In the 19th free economic zone committee meeting held Aug. 17, presided over by the Minister of Finance and Economy (Mr. Kwon O-kyu), Korean government decided to extend a tax exemption period on some large-scale foreign-invested companies in the country's free economic zones, a move aimed at attracting more foreign investment. (The foregoing committee presently consists of 16 ministers from various ministries within the government and 8 members from private sector.)
Currently, foreign-invested enterprises within the free economic zones are exempted from corporate income tax and income tax for a period of 5 years (100% for 3 years followed by 50% for the last 2 years). And import tariff is exempted 100% for 3 years with regard to importing capital goods.
The above tax-exemption is presently applied to the foreign investment of at least USD 10 million in manufacturing and tourism business and also the foreign investment of at least USD 5 million in logistics and medical fields.
If the tax benefit increase is effected (expected in late this year), the tax exemption period will be increased from 5 years to 7 years (100% for 5 years and 50% for 2 years), provided that such benefit will be applied to the manufacturing business of USD 30 million or more, tourism business of USD 20 million or more and logistics business of USD 10 million or more.
In addition, value added taxes will be exempted in regard to import of capital goods for 3 years.
The government also plans to add research and development businesses as beneficiaries of the tax exemption and reduction to attract more research centers. The government also indicated that it could offer more tax incentives to world-class multinational corporations if such incentives would be deemed necessary to attract foreign companies in strategically important areas (e.g., bio- and IT-related).
In addition, the government plans to select two to three more regions as new free economic zones within this year. Currently, Incheon, Pusan, Jinhae, and Kwangyang-man areas are designated as the free economic zones.