Foreign Investment Information (Essentials of Related Acts.)

1. Applicable Acts and subordinate statutes by way of making domestic investment

Foreigners can advance into the domestic market through four types: Establishment of a domestic corporation, individual entrepreneur, domestic branch of a foreign corporation, and liaison office of a foreign corporation. They shall satisfy certain conditions to be recognized as foreign investment as stipulated by the Foreign Investment Promotion Act

1.1. Forms of domestic business by foreigners

• Foreigners may advance into the domestic market for business in the four forms: Establishment

of a domestic corporation (including acquiring the existing stocks or stakes of a domestic corporation);

operation as an individual entrepreneur; establishment of a domestic branch of a foreign corporation; and

establishment of a liaison office of a foreign corporation. The Foreign Investment Promotion Act

shall apply to the first two types and the Foreign Exchange Transactions Act to the latter two.

1.2. Intent of the Foreign Investment Promotion Act and Foreign Exchange Transactions Act

• TheForeign Investment Promotion Act is designed to promote foreign investment by

• The Foreign Exchange Transactions Act is intended to facilitate external transactions and

ensure balance of international payments and stability in the value of the currency by guaranteeing

freedom in foreign exchange transactions and other external transactions and boosting market functions.

1.3 Conditions to be recognized as 'foreign investment' as dictated by the Foreign Investment Promotion Act

• To be recognized as foreign investment under the Foreign Investment Promotion Act, one

1.3.1. Where a foreigner owns stocks or stakes in a Korean corporation or company: The investment amount by the foreigner shall be no less than 100 million won, he shallown no less than 10 percent of the total number of the stocks with voting rights or of the total equity investment, or a contract shall be concluded capable of dispatching or electing executives, to deliver or purchase products, etc. for no less than one year, or for furnishing or introducing technology;

1.3.2. Where a loan with a maturity of no less than five years is extended to a foreigncapital invested company by its overseas holding company;

1.3.3. Where a contribution is made to a non-profit corporation that meets certain conditions.

1.4. Outline of foreign investment procedures through the establishment of domestic corporation or the form of individual entrepreneur If a foreigner wishes to make foreign investment as defined under the Foreign Investment Promotion Act through the establishment of a domestic corporation or the form of individual entrepreneur, he shall 1. make a 'foreign investment report' to the head of the Korea Trade Investment Promotion Agency or of a foreign exchange bank before making foreign investment (Articles 5 to 8 and 8-2 of the Foreign Investment Promotion Act), 2 remit investment money to Korea through a foreign exchange bank, 3 complete registration of corporation establishment with a court registry office (this only applies to corporation establishment) and complete business registration with the competent tax office with jurisdiction over the location of the corresponding place of business (Article 5 of the Value-Added Tax Act), and 4 request registration as a foreign-capital invested company to the institution to which he made the foreign investment report (Article 21 of the Foreign Investment Promotion Act).

2. Business categories where foreign investment is restricted

In Korea, foreign investors and foreign-capital invested companies receive the same treatment as Korean nationals regarding their business unless otherwise stipulated in laws. However, foreign investment is restricted in certain business categories.

A foreigner shall be prohibited from making an investment in any company running concurrently both a category of business in which foreign investment is not permitted and a category of business in which foreign investment is only partially permitted, and where intending to make an investment in any company running at least two categories of business in which foreign investment is only partially permitted, he shall be prohibited from making an investment in the company in excess of the ratio of foreign investment in the category of business in which the ratio of investment permissible to foreigners is the lowest.

2.1. Business categories where foreign investment is not permitted

The business categories not permitted for foreign investment are those of a public nature where it is inappropriate to apply the Foreign Investment Promotion Act. Their examples are indicated below and further details are defined in attached Table 1 of the Regulations on Foreign Investment and Technology Introduction (Ministry of Knowledge Economy Notice No. 2010-63):

2.1. Postal service, central banking, individual mutual aid organizations, pension funds, securities and futures brokerage(business), other financial market management, bill clearing, etc.

2.2. Legislative administration, other general public service activities, courts, prosecution services, police protection, other justice, public order and safety activities, compulsory social security activities, etc.

2.3. Pre-primary education, primary schools, junior high schools, general high schools, universities, graduate schools, schools for the handicapped, etc.

2.4. Independent performing artists, independent non-performing artists, business organizations, professional organizations, labor organizations, various religious organizations, political organizations, etc.

2.5. Foreign embassies, other extraterritorial organizations and bodies, etc.

2.2. Business categories restricted for foreign investment

Content of public notices on foreign investment restrictions

• The categories of business in which foreign investment is restricted, and the contents of the

2.2.1. A category of business in which foreign investment is not permitted or is only partially permitted;

2.2.2. The total ratio of investment permissible to foreigners by each category of business in which foreign investment is only partially permitted;

2.2.3. Qualifications of foreign investors and the parties concerned with respect to domestic joint investments; and

2.2.4. Other standards for permission such as the time of permission for foreign investment.

Business categories where foreign investment is restricted

• The business categories where foreign investment is restricted are those where foreign investment is in principle permitted but certain restrictions are applied, and they are defined in attached

• Even when the business category of a company in which a foreigner makes an investment is

subject to restriction, he may still make an investment without restriction if the company's ratio of the

turnover of the restricted category is not more than 1/100 of the total turnover (Article 5.(2) of the

Enforcement Decree of the Foreign Investment Promotion Act).

