Invest KOREA

A reduction in the foreign investment amount by more than 30 percent is a significant change, not a minor one. In this regard, the foreign-invested company and the local government should hold a preliminary meeting with the Ministry of Trade, Industry and Energy to revise the project plan and submit the amended project plan to the Ministry of Trade, Industry and Energy for the foreign investment committee’s deliberation. The mayor/provincial governor should subsequently put up a notice of change in FIZ designation. The foreign-invested company should attach the notice of change and report a change in tax reduction or exemption and then attach the notice of change and report change of tax reduction or exemption to the Minister of Economy and Finance.

It is possible if an FIZ tenant company with a foreign investment ratio of 30 percent or higher requests that its contractor without any foreign investment be permitted to use a part of the tenant company's factory facilities in order to shorten the process and cut costs, and obtains the agreement of the Minister of Trade, Industry and Energy. At the request of the tenant company, the FIZ management agency may sign a contract with the tenant company's contractor permitted to move in. The contract should be renewed every five years, and its period should be within the remaining period of the contract with the tenant company. The contractor is allowed to occupy up to 30 percent of the total factory area of the tenant company.

Yes, but only when recognition of the foreign investment committee it is obtained. Article 23(3) of the Guidelines for Operation of Foreign Investment Zones defines the case of installing new factory facilities and the case of installing new facilities as follows: ◎ Where factory facilities (referring to a place of business in the case of a business other than manufacturing business categorized in the Korean Standard Industrial Classification) are newly installed or where any machinery or installations, equipment are newly installed in an existing building ◎ Where the same corporation installs any factory facilities, or any machinery, installations or equipment, which are recorded on a separate accounting book from that of the existing factory facilities ◎ Where business activities are conducted after obtaining an approval to use a building under the Building Act after acquiring a building the construction of which is incomplete (However, the Foreign Investment Committee may choose not to acknowledge it depending on the stage of progress of the construction work.)

It is possible. In the case of a manufacturing business, a foreigninvested company has to invest a minimum of USD 30 million to be designated as an individual FIZ. However, provided certain requirements are met, two or more foreign-invested companies can combine their invested amounts to meet the requirements for an individual-type FIZ designation. ◎ Article 18(2) of the Foreign Investment Promotion Act stipulates the designation of an individual-type FIZ by two ore more foreign investors. Article 25(5) of the Enforcement Decree of the same Act defines specific requirements as follows: – The total amount invested by two or more foreign investors shall be no less than the amount of foreign investment for the business category in the individual-type FIZ. – The business operated shall be a business subject to designation as a an individual-type FIZ. – The facilities shall be placed adjacent to each other.

There are restrictions, but they are limited to restriction of permitted business categories, which are also applied in general industrial complexes. ◎ The following business categories are eligible for occupancy in a complex-type FIZ. Business categories allowed to move into each FIZ are determined by the basic management plan for each complextype FIZ, under Article 10 of the Guidelines for Operation of Foreign Investment Zones. – Businesses involving technologies for new growth engine industries prescribed under Article 121-2(1)1 of the Restriction of Special Taxation Act – Businesses applying or manufacturing advanced technologies or advanced products defined under Article 5 of the Industrial Development Act – Research institutes affiliated with enterprises under subparagraph 3(c) of Article 2 of the Special Act on Support of Scientists and Engineers for Strengthening National Science and Technology Competitiveness and research and development businesses under subparagraph 4(a) of Article 2 of the same Act – Businesses prescribed by Articles 25(1)3(a) and 25(1)3(b) of the Enforcement Decree of the Foreign Investment Promotion Act – Other business categories that a management agency determines, taking account of the industrial characteristics of the relevant region ◎ Before signing the tenancy contract, a company shall review the basic management plan of the FIZ that it wishes to move into and check which business categories are permitted.

An FIZ tenant company that is provided a leased site may apply for cash grant. However, calculation of the cash grant ceiling shall be based on the Operation Guidelines for the Cash Grant System, and the amount of reduced or exempted rent that the FIZ tenant company has received until the cash grant contract is signed shall be included in the cash grant ceiling, resulting in a reduced cash grant amount. ※ Related regulations: Article 10 of the Operation Guidelines for the Cash Grant System

No tax reduction or exemption benefits are provided for service-type FIZ tenant companies under the Restriction of Special Taxation Act. ◎ The Restriction of Special Taxation Act defines individual-type FIZ and complex-type FIZ tenant companies as eligible for tax reduction or exemption under Article 121-2(1)2 and Article 121-2(1)2-5. Service-type FIZ tenant companies are not included.

The tenant company of a service-type FIZ should implement the project plan (in terms of the foreign investment amount, building construction area, and minimum number of hires) within three years from the date of signing the tenancy agreement. However, for complex-type and individual-type FIZs, tenant companies should implement the project plan within five years.

Long-term loans can be repaid to maturity under the Foreign Investment Promotion Act. If such repayment leads the tenant company to fail to meet the tenancy requirements per project plan, it can be a cause for the tenancy agreement's termination, and the market rent (five percent of the land acquisition price) will be applied.

The tenant company of an FIZ should complete its investment (implementation period of the project plan) within five years from signing the tenancy agreement. The investment’s fulfillment is determined based on the balance of foreign investment and the construction area after the five years.