Writer 관리자 Date 2011-07-27
 Title ALLOWANCES
 Content 5 ALLOWANCES
5.1 Incentives on Foreign Investment in Korea

5.1.1 Tax Reduction & Exemption for Foreign Investment Companies or Corporations
The Korean government supports foreign-invested companies operating in Foreign-
Investment Zones with tax reductions or exemptions and privileges such as construction costs and basic facility support and exemption of the traffic generation charge. Details of the available tax reductions and exemptions are as follows:
Corporate Tax, Income Tax:
· Until the end of 2004, if a foreign-invested company reports and applies for a
tax reduction/exemption from the Korean government, a 100% exemption for
the initial 7 or 3 years and a 50% exemption for the following 3 or 2 years will be
available.
· From 1 January 2005, if a foreign-invested company reports and applies for a
tax reduction/exemption from the Korean government, a 100% exemption for
the initial 5 or 3 years and a 50% exemption for the following 2 years will be
available Property Tax, Acquisition Tax, Aggregate Land Tax, Registration Tax:
· Until the end of 2004, if a foreign-invested company reports and applies for a
tax reduction/exemption from the Korean government, a 100% exemption for
the initial 5 or 3 years and 50% exemption for the following 3 or 2 years will be
available.
· From 1 January 2005, if a foreign-invested company reports and applies for a
tax reduction/exemption from the Korean government, a 100% exemption for
the initial 5 or 3 years and a 50% exemption for the following 2 years will be
available.
· A local government can increase the reduction/exemption period and
percentage for the period up to 15 years.

5.1.2 Tax Support for Foreign Investors' Dividends
For dividends received by foreign investors from a foreign-invested corporation that is engaged in businesses eligible for corporate or income tax reduction or tax exemption, tax will be reduced or exempted based on the rate of income generated by the foreign-invested corporation from its operation of business that is eligible for corporate or income tax reduction or exemption.

The initial date in reckoning for tax reduction or tax exemption of dividends generated by new investments and capital increase through paying actual money, actual shares and dividends is same as the initial date in reckoning the corporate tax. During the period when the corporate tax is exempted 100%, the dividend income tax will also be exempted 100%.
During the period for 50% reduction on the corporate tax, the dividend income tax will also be reduced 50%.
In the case where a foreign investor takes over the shares of a foreign-invested company from a local individual or a local corporation, it is regarded as acquisition of existing shares. Therefore, it is not eligible for the tax reduction or tax exemption. However, in the case where a foreigner or a foreign corporation takes over the shares of a foreigner or a foreign corporation, the original period and rate for tax reduction and tax exemption remain effective.

5.1.3 Tax Exemption on Advanced Foreign Technology
In case highly advanced technology, which is judged critical for enhancing Korea’s global competitiveness, is introduced pursuant to an agreement, the provider’s (individual, corporation, international organization) corporate tax and income tax will be exempted for five years from the date which the initial compensation for introducing the technology is to be made.

5.1.4 Tax Support for Foreign Technicians
A foreign technician will be exempted from earned income tax if he/she renders his/her service to Koreans in Korea pursuant to the technology introduction agreement stipulated in the FIPA. However, the privilege shall remain effective only for five years to the month of the issuing date of certificate of report for the technology introduction agreement under the condition that the agreement is observed.

5.1.5 Expansion of Scope for Tax Exemption on Foreign Workers' Overseas Allowance
The recipient of this benefit can be choose to receive either a tax exemption on 15% of his/her gross salary or to receive a tax exemption on 30% of his/her gross salary and pay tax on the remainder at a tax rate applicable to Koreans.


Prepared by: Mr. Doo-Yeol Lee
Woori Accounting Corporation
Amended: November 2010
For further information on the services available from the DFK International Member firm in South Korea please contact:
Mr. Doo-Yeol Lee
Woori Accounting Corporation
Tel: +82 2 565 7083
Email: LDY1613@unitel.co.kr
Web: www.ventureplaza.co.kr/english