Following capital goods are needed to receive confirmation of the declaration of capital goods import

In order to receive confirmation of the declaration of capital goods import, documents to prove capital goods’ price, including three copies of application for import clearance of the goods with a quantity, standard, price and manufacturer of the items and offer sheet, are need to be submitted to a foreign exchange bank or KOTRA. 

In order to export capital goods exempted duty within three years from the day when the import notification is accepted, the approval from the director of the relevant customs office is necessary.
Generally, if the capital goods are not used for the original purpose or disposed, the exempted duty has to be paid. However, if the goods are exported with the approval from the director of customs office, exempted duty dose not need to be paid. 

• In general, there are four types of foreign direct investment (FDI):

– The first type of FDI is participation in the capital increase of a domestic company (including foreign-invested companies) or the acquisition of new shares by establishing a new corporate entity (individual or joint venture).
– The second type of foreign direct investment involves the acquisition of existing shares, that is, when foreigners acquire the shares of domestic or foreign-invested companies possessed by domestic shareholders.
– The third type takes the form of long-term loans, which means that the parent company in the home country extends long-term loans to the foreign-invested company with a maturity of more than five years.- The fourth type includes the acquisition of shares through M&A, which means:

• Acquiring shares through free capital increase of foreign-invested companies;
• Acquiring shares through the continued existence or new corporate identity of the merged company;
• Acquiring shares of a foreign-invested company through purchase, inheritance, capital increase or donation from a foreign investor;
• Acquiring shares through dividends from prior investments;
• Transformation, acquisition or exchange of convertible bonds, exchangeable bonds and depository receipts.

♦Social and economic aspects
– Minimize the social and economic loss of companies going bankrupt and help
companies to rebuild themselves;
– Increase management efficiency and reduce costs through industrial restructuring;
· Acquire new technology, train and educate potential human resources, minimize the
time needed to secure new markets and establish the basis for management;
– Strengthen the market control power and increase the concentration of using company
resources for a larger market.
· Reduce costs in terms of raw material purchase, inventory management and fixed
production costs, as well as achieve economies of scale through more production

♦ Business aspects
– Increased value-added and business synergy effects through expanded value-chain
activity;
– Reduced R&D costs and secure technology lead to faster market access.

♦ Financial aspects
– Reduced corporate risk factors or dispersed risk factors through increased returns;
– Higher potential to manage liabilities and expected benefits such as tax breaks. 

The notification of changes has to be made within two years of the day the changes have occurred. 

The deduction of taxes is calculated as follows:

• Corporate tax and tax for profits made from dividends
– (Calculated tax amount x tax base (subject to deduction) / total tax base) x rate of
foreign investment x (deduction rate of 100% or 50%)

• Local tax
– Calculated tax x rate of foreign investment x (tax deduction rate of 100% or 50%)

• Customs, special excise tax, value-added tax
– The tax depends on the import of capital goods (with conditions);
– For high-technology sector and foreign investment zones, 100% deduction for
import within three years of the date of FDI notification;
– For other foreign-invested companies, only deduction for customs.

The foreign investor had initially notified an investment of KRW10 billion with a foreign investment ratio of 50%. This changed to KRW15 billion and 75%.
If approval for tax deduction regarding the notified FDI amount was received, and the FDI amount changed before the actual investment took place, then it is not necessary to apply for a change of tax deduction. In such cases, the tax deduction will take effect depending on the application for change in FDI. However, if additional investment was made after starting the business, then application for tax deduction has to be filed for each capital increase.

If the resident is not conducting business:

The duty for imported items is decided by the added trade price according to the price condition that actually made or will be made for sales items in order to export.
However, if there is no market price for investment in kind because it is specially produced, the customs duty calculation will not be applied under the Article 30 or 33 of the Customs Act. In this case, customs duty will be calculated under the Article 34 of the Customs Act, it adds i) raw material cost and other cost to be spent for assembling or manufacturing, ii) general profit and expenditure, occurred when the items are sold, iii) transportation and insurance fee to import port.
Therefore, if a foreign investor specially produced machinery for investment in kind, the price will be calculated based on estimated value. If the price can not be calculated by the estimated value, it can be calculated appropriate standard based on the Article 30 or 35 of the Customs Act under the Article 35 of the Customs Act. 

According to current regulation of the non-litigation case adjective law, in case of a corporation, it is necessary to submit a report about performance of investment in kind. However, in case of a limited company, ‘a statement that verifies the whole asset purpose of investment in kind has been paid’ has to be submitted. Thus it is not necessary to submit the confirmation of completion of the investment in kind.
In addition, in accordance with Foreign Investment Promotion Act, in case of a foreign investor introduces investment in kind, despite of the Article 229 of the Commercial Law, it is regulated that the Commissioner of Customs needs to see a confirmation of completion of investment in kind that confirms type, quantity and price of the items as a report made by inspector under the regulation of the non-litigation case adjective law. Thus, for a corporation, it is necessary to submit a conformation of completion of investment in kind, but not for a limited company.
Therefore, if a limited company wants to register capital goods that were received from a foreign investor with actual things, certification of import notification can be submitted instead of a conformation of completion of investment in kind.