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.. ■ Definition of Foreign Investment Zone
  Each mayor and governor shall designate and supervise a zone, in which a foreign investor desires to invest, as a Foreign Investment Zone (FIZ) after deliberation by the Foreign Investment Committee, if necessary for promoting foreign investment with following specifications. However, if all or part of a National Industrial Complex has been designated as a Foreign Investment Zone and already is run by a coordinating government organization, the organization will continue to manage the zone.

In the case where constructing a new site is necessary to build a plant, etc., in a Foreign Investment Zone, it can be developed as a provincial industrial complex, which requires a development plan.

On the other hand, an area where more than two foreign investors invest can be designated as the Foreign Investment Zone, provided that;
- The total foreign investment is over $30 mil.
- Both of their business categories fall under the following criteria (see below), and
- The site where their plants or research facilities are located is in the same National Industrial
- Complex or Provincial Industrial Complex or is adjacent to either one.

In case where the area is designated as a Foreign Investment Zone, the investors should fulfill the following criteria within 5 years of the designation notification.

 
<Criteria for Foreign Investment Zone Designation>
 
Criteria for Business Categories
Criteria for Designation
Manufacturing, industry support service, hi-tech business Foreign investment amount should be more than $30 mil.
Tourist hotel business, floating tourist hotel business, general recreation service, general resort facility provider, international convention facility Foreign investment amount should be more than $20 mil.
Complex cargo terminal business, establishing and operating site for public pick-up/delivery center, Business operating harbor facilities, Business operating airport facilities, logistics industry, SOC facilities establishment business Foreign investment amount should be more than $10 mil.
Research facilities - Foreign investment amount should be more than
$5 mil.
- Regular employment of more than 10 full-time researchers with 3 years or above research experience holding master's degrees or higher.
.. ■ Support for Foreign Investment Zones
  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 benefits are as follows:
 
Corporate Tax, Income Tax
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 gov-
ernment, a 100% exemption for the initial
7 yrs and a 50% exemption for the next 3
yrs will be available.
- From Jan. 1st 2005, if a foreign-invested
company reports and applies for a tax
reduction/exemption from the Korean gov-
ernment, a 100% exemption for the initial
5 years and a 50 % exemption for the
next 2 years will be available.
 - 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 yrs and 50 % exemption for the next
3 yrs will be available.
- From Jan. 1st 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 yrs and a 50 % exemption for the
following 2 yrs will be available.

- A provincial government can increase the reduction/
exemption period and percentage within 15 yrs.

  If designated as a Foreign Investment Zone, support for infrastructures such as harbors, roads, water supplies, railroads, communications and electrical power supplies will be provided plus rents for national properties will be 100-percent exempted. The traffic generation fee caused by necessary construction work will also be exempted. At the same time, restrictions on the invested companies' exporting and importing will be alleviated.
 
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Post-Investment Actions for Foreign Investors
.. ■ Foreign-Invested Company Registration
  When a foreign investor or a foreign-invested company has paid in full its contribution to the required capitalization and acquires outstanding shares, or converts or subscribes to, or exchanges any depository receipts or any other convertible bonds or exchangeable bonds or securities into or for equity securities, then such foreign investor must file for foreign-invested company registration or modification to the registration within 30 days from such event.
In addition, if a foreign investor or a foreign-invested company files a notification of the acquisition of equity securities arising due to merger or otherwise, completes transfer or reduction of equity securities, or changes its corporate name, designation, investment amount or business objectives, then such foreign investor or foreign-invested company must file for modification to its foreign-invested company registration within 30 days of such event.
.. ■ Restrictions on Disposal of Capital Goods
  A foreign investor or a foreign-invested company must report to the Ministry of Commerce, Industry and Energy (MOCIE) in advance if it intends to transfer, lease, or use for any other purposes than reported within five years from the date of import notification of any capital goods imported under customs exemption.
.. ■ Conduct of Other Business of Foreign-Invested Company
  Any registered foreign-invested company must not engage in any lines of business with respect to which foreign investment is restricted beyond the extent permitted (unless the foreign investment ratio is less than 10 %).

It is also prohibited to acquire, beyond the extent permitted, equity securities in another domestic company that is engaged in any lines of business with respect to which foreign investment is restricted; provided, however, that such prohibition does not apply if;
(i) the foreign investment ratio of the acquirer is less than 50 percent and the largest shareholder of
(i) the acquirer is not a foreign investor (including any affiliates),
(ii) a foreign-invested company engaged in financial or insurance business whose business
(ii) objectives include acquisition of equity securities in other companies acquires equity securities in
(ii) other companies in accordance with the provisions of other laws, or
(iii) the acquired equity securities are not more than 10 percent of the aggregate number of the
(iii) issued and outstanding shares or the aggregate equity investment.

Besides, a foreign investor or a foreign-invested company must not use the capital contributions for any other purposes than reported or permitted.

.. ■ Notification of Transfer of Shares and Capital Reduction
  A foreign investor must file a notification with the MOCIE within 30 days of the entry into a transfer agreement if it transfers the acquired shares to another person or within 30 days of the expiration of the notice period for creditors if it intends to reduce the shares held by it through capital reduction.

If the license or registration of a foreign investor is revoked or cancelled, such foreign investor must transfer the equity securities held by itself to a Korean national or corpo-ration within six months of such revocation or cancellation.

Besides, if any unregistered foreign investor receives and fails to comply with a correction order, then such foreign investor must transfer the equity securities held by itself to a Korean national or corporation within six months of the expiration of the period within which such correction order must be complied with.

However, if unavoidable circumstances prevent such transfer in the above two cases, then the period within which such transfer must be performed may be extended for up to six months with the approval of the MOCIE.

 
 
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