3. Types and content of industrial sites

In addition to industrial complexes designated and developed to facilitate industrial development, Korea offers foreign investment zones, free trade zones, free economic zones, etc. that satisfies a range of conditions necessary for foreign investment to promote attraction of foreign investment.

3.1. Industrial complexes

Significance of industrial complexes

• Industrial complexes refer to any plot of land to be designated and developed under a

• To ensure continuous industrial development by efficiently providing lots, rationally deploying

industries, and designating industrial complexes, Korea has systematic infrastructure in place necessary for

production activities including factory establishment.

Types of industrial complexes

• National industrial complex; An industrial complex designated to promote the nation's key

• General local industrial complex; An industrial complex designated to promote appropriate

• Up-to-date city industrial complex; An industrial complex designated in a city area to foster upto-date industries such as the knowledge industry, cultural industry, and information and communication

• Agricultural and industrial complex; An industrial complex designated to attract and promote

industries for increasing the income of farmers and fishermen in agricultural and fishing areas (item (d) of

subparagraph 5 of Article 2 of the Industrial Sites and Development Act).

3.2. Industrial sites for foreign investment

Significance of industrial sites for foreign investment

• To facilitate investment by foreign-capital invested companies, the Korean government secures

certain areas within the industrial complexes or separate sites and offers various forms of support. Among

the locations for foreign investment are foreign investment zones, free trade zones, free economic zones,

and free international cities.

Types of industrial sites for foreign investment

• Foreign investment zone

Foreign investment zones refer to specially designated areas where the State government provides various incentives such as reduction and exemption of taxes and rents and mitigates administrative regulation for the purpose of inducing investment of a certain or larger scale that contributes to the Korean economy through the advancement of industry, technology transfer, job creation, etc. There are 4 types of foreign investment zones of complex-type and individual-type, Research and developmenttype, Service-type :

Complex-type foreign investment zones refer to those designated exclusively for the purpose of renting or transferring land therein to foreign-capital invested companies from among national industrial complexes (Article 6 of the Industrial Sites and Development Act) and general local industrial complexes (Article 7 of the Industrial Sites and Development Act) by city (Si) mayors and province (Do) governors after going through deliberation by the Foreign Investment Committee (Article 18.(1).1 of the Foreign Investment Promotion Act).

Individual-type foreign investment zones refer to those in which any foreign investor hopes to make his investment and which are designated by Si mayors and Do governors after going through deliberation by the Foreign Investment Committee (Article 18.(1).2 of the Foreign Investment Promotion Act).

Research and development-type foreign investment zones refer to those that are designated exclusively for renting or transferring land therein to foreign-capital invested companies that conduct research and development, from among special research and development zones, technoparks, knowledge industry centers, and high-tech medical complexes (Article 18.(1).3 of the Foreign Investment Promotion Act & Article 25.(2) of the Enforcement Decree of the same Act).

Service-type foreign investment zones refer to those that are designated for renting or transferring land therein to foreign-capital invested companies engaged in the businesses of finance, insurance, knowledge service, industrial support service, culture, and tourism after going through consultation with the heads of appropriate central administrative agencies (Article 18.(1).4 of the Foreign Investment Promotion Act & Article 25.(3) of the Enforcement Decree of the same Act).

• Free trade zone; Free trade zones are areas in which free activities of manufacture, logistics,

• Currently, Gunsan, Iksan, Masan, Incheon Airport, etc. are designated as free trade zones. Details on the free trade zones can be found by navigating the 'foreign investment support system,' 'location support,' and 'free trade zone' sections under the ?Foreign Investors ?tab on this Web site (http://oneclick.law.go.kr).
• Free economic zone; Free economic zones are areas that are created to provide improved

• Currently, Busan-Jinhae, Incheon, and Gwangyang are designated as free economic zones. Details on the free economic zones can be found by navigating the 'foreign investment support system,' 'location

• Free international city (or Jeju investment promotion zone); Free international cities refer to

areas applied with deregulation and international standards so that international movement of people,

products, and capital and convenience of corporate activities are guaranteed to the maximum extent

possible. The Special Act on the Establishment of the Jeju Special Self-Governing Province & the

Development of Free International Cities specifies various support measures and special cases to develop

the Jeju Special Self-Governing Province into a free international city.

4. Regulation on factory sites

The Industrial Cluster Development and Factory Establishment Act, Seoul Metropolitan Area Readjustment Planning Act?, and other Acts restrict the location size and method of factories and other facilities in certain cases to ensure balanced regional development.

4.1. Classification of factory sites

• The Industrial Cluster Development and Factory Establishment Act and Seoul

• For efficient use, development, and conservation of the national land, the National Land

4.1.1. The term 'specific-use area' are areas determined by urban management planning so as not to be mutually overlapped, in order to utilize the land economically and efficiently and to ensure the improvement of the public’s welfare, by placing limits on the utilization of land and on the usage, coverage ratio, floor area ratio, and height, etc. of buildings (subparagraph 15 of Article 5 and Article 6 of National Land Planning and Utilization Act).

(a) Urban areas: Areas requiring systematic development, consolidation, management, preservation, etc. as the population and industries are concentrated or such concentration is expected therein;

(b) Control areas: Areas to be systematically controlled as the urban areas are in order to accommodate the population and industries of urban areas, or those requiring control as the agricultural or natural environment control areas in order to promote the agricultural and forest industry and to preserve the natural environment or forests;

(c) Agricultural and forest areas; Areas which are required for the promotion of the agricultural and forest industry and preservation of forests, which are agricultural development areas under the Farmland Act or conserved mountainous districts under the Management of Mountainous Districts Act, and which do not belong to urban areas; and

(d) Natural environment control areas; Areas required for the preservation of the natural environment, water resources, coastal areas, ecosystem, water supply resources and cultural properties, and protection and augmentation of fishery resources, etc.

