World Wide Tax News Issue 54 - March 2020

Cash grant budget expansion

The Korean Government recently announced the cancellation of most tax incentive programmes for foreign investors. To compensate for this change, cash grant budgets have been dramatically increased under the Foreign Investment Promotion Act. Cash grants should be provided by the central and local governments of Korea on a matching fund basis.


A foreign investor must own more than a 30% interest in the company in Korea and meet one of the following conditions:

  1. The applicant establishes manufacturing facilities or expands its existing facilities to run the new growth driver industry (173 technologies) in accordance with the Restriction of Special Taxation Act, or a state-of-the-art industry (2,768 technologies) in accordance with the Industrial Development Act. From January 2020, the Government extended the number of eligible technologies to 2,990 in 33 fields, including high-tech products such as:
    • IoT emotional diagnosis
    • Biometric authentication payment.
  2. The applicant establishes manufacturing facilities or expands its existing facilities to produce parts and materials stipulated under the Act on Special Measures for the Promotion of Specialised Enterprises for Materials and Components.
  3. The applicant creates new jobs in excess of the required number - for example, 300 for manufacturing, 200 for retail and 100 for waste treatment, etc.
  4. The applicant newly commences or expands R&D activities for a business accompanying a new growth driver industry technology with five or more full-time researchers with a master’s degree in a relevant field or a bachelor’s degree in a relevant field, supplemented with at least three years of research experience.
  5. The applicant produces material, parts and equipment complying with Japanese export restrictions. In this case, the cash grant limit increases up to 40% of the investment.
  6. An investment that makes a significant contribution to the domestic economy relative to the amount of investment meets one of the following conditions, and is recognised by the Foreign Investment Committee as an investment that needs support with regard to the qualifications required for foreign investors, etc:
    • Establishment of a regional headquarters, or
    • The applicant runs the business stipulated in The Special Act on Balanced National Development and the relevant industry will contribute to the development of the local economy.

Min Jae Lee
[email protected]

Sung Soo Jin
[email protected]