ANNOUNCEMENT 01 Jan 2019

The Republic of Korea updated their tax laws and removed certain tax incentives that affect FDI. 

NUMBER OF INTERVENTIONS

2

  • 1 harmful
  • 0 neutral
  • 1 liberalising

SOURCE

United Nations UNCTAD. Investment Policy Hub. Home. Investment Policy Monitor. Korea, Republic of - Abolishing certain tax incentives for foreign investment. "Abolishing certain tax incentives for foreign investment" of 1 January 2019. Available at:
https://investmentpolicy.unctad.org/investment-policy-monitor/measures/3332/abolishing-certain-tax-incentives-for-foreign-investment

Kim & Chang Law Firm. Home. Insights. Newsletters. "Tax Law Changes for 2019 (Selected Items)" of February 2019. Available at:
https://mediafra.admiralcloud.com/customer_609/44103ad8-bfba-477e-bdc2-b3f29eed8a6c?response-content-disposition=inline%3B%20filename%3D%22Tax_Law_Changes_for_2019__Selected_Items__ENG.pdf.pdf%22&Expires=1618403579&Key-Pair-Id=APKAI2N3YMVS7R4AXMPQ&Signature=Iyki-sXOCkKtw8WbcmFaitqAk0AFemNyva1doPHMWoK~PtNA5BM~fP-1vj5XeWki4mCHG2Akt9JXCLMcdwjNVC9S9GCEG~9op4W9XQG0p6Elwei1H3NdK1AcAaj-1wEExZjmNOeO5n6QZcr24Lzkm1YqH6vm-eCY~4DEotS4sUo4htZiBVuhksbkVYDMB-vDoluprjZwJzPsYBYpoFjpHzdTQfZRPWvSWsVnOqozQuggjcTLk3lF7z7XkNBoy0ffgsywI7k-j7bU-n3XrKZJmY5CGxtVxDnN6VIVPJNp7LYA0D~EONOem06G-asPXrIWaYlRVkuMhj7D0u-Z8lS95A__

The Korean Ministry of Economy and Finance. Press releases. "2016 Decree Revision Focuses on Fostering New Growth Industries" of 28 December 2016. Available at:
https://english.moef.go.kr/pc/selectTbPressCenterDtl.do?boardCd=N0001&seq=4223

Inception date: 01 Jan 2019 | Removal date: open ended

FDI: Financial incentive

On January 1st, 2019, the Republic of Korea amended their tax laws, some of which directly affect foreign direct investment. 

One meaningful change is the complete removal of certain tax incentives related to FDI. Prior to the revision, industries in the new growth sectors could receive corporate and personal income tax exemptions of up to 7 years.

According to the Korean Ministry of Economy and Finance, the specific new growth areas are: "1) future automobile technology, 2) artificial intelligence, 3) next generation SW and information security, 4) contents, 5) next generation electronic information device, 6) next generation broadcasting communication system, 7) bio-health innovation, 8) new energy industry and environment, 9) composite materials, 10) robotics, and 11) air and aerospace technology." Notably, tax exemption applications made on or before December 31st, 2018, will remain eligible for tax exemptions under the new regulation.

Additionally, investments in foreign investment zones, free economic zones, and free trade zones could also receive the aforementioned tax exemptions prior to the 2019 Korean tax law changes.

These revisions are not the first Korean tax law amendments that affect FDI. Please, see related state acts. 

AFFECTED SECTORS

 
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AFFECTED PRODUCTS

 
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Inception date: 01 Jan 2019 | Removal date: open ended

Tax or social insurance relief

On January 1st, 2019, the Republic of Korea revised their tax laws, which remove certain tax relief benefits for firms in the new growth sector. Prior to the implemented changes, firms in these industries could receive corporate and personal income tax exemptions for up to 7 years.

According to the Ministry of Economy and Finance, Korean new growth industries are the following: "1) future automobile technology, 2) artificial intelligence, 3) next generation SW and information security, 4) contents, 5) next generation electronic information device, 6) next generation broadcasting communication system, 7) bio-health innovation, 8) new energy industry and environment, 9) composite materials, 10) robotics, and 11) air and aerospace technology." The change was made to establish impartial taxation standards for domestic and foreign investments.

Tax exemption applications made on or before December 31st, 2018 will remain eligible for tax incentives under the new regulation.  

 
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