4.1.2. The term 'specific-use district' means districts determined by urban management planning in order to increase the performance of specific-use areas, and to secure the beautiful sight, scenery, and safety, etc. by placing tightened or mitigated limits for specific-use areas in terms of the utilization of land and the usage, coverage ratio, floor area ratio, height, etc. of buildings (subparagraph 16 of Article 5 of the National Land Planning and Utilization Act).

4.1.3. The term 'specific-use zone' means zones determined by urban management planning in order to prevent disorderly expansion of urban districts, to ensure planned and phased utilization of land, and to comprehensively adjust and manage land utilization, etc. by separately determining tightened or mitigated limits for specific-use areas and specific-use districts in terms of the utilization of land and the usage, coverage ratio, floor area ratio, height, etc. of buildings (subparagraph 17 of Article 5 of the National Land Planning and Utilization Act).

• Areas, districts, zones or divisions are designated for the use of the land according to the

Building Act, Industrial Sites and Development Act, Housing Site Development Promotion Act, Farmland Act, ฤAct on Formation and Management of Forests, Grassland Act, Dairy Promotion Act, Clean Air Conservation Act, Act on Water Quality and Conservation of Aquatic Ecosystems, Water Supply and Waterworks Installation Act, Natural Parks Act, Protection of Cultural Properties Act, Electric Source Development Promotion Act, and other Acts and subordinate statutes related to the environment and land use regarding factory establishment.

4.2. Regulations on factory sites

Restrictions on factory sites in overpopulation control area, growth administration area, and environmental control area

• Factories (including Knowledge industry center) with a floor space of not less than five hundred

• Nevertheless, activities stipulated under Articles 26, 27, 27-2, and 27-3 of the Enforcement

• In order to prevent excessive concentration, in the Seoul Metropolitan Area, of factories, schools, and such other population-concentrating facilities, a ceiling on their permissible installations and extensions shall be set and such installation or extension which exceeds the ceiling may be restricted (Article 18.(1) of the Seoul Metropolitan Area Readjustment Planning Act).
• Operation of the regulation system by ceiling, ceiling on factory construction, etc. are defined under the Operation Guidelines of the Factory Ceiling System(Ministry of Construction & Transportation Guidelines issued on September 29, 2006) and Ceiling on Factory Construction (Ministry of Land, Transport and Maritime Affairs Notice No. 2009-93).

Standards for factory sites

• A foreign-investor or a foreign-capital invested company that intends to establish a factory shall satisfy the corresponding standards of the Factory Site Standards Notice (Ministry of Knowledge

4.2.1. Matters related to the business type, size and scope of a factory which are allowed or restricted according to different specific-use areas under the National Land Planning and Utilization Act, Building Act, Industrial Sites and Development Act, Housing Site Development Promotion Act, Farmland Act, Act on Formation and Management of Forests, Grassland Act, Dairy Promotion Act, Clean Air Conservation Act, Act on Water Quality and Conservation of Aquatic Ecosystems, Water Supply and Waterworks Installation Act, Natural Parks Act, Protection of Cultural Properties Act, Electric Source Development Promotion Act, and other Acts and subordinate statutes related to the environment and land use regarding factory establishment;

4.2.2. Ratio of the total of the following areas tothe area of a factory site by manufacturing business type (referring to the horizontal projection area of the site where the factory is built) and objects to which the ratio is to be applied:

(a) Area of each floor of the building on the factory site;

(b) Horizontal project area of machinery, equipment or other structures installed on the factory site, but outside the building.

4.2.3. Matters related to the prevention of environmental pollution by manufacturing business type; and

4.2.4. Matters related to restrictions on factory sites which may cause environmental pollution.

5. Reference information by each foreign investment procedure

A foreigner who wishes to make investment shall make a report or gain permission as dictated by the Foreign Investment Promotion Act. A foreigner who wishes to remit investment money to Korea, shall do so according to the Foreign Exchange Transactions Act. Once foreign investment is made, the foreign investor or foreign-capital invested company shall request registration as foreign-capital invested company.

5.1. Report and permission of foreign investment

Advance report

• A foreigner who wishes to make foreign investment shall report to the head of the Korea Trade

• Where a foreign investor or a foreign-capital invested company intends to transfer, lease, or use for purposes other than those reported capital goods which he or it introduced into this nation with their taxes exempted, he or it shall report such intention in advance (Article 22.(1) of the Foreign Investment Promotion Act).

After-the-fact report

• Where a foreigner makes foreign investment by one of the following means, he shall report to

1. Where a foreign investor has acquired stocks or stakes issued upon the capitalization of the surplus reserve and reevaluation reserve of the foreign-capital invested company in which he has been involved, or of reserve funds as prescribed by other Acts and subordinate statutes;

2. Where a foreign investor acquires the stocks or stakes of a newly incorporated corporation or a surviving corporation after a merger, the comprehensive exchange of stock, the transfer of stock, and a company division with the stock he possesses at the time when the relevant foreign-invested company is merged, the stock is comprehensively swapped, the stock is transferred or the company is divided;

3. Where a foreigner has acquired stocks or stakes of a foreign-capital invested company registered by means of purchase, inheritance, testamentary gift, or gift from a foreign investor;

4. Where a foreign investor has acquired stocks or stakes by means of investing the proceeds from the stocks or stakes which were acquired under the Foreign Investment Promotion Act; and

5. Where a foreigner has acquired stocks or stakes using convertible bonds, exchangeable bonds, stock depositary receipts, and such other similar instruments as may be converted into, available for the acceptance of, or exchanged for stocks or stakes.

