Consequently, companies that intend to export products made with imported foreign raw materials do not have go through complicated refund processes. Long-term leases of land or buildings are available at affordable prices, offering favorable locations to foreign-invested companies that are engaged in manufacturing for the purposes of export, logistics including warehouses, distribution, cargo handling, and packaging, and wholesale for the purpose of export and import transactions. Free trade zones have been established in optimal locations, especially for large-scale foreign-invested companies that concurrently operate manufacturing and logistics businesses.

※ Free trade zones are planned to be integrated into free economic zones in accordance with the revision of the investment attraction support system (July 2018).

Requirements for Occupancy

Manufacturing companies whose primary purpose is exporting (including Korean offshore companies in repatriation)
Wholesale companies whose primary purposes are export and import transactions
Knowledge-based service companies
Foreign-invested companies engaged in manufacturing and knowledge-based services
Logistics companies dealing in cargo handling, transport, storage, and exhibition
Companies assisting occupying companies in finance, customs, and data processing, etc.

Incentives

Incentives : Category,Eligible Business,Incentives
Category	Eligible Business	Incentives
Tax Reductions or Exemptions	Businesses dealing technologies for new growth engine industries: At least USD 2 million Manufacturing: At least USD 10 million Logistics: At least USD 5 million	100% of local taxes (acquisition tax, registration tax) for up to 15 years
Tariff Benefits	No tariffs when importing goods from overseas in order to use and consume inside free trade zones as facility materials, raw materials, building materials, or other business purposes; tariffs exempted or refunded for domestic goods imported into free trade zones and reported
Zero-Tax Rate of Value-Added Tax	Domestic goods imported into free trade zones and reported foreign goods or services supplied or offered among companies located in free trade zones
Rental Fee Reductions or Exemptions	Foreign-invested companies whose foreign investment ratio is at least 30%, or whose largest stakeholder is a foreigner, and that meet the following requirements are exempted from rental fees for 10 years: 100% for business dealing technologies for new growth engine industries whose new investment amount is at least USD 1 million 100% for parts and materials businesses whose new investment amount is at least USD 5 million 75% for manufacturing businesses whose new investment amount is at least USD 5 million

※ Source : Korean Free Economic Zones Homepage (www.fez.go.kr)

Designation of Free Trade Zones

Free trade zones are classified into industrial complex-type, airport-type, and seaport-type zones. There are seven industrial complex-type zones located in Masan, Iksan, Gunsan, Daebul, and other areas, and six airport-type and seaport-type zones including those located in Incheon International Airport, the Port of Pohang, the Port of Pyeongtaek-Dangjin, and the Port of Gwangyang. Logistics complexes and cargo terminals are also eligible for designation.

Industrial Complex-Type Free Trade Zones (As of March 31, 2018)

Industrial Complex-Type Free Trade Zones (As of March 31, 2018) : by region Date of Designation,Area (1,000㎡),Number of Companies,Occupancy Rate(%)
Category	Masan	Gunsan	Daebul	East Coast	Yulchon	Ulsan	Gimje
Date of Designation	’07.1.1.	’00.10.6.	’02.11.21.	’05.12.12.	’02.12.12.	’08.12.8.	’09.1.6.
Area (1,000㎡)	957	1,256	1,157	248	344	819	991
Number of Companies	113	28	34	17	14	35	25
Occupancy Rate (%)	98.1	89.9	96.5	58.7	62.7	96.2	46.3

Airport-TypeㆍSeaport-Type Free Trade Zones (As of March 31, 2018)

Airport-TypeㆍSeaport-Type Free Trade Zones (As of March 31, 2018) : by region Date of Designation,Area (1,000 m2),Number of Companies,입주율 정보 제공
Category	Seaport-Type					Airport-Type
Category	Port of Busan	Port of Pohang	Port of Pyeongtaek-Dangjin	Port of Gwangyang	Port of Incheon	Incheon International Airport
Date of Designation	‘02.1.1.	’08.12.8.	’09.3.30.	‘02.1.1.	‘03.1.1.	‘05.4.6.(1stage) ‘07.12.31.(2stage)
Area (1,000 m2)	9,364	840	1,429	8,880	1,837	3,050
Number of Companies	67	3	15	47	1	664

※ Source : Ministry of Trade, Industry, and Energy website

Free trade zones are special zones that guarantee more freedom in manufacturing, logistics, distribution, and trade. Foreign investors receive various benefits, such as tax exemptions, rental fee reductions, and supportive facilities, in accordance with related laws. Free trade zones act as tariff reserve areas, which means companies will find more advantages for import and export activities in these zones than in any other region.

Overview of Free Trade Zones

※ Source: Study on the Reinforcement of Special Economic Zones for Attracting Foreign Direct Investment, Korea Institute for Industrial Economics and Trade, 2013

Free Trade Zones in Korea

※ Source: Study on the Reinforcement of Special Economic Zones for Attracting Foreign Direct Investment, Korea Institute for Industrial Economics and Trade, 2013