• A foreign investor who intends to transfer to another person shares of stock or stakes acquired

1. Where shares of stock, etc. are to be transferred: Date on which the conveyance contract is concluded; and

2. Where the capital is to be decreased: Date on which the period of peremptory notice to the creditors expires (Article 439 of the Commercial Act) or on which commencement of the rehabilitation process comes to an end (Article 51 of the Debtor Rehabilitation and Bankruptcy Act).

Permission

• Where a foreigner intends to make investment by acquiring the existing stocks or stakes of a

defense industry company, he shall gain permission from the Minister of Knowledge Economy in advance

(Article 6.(3) of the Foreign Investment Promotion Act and Article 7.(2) of the Enforcement Decree

of the same Act).

Alteration report and permission

• Where a foreigner intends to alter any of the followings after making a report of foreign

1. The trade name or title and nationality of the foreign investor concerned;

2. The form and objective of investment (referring only to cases where stocks or stakes are newly acquired) and the address of the foreign-capital invested company;

3. The amount, ratio, and method of foreign investment (referring only to cases where stocks or stakes are acquired);

4. The type of business desired to be operated (referring only to cases where stocks or stakes are acquired);

5. The transferor of stocks or stakes (referring only to cases where stocks or stakes are acquired);

6. The offerer, amount, and conditions of a loan (referring only to foreign investment through a loan); and

7. The amount and conditions of a contribution (referring only to foreign investment through a contribution).

5.2. Remittance of investment funds

When remitting capital stock through bank

• Where the amount is no less than US$ 1,000, documents that prove the reason for the remittance,

the amount, etc. shall be submitted to the head of a foreign exchange bank [Article 4-2.(1) of the

Foreign Exchange Transactions Regulations (Ministry of Strategy and Finance Notice No. 2010-14)].

When bringing capital stock into Korea by carrying it personally

• When the amount is more than US$ 10,000, it shall be reported to the head of the competent

customhouse to receive a foreign exchange declaration certificate [Article 6-2.(2)&(4) of the Foreign

Exchange Transactions Regulations (Ministry of Strategy and Finance Notice No. 2010-14)].

5.3. Registration and alteration registration of foreign-capital invested company

Causes for registration

• A foreign investor or a foreign-capital invested company, where such investor or company falls

1. Where such investor or company has completed the payment of the object of investment;

2. Where such investor or company has acquired the existing stocks or stakes already issued by a Korean corporation or a company run by a national of the Republic of Korea (referring to having paid for the existing stocks);

3. Where such investor or company has acquired stocks or stakes using convertible bonds, exchangeable bonds, stock depositary receipts, and such other similar instruments as may be converted into, available for the acceptance of, or exchanged for stocks or stakes; and

4. Where such investor or company has completed making a contribution to a non-profitcorporation.

• Nevertheless, registration may be requested even before the act under 1 or 2 for a foreign

investment falling under item (a) of subparagraph 4 of paragraph 1 of Article 2 of the Foreign

Investment Promotion Act(Article 21.(2) of the Foreign Investment Promotion Act). In the event of

a foreign investment which falls under Article 2.(1).4.(a) of the Foreign Investment Promotion Act,

an application for registration thereof may be made even prior to such acts as provided in subparagraphs 1

and 2 (Article 21.(2) of the Foreign Investment Promotion Act).

Causes for alteration registration

• Where any of the following reasons for alteration registration occurs to a registered foreigncapital invested company, such company shall file a request to register the alteration to the president of the Korea Trade Investment Promotion Agency or the head of a foreign exchange bank within thirty days from the day on which a cause for the alteration registration has occurred (Article 27.(2) of the Enforcement Decree of the Foreign Investment Promotion Act):

1. Where foreign investment was made and acquisition of stocks or stakes has been reported according to any of the following methods:

(a) Where a foreign investor has acquired stocks or stakes issued upon the capitalization of the surplus reserve and reevaluation reserve of the foreign-capital invested company in which such investor has been involved, or of reserve funds as prescribed by other Acts and subordinate statutes;

(b) Where a foreign investor acquires the stocks or stakes of a newly incorporated corporation or a surviving corporation after a merger, the comprehensive exchange of stock, the transfer of stock, and a company division with the stock such investor possesses at the time when the relevant foreigninvested company is merged, the stock is comprehensively swapped, the stock is transferred, or the company is divided;

(c) Where a foreigner has acquired stocks of a foreign-capital invested company registered by means of purchase, inheritance, testamentary gift, or gift from a foreign investor;

(d) Where a foreign investor has acquired stocks or stakes by means of investing the proceeds from the stocks or stakes which were acquired under the Foreign Investment Promotion Act; and

(e) Where a foreigner has acquired stocks or stakes using convertible bonds, exchangeable bonds, stock depositary receipts, and such other similar instruments as may be converted into, available for the acceptance of, or exchanged for stocks or stakes.

2. Where a foreign investor made the report to transfer to another person stocks or stakes such investor owns or decrease them through capital decrease and has completed the transfer or decrease of the stocks or stakes;

3. Where the trade name or title of the foreign-capital invested company has been changed; and

4. Where an alteration has been made with respect to any of the following subject matters:

(a) The trade name or title and nationality of the foreign investor concerned;

(b) The form and objective of investment (referring only to cases where stocks or stakes are newly acquired) and the address of the foreign-capital invested company;

(c) The amount, ratio, and method of foreign investment (referring only to cases where stocks, etc. are acquired);

(d) The type of business desired to be operated (referring only to cases where stocks, etc. are acquired);

(e) The transferor of stocks or stakes (referring only to cases where stocks, etc. are acquired);

(f) The offerer, amount, and conditions of a loan (referring only to foreign investment through a loan); and

(g) The amount and conditions of a contribution (referring only to foreign investment through a contribution)

6. Reference information for land acquisition, factory establishment, and borrowing of funds

Foreigners who intend to acquire land in the territory of the Republic of Korea shall make a report and gain permission as dictated by the Foreigner's Land Acquisition Act.

To newly build or expand a factory or to alter the business type in Korea, necessary procedures shall be taken such as approval for factory establishment, permission for factory construction, and report of completion of factory establishment as dictated by the Industrial Cluster Development and Factory Establishment Act.

A foreign investor or foreign-capital invested company that intends to borrow funds in foreign currency or Korean won from a non-resident shall report to the head of a foreign exchange bank designated for transactions or report to the Minister of Strategy and Finance via the head of such bank as dictated by the Foreign Exchange Transactions Act.

6.1. Land acquisition

Report

• When a foreigner intends to acquire land within the territory of the Republic of Korea, he/she

• Cases where a foreigner shall report land acquisition are divided into two cases where he

1. Land acquisition by a contract: 60 days of the date of concluding the contract;

2. Land acquisition by reasons other than a contract: Within six months of the date of land acquisition (inheritance: the date of the inheritee’s death, auction: the date of full payment of the auction price, repurchase: the date of the repurchase contract or when the repurchase amount is deposited, irrevocable judgment: the date when the judgment is delivered)

Permission

• When acquiring land located in the following districts or areas, a foreigner shall obtain

1. Military base and military installation protection areas (subparagraph 2 of Article 2 of the Protection of Military Bases and Installations Act);

2. Islands which are necessary for military purposes and with notice given by the Minister of Land, Transport and Maritime Affairs through consultation with the head of relevant central administrative agencies including the Minister of National Defense;

3. Designated cultural properties (Article 2.(2) of the Protection of Cultural Properties Act) and protectors or reservations therefor;

4. Ecological and scenery conservation areas (subparagraph 12 of Article 2 of the Natural Environment Conservation Act); and

5. Special protection areas for wild animals and plants (Article 27 of the Protection of Wild Fauna and Flora Act).

6.2. Factory establishment

Approval for factory establishment

• A person, who intends to newly build or expand or to alter the business type of a factory on an

• A person, who intends to be granted the legal fiction of a permission, report, licence, approval, cancellation or disuse under Article 13-2 of the Industrial Cluster Development and Factory

• An application for approval for factory establishment, etc. shall be filed prior to an application for permission for construction or a report of construction for the construction of a factory (main sentence of Article 19.(5) of the Enforcement Decree of the Industrial Cluster Development and Factory Establishment Act).
• This shall not apply where permission for construction or a report of construction is deemed to be obtained with approval for factory establishment by legal fiction (Proviso of Article 19.(5) of the

Enforcement Decree of the Industrial Cluster Development and Factory Establishment Act).

Permission to construct factory, etc.

• A person who receives permission for the establishment, etc. of a factory (including a case

where permission is deemed to have been obtained by legal fiction) shall receive construction permission

according to Article 11 of the Building Act or file a construction report according to Article 14 of the

Building Act.

Report on the completion of establishment, etc. of factory

• If a person who obtains approval for the establishment, etc. of a factory (including a person who is deemed to do so by legal fiction) completes the construction of the factory, he shall report such

completion to the head of Si/Gun/Gu or a management organization thereof within two months of the date

when the final use of the building is approved and installation of machinery and equipment is completed

(Article 15.(1) of the Industrial Cluster Development and Factory Establishment Act, Article 20 of

the Enforcement Decree of the same Act, and Article 9.(1) of the Enforcement Rule of the same Act).

6.3. Borrowing of funds

Borrowing of foreign currency fund

• A foreign-capital invested company, which intends to borrow a fund in foreign currency from a

• An individual or non-profit corporation that intends to borrow a fund in foreign currency from a

non-resident shall report such intention to the Minister of Strategy and Finance through the foreign

exchange bank designated for transaction [Article 7-14.(4) of the Foreign Exchange Transactions

Regulations (Ministry of Strategy and Finance Notice No. 2010-14)].

Borrowing of short-term foreign currency fund

• Where a resident, that is a company engaged in the general manufacturing business as defined

1. High-tech company: Within the foreign-capital invested amount (foreign-currency investment amount indicated on the foreign-capital invested company registration certificate and unregistered payment amount for stock purchase). Nevertheless, it is within 75% of the foreign-capital invested amount for high-tech companies where the foreign-capital invested ratio is less than one third;

2. General manufacturing company: 50/100 of the foreign-capital invested amount.

Borrowing of Korean-won fund

• A resident that intends to borrow a fund in Korean won (domestic means of payment deposited

in a non-resident free won account) from a non-resident shall report such intention to the Minister of

Strategy and Finance through the foreign exchange bank designated for transaction [Article 7-15 of the

Foreign Exchange Transactions Regulations (Ministry of Strategy and Finance Notice No. 2010-14)].

7. Request subjects and time limits for various support

A foreign investor or foreign-capital invested company that intends to receive a tax reduction or exemption according to the ?Restriction of Special Taxation Act or cash support or rent reduction for lease of State and public properties according to the Foreign Investment Promotion Act, he or it shall make a request to the head of the concerned agency.

7.1. Request for tax support

Request for reduction and exemption of corporate tax, etc.

• A foreign investor or foreign-capital invested company that intends to receive the tax reduction

• An application for modification of the business contents for tax reduction or exemption shall be

made not later than the date on which two years elapse from the date on which the causes for the relevant

modification occurred (proviso of Article 121-2.(6) of the Restriction of Special Taxation Act).

Request for reduction and exemption of customs duties, etc.

• A foreign investor or foreign-capital invested company that intends to be exempted from

customs duties, special consumption tax, and/or value-added tax shall file an exemption application with

the head of a customhouse (Article 121-3 of the Restriction of Special Taxation Act and Article 51-5

of the Enforcement Rule of the same Act).

7.2. Request for cash support

• To receive support in cash from the Korean government, a cash support application (Form 11-2

of the Enforcement Rule of the Foreign Investment Promotion Act) shall first be filled out and

submitted to the Minister of Knowledge Economy (Article 20-3.(1) of the Enforcement Decree of the

Foreign Investment Promotion Act and Article 9-3 of the Enforcement Rule of the same Act).

7.3. Request for reduction and exemption of rents for lease of State and public properties

• A foreign-capital invested company that leases land, a factory, or other properties owned by the

State government, a local government, government-invested institution or local public enterprise and

intends to receive a reduction in or be exempted from the rents, such company shall file a reduction and

exemption application with the head of the administrative agencies in charge of managing State properties

or of the local government concerned (Article 19.(6) of the Enforcement Decree of the Foreign

Investment Promotion Act and Article 9 of the Enforcement Rule of the same Act).

8. Agencies to handle civil petitions and grievance

In order to ensure convenience for foreign investment, agencies have been established and are in operation to handle civil petitions and grievance related to foreign investment according to the Foreign Investment Promotion Act, Special Act on Designation and Management of Free Economic Zones, and other Acts.

8.1. Foreign investment-related agencies under the Foreign Investment Promotion Act

Foreign Investment Support Center (Invest Korea)

• The Foreign Investment Support Center (Invest Korea) is in place at the Korea Trade and

Investment Promotion Agency in order to provide or conduct consultations, guidance, advertisement,

research, and handling of civil petitions either directly or by proxy concerning foreign investment, the

nurturing of business start-ups, and comprehensive support measures for foreign investors and foreigncapital

invested companies (Article 15.(1) of the Foreign Investment Promotion Act).

Foreign investment ombudsman, etc.

• To handle grievances of foreign investors and foreign-capital invested companies, a foreign

• The grievance settlement organ shall be in place at the Korea Trade and Investment Promotion

Agency in order to support the work of the foreign investment ombudsman (Article 15-2.(7) of the

Foreign Investment Promotion Act).

Foreign investment promotion office

• Every central administrative agency, special metropolitan city, metropolitan city, Do and

Si/Gun/Gu may each designate an office in charge of foreign investment to work as a foreign investment

promotion office, or install a foreign investment promotion office, for rendering efficient support for

foreign investment by properly supervising the handling of civil petitions concerning permissions,

authorizations, licensing, approvals, designations, revocations, reports, recommendations, and consultation

related to foreign investment; assisting prompt settling of grievances for foreign investors and foreigncapital invested companies; and establishing systems for cooperation with appropriate agencies(Article 16.(1) of the Foreign Investment Promotion Act).

8.2. Foreign investment support agencies under other Acts than the Foreign Investment Promotion Act

Ombudsman for foreign investment and commercial dispute arbitration office

• An ombudsman shall be established in the administrative body with the assignment of resolving

Center for supporting factory establishment and ombudsman office for factory establishment

• The center for supporting factory establishment and the ombudsman office for factory

establishment are in place at the Korea Industrial Complex Corporation to render consulting services

regarding site selection for factory establishment, help gain access to various funds, provide information

pertaining to tax reduction and exemption, and receive, check and deal with corporate bottlenecks (Article

7-2.(1) and Article 7-3.(1) of the Industrial Cluster Development and Factory Establishment Act).

9. Report when disposing of capital goods, stocks, etc.

Where a foreign investor or a foreign-capital invested company intends to transfer, lease or use capital goods which were introduced into Korea with customs duties, etc. exempted for purposes other than those reported , such investor or company shall report such intention in advance.

A foreign investor, who intends to transfer to another person stocks or stakes acquired through foreign investment or decrease stocks or stakes such investor owns through capital decrease, shall make a report thereof.

9.1. Report for the disposal of capital goods

Subjects and procedures

• A foreign investor or a foreign-capital invested company shall use capital goods, which were

Exception

• Nevertheless, no report is required when disposing of or using capital goods which were

introduced with customs duties, special consumption tax, and value-added tax exempted according to

Article 121-3.(1) of the Restriction of Special Taxation Act and five years have passed from the date

when the import declaration was received according to the Customs Act (Article 29.(1) of the

Enforcement Decree of the Foreign Investment Promotion Act).

9.2. Report for the transfer of stocks or stakes or capital decrease

Subjects and procedures

• A foreign investor who intends to transfer to another person shares of stock or stakes acquired

1. Where shares of stock, etc. are to be transferred: Date on which the conveyance contract is concluded; and

2. Where the capital is to be decreased: Date on which the period of peremptory notice to the creditors expires (Article 439 of the Commercial Act) or on which commencement of the rehabilitation process comes to an end (Article 51 of the Debtor Rehabilitation and Bankruptcy Act).

• Registration cancellation when all the stocks owned are lost due to the transfer of stocks or stakes or capital decrease

Where a foreign investor or a foreign-capital invested company has come not to hold any of the stocks or stakes he previously held because he has transferred all of the stocks or stakes held by himself to a Korean citizen or corporation OR because the foreign-capital invested company concerned has decreased its capital, the registration of the foreign-capital invested company concerned shall be cancelled through an application or in virtue of the appropriate office (Article 28.(1) and Article 30.(2) of the Enforcement Decree of the Foreign Investment Promotion Act).

10. Prohibited acts for foreign-capital invested companies, etc.

• Certain acts by foreign-capital invested companies are prohibited under the Foreign Investment Promotion Act. The registration of foreign-capital invested companies shall be cancelled in certain cases : e.g when a registration has been effected in disguise of the payment of the object of investment.

10.1. Prohibited acts for foreign-capital invested companies

Foreign-capital invested companies shall not engage in any of the following acts (Article 22.(3) & (4) of the Foreign Investment Promotion Act and Article 29.(2) of the Enforcement Decree of the Foreign Investment Promotion Act):

1. Conducting business beyond the allowed limit in a business category in which foreign investment is restricted Exception Allowed when the ratio of foreign investment is less than 10%;

2. Acquiring stocks or stakes beyond the allowed limit of a domestic company engaging in a business category in which foreign investment is restricted ; Exception Acquisition of stocks or stakes is exceptionally allowed under the following cases:

(1) Where a company whose ratio of foreign investment is under 50/100 and whose largest stockholder is not a foreign investor (including persons of special relationship as prescribed in Article 7.(1) of the Foreign Investment Promotion Act) acquires the stocks or stakes of a domestic company;

(2) Where a foreign-capital invested company engaged in the financial or insurance business, all or part of whose business activities consist of acquisition of the stocks or stakes of other companies, (excluding private equity funds under Article 9.(18).7 of the Financial Investment Services and Capital Markets Act) acquires the stocks or stakes of other companies in accordance with the provisions of other Acts and subordinate statutes;

Where not more than 10/100 of the total number of the stocks issued by, or the total equity investment of a domestic company is acquired.

3. Using investment funds for purposes other than those reported or permitted.

10.2 Reasons for registration cancellation, etc. of foreign-capital invested companies

Where a foreign-capital invested company, registered according to the Foreign Investment Promotion Act falls under one of the following cases, the permission thereof may be revoked or the registration thereof may be cancelled (Article 21.(3) of the Foreign Investment Promotion Act and Article 30.(2) of the Enforcement Decree of the same Act).

1. Where a registered foreign-capital invested company has been closed or has not conducted its business activities for two or more consecutive years;

2. Where a registered foreign-capital invested company or a foreign investor who was granted permission to purchase the existing stocks or stakes of a defense industry company has not complied with a correction order by the Minister of Knowledge Economy or has not carried out other necessary measures;

3. Where there are reasons for the dissolution of a foreign-capital invested company;

4. Where a foreign investor or a foreign-capital invested company has applied for the cancellation of registration;

• Where a foreign investor or a foreign-capital invested company falls under 1, 2, 3, or 7, he may apply

5. Where a foreign investor has transferred or lent the registration certificate of a foreign-capital invested company to another person;

6. Where a foreign investor has effected the registration of a foreign-capital invested company in disguise of the payment of the object of investment; and

7. Where a foreign investor has come not to hold any of the stocks or stakes he previously held because such investor has transferred all of the stocks or stakes held by himself to a Korean citizen or corporation OR because the foreign-capital invested company concerned has decreased its capital. for registration cancellation.

11. Additional collection of taxes and redemption of cash support

In cases where a foreign investor or any foreign-capital invested company, for whom or for which tax is reduced or exempted according to the Restriction of Special Taxation Act, fails to meet the reduction and exemption conditions, such foreign investor or foreign-capital invested company shall pay the reduced or exempted tax amount. In case where any foreigner who received cash support falls under certain conditions, the support amount may be redeemed.

11.1. Reasons for additional collection of reduced or exempted tax amount

• In cases where any foreign investor or any foreign-capital invested company, for whom or for

1. Where a foreign-capital invested company is closed or its registration is cancelled;

2. Where the standards for tax reduction or exemption are not satisfied;

3. Where a corrective order is received due to the failure to carry out the reported content, but it is not complied with;

4. Where a foreign investor transfers the stocks or stakes which he owns to a national or a corporation of the Republic of Korea;

5. Where the payment of the object of investment and the introduction of a loan fall short of the standards for the tax reduction or exemption within five years after making a report on foreign investment (three years for the standards for the employment-related tax reduction or exemption);

6. Where the object of investment is used or disposed of for other purposes than the reported ones; and

7. Where the ratio of the stocks or stakes of foreign investors falls short of the ratio of the stocks or stakes at the time of reduction or exemption.

11.2. Reasons for cancellation, revocation, reduction and redemption of cash support

• If a foreigner who receives support in cash according to Article 14-2 of the Foreign Investment Promotion Act commits any of the following acts, the cash support contract may be cancelled or revoked, the cash support amount reduced, or all or part of the paid amount redeemed [Article 18.(1) of the Operation Guidelines for the Cash Support System(Ministry of Knowledge Economy Notice No. 2010-299)].

1. Where the fund was requested based on false facts and through other wrongful methods;

2. Where an obligation prescribed under the cash support contract is not performed; OR

3. When the beneficiary company can no longer carry out its business during the contract period due to its bankruptcy, cessation of business, or other reasons.

12. Reference information for occupancy of industrial sites

Where a foreign-capital invested company moves in a foreign investment zone, free trade zone, free economic zone, etc. which are formed to promote attraction of foreign investment, it shall observe obligations specified by relevant Acts and subordinate statutes to maintain its occupant status.

12.1. Foreign investment zones

• In cases where a foreign-capital invested company or foreign investment zone comes not to

• In cases where a foreign-capital invested company in a complex-type foreign investment zone

1. Where falling under any of the followings (each item of Article 42.(1) of the Industrial Cluster Development and Factory Establishment Act). Nevertheless, the application period of item (a) shall be one year.

(a) Where, after concluding a contract for occupancy, the construction of a factory etc. is not commenced within three years without justifiable causes;

(b) Where it is recognized that the completion of a factory etc. is virtually impossible;

(c) Where, without justifiable causes, the business has not been commenced within one year after the completion of the factory. etc. or the business has been suspended continuously for not less than one year;

(d) Where the occupant company has modified the matters without concluding a contract of modification;

(e) Where industrial sites, factories, etc. are leased or sold in violation of the provisions of Article 38-2 or Article 39.(1) of the Industrial Cluster Development and Factory Establishment Act; and

(f) Where the contract for occupancy is breached.

(g) Where industrial sites or co-owned shares therein are disposed of in violation of Article 39-2.(4) of the Industrial Cluster Development and Factory Establishment Act

2. Where the occupant company has come to lose occupant's qualifications;

3. Where the site is used for a use other than those specified under the occupancy contract OR the building sold, leased, exchanged or otherwise disposed of without a written consent by the administrative agency;

4. Where the business cannot be redundant carried out, as the industrial site, factory, etc. is disposed of or the administrative agency has redeemed the site;

5. Where the occupant company has lost its ownership of the object on the ground through public sale, auction, etc. due to liabilities;

6. Where the occupant company files for the commencement of corporate liquidation procedures or bankruptcy according to the Corporate Liquidation Act;

7. Where the occupant company closes its business or has not continuously conducted any business activities for no less than one year;

8. Where the occupant company fails to perform an obligation specified by the contract or it is deemed there is no prospect for improvement as it has not paid rents for no less than one year;

9. Where the occupant company fails to perform the contract or violates other Acts and subordinate statutes, ordinances, etc.

12.2. Free trade zones

Matters to be observed by occupant companies

• Any person who obtains an occupancy permit to move and engage in business in a free trade

1. Such person is required to conclude a sale and purchase contract or a lease contract covering the land, factory, building, and other facilities in the relevant free trade zone within 60 days from the date on which such person is granted the occupancy permit;

2. If such person rents a factory, building, or other facilities owned by the State or any local government, that person is required to complete the installation of facilities necessary for the purpose of running a business within 150 days from the date on which that person concludes the lease contract; and

3. Such person is required to obtain a construction permit or complete a construction report within 180 days (for construction permit) or 150 days (for construction report) from the date on which that person is granted the occupancy permit.

Cancellation of occupancy permit

• In the event that a occupant company in a free trade zone obtains an occupancy permit illegally

• In the event that an occupant company in a free trade zone falls under any of the followings, its occupancy permit may be revoked (Article 15.(2) of the Act on Designation and Management of Free

1. If it runs a business other than the business for which it obtains the occupancy permit;

2. If it fails to meet the terms that are set down when the occupancy permit is granted;

3. If it falls under the grounds of disqualification;

4. If it violates the matters to be observed by occupant companies (Article 13 of Act on Designation and Management of Free Trade Zones); and

5. If it closes its business or suspends its businessfor three months without any justifiable grounds. Trade Zones).

Restrictions on rental and transfer of factory, etc.

• In the event that an occupant company in a free trade zone constructs a factory, building, or

other facilities, using foreign goods, etc., such occupant company shall be prohibited from renting or

transferring the factory, etc. to any person other than occupant companieswithin 3 years from the date on

which the factory, etc. is fully constructed. Nevertheless, it may rent part of the factory, etc. to a support company after obtaining permission therefor from the head of a customhouse (Article 24 of the Act on Designation and Management of Free Trade Zones).

Restrictions on disposal of land, factory, etc.

• When an occupant company intends to dispose of any of land, factories, buildings, and other

• When an occupant company transfers or rents, or allows any other person to use the factory,

building, or other facilities that are constructed on the land owned by the State or any local government, it shall make a report thereof to the administrative authority (Article 25.(4) of the Act on Designation and Management of Free Trade Zones).

12.3. Free economic zones

Limits on acts such as alteration of form and quality of land

• A person who intends to perform any of the following acts within the districts of free economic

1. Alteration of the form and quality of land and excavation;

2. Gathering of earth and rocks, gravel, and sand;

3. New construction, reconstruction and expansion of buildings, or installation of structures;

4. Deforestation of bamboo trees and planting; and

5. Installation or stacking of goods which are difficult to move.

Special case for the Farmland Act

• A person who intends to divert the use of any farmland in a free economic zone may do so by

obtaining a permission from the competent mayor/Do governor, notwithstanding Article 34 of the

Farmland Act (Article 9-6 of the Special Act on Designation and Management of Free Economic

Zones).

Office of Commercial Affairs, Seoul

Source : http://www.depthai.go.th