Foreign-invested companies in an FTZ are excluded from the following regulations, with which companies located in other areas have to comply (Art. 3 of the Act on Free Trade Zones):

• A certain level of elderly people have to be employed (Art. 12 of the Employment Promotion for the Aged Act);
• If people with distinguished services to the state or their families apply for employment, additional points and privilege must be given to them (Art. 31 of the Act on the Honorable Treatment and Support of Persons of Distinguished Services to the State);
• If a person has contributed or sacrificed in relation to the 5.18 democratization movement and family of the person apply for employment, additional points and privilege must be given (Art. 22 of the Act on the Honorable Treatment of Persons of Distinguished Services to the Gwangju Democratization Movement);
• Employment must be guaranteed to those who have sacrificed for the state with a special duty and for their families (Art. 21 of the Act on the Support of Persons Executing a Special Duty);
• A certain level of disabled people must be employed for companies with a certain number of employees (Art. 24 of the Employment Promotion and Vocational Rehabilitation of Disabled Persons Act);
• In order to preserve the stability of business for small-medium enterprises, the participation of conglomerates in specific sectors shall be restricted and instead assigned to small-medium companies (Art. 4 and 12 of the Act on the Protection of the Business Sphere of Small and Medium Enterprises and Promotion of Their Cooperation).

Approval and permission (from the mayor or governor of the city, county or province)

– Permission for construction
– Approval for using the building

Notification (to the mayor or governor of the city, “gun” or “gu”)

– Notification of groundbreaking
– Approval for using the building

The moving and transfer of goods between companies within the FTZ are handled through the notification and records in the account books of the companies (via e-mail).
There is no need for a separate process regarding the use and consumption of foreign goods. They are notified to the Customs House via e-mail through import notification when carrying them into the FTZ.

Normally, it takes about one and a half hours in average for general goods after the import notification.
Around 1% of the goods are subject to inspection. Goods not requiring inspection are processed immediately, whereas goods needing inspection take a little bit longer. However, they are processed within the same day.

Both types are similar in that they are designated to boost foreign investment. Companies can receive dual benefits and support by choosing the kinds of benefits that best suit their needs, which is more advantageous to the company.
FEZs are a special administrative area designated to support foreign-invested companies by accommodating not only the facilities of logistics, manufacturing and service industries but also housing, schools and hospitals for foreign investors. It provides exemption from taxes, rents, customs duty and VAT to improve the living conditions of foreigners.
FTZs are in turn a special industrial area, especially designated to allow the smooth flow of international logistics, promote trade and attract foreign investment by exempting not only rent and taxes, but also customs duty and VAT.

There are no special restrictions regarding the import of new and used goods, but certain conditions have to be met for specific goods in order to pass the customs (for example, certain certificates for automobiles, or certain examination or formal approval for construction equipment)The goods carried into the FTZ are not subject to the conditions of the comprehensive notification, but the goods listed below are restricted entry:

– Goods with negative impacts on people?s health and environmental preservation;
– Waste,such as industrial waste;
– Weapons and other illegal weaponry, drugs and narcotics;
– Products that infringe trademark and intellectual property rights.

If foreign goods are carried out destined for overseas, then a notification has to be made to the customs bureau. If only goods (not foreign goods) are to be carried out, then an export notification has to be made.
If goods are manufactured or produced in the FTZ by using foreign goods (whole or part of it), and foreign goods in their original form are carried into the customs area (Korea), then it is necessary to make an import notification and pay customs duty.

The company in the FTZ has to notify the tax officer about the following goods to carry in and out of the FTZ:

– Machinery, tools, appliances and equipment as well as their parts;
– Raw material, lubricant, computers for office use and construction material;
– Other goods needed for business activities, which are accepted and designated by the
Customs House.

Import notification needs to be made and customs have to be paid for the following cases pursuant to Art. 241 of the Customs Act:

– If the company in the FTZ carries in foreign goods, which are not included in the above
list for notification;
– If another company / person besides the company in the FTZ wants to carry foreign
goods into the FTZ.

In order to open a business or factory in an FTZ, it is necessary to obtain permission from the competent authorities;

– In case of a manufacturing company, an application for permission to enter an FTZ has
to be submitted together with the business plan and the FDI notification;
– For other companies, an additional document verifying that it has received permission,
the approval, certificate or registration has to be submitted in addition to the other
documents. If it is a new foreign investment, the relevant permission, approval,
certificate or registration has to be obtained within six months from the date of FDI
notification.

Reduction of direct taxation

– For foreign-invested companies in the high-technology and industry-supporting sector;
– For foreign-invested companies in the manufacturing sector with a foreign investment of
over US$10 million;
– For foreign-invested companies in the logistics sector with a foreign investment of over
US$ 5 million.

For national tax (corporate tax and income tax) and local tax (acquisition tax, registration tax, comprehensive land tax): 100% exemption for three years, 50% reduction for two years.

Indirect taxes

– Customs for foreign goods carried in and out of the FTZ are reserved;
– Zero percent value-added tax is applied to internal trade (within the companies in the
FTZ) and for Korean goods carried into the FTZ;
– Reservation for the following taxes: temporary import surtax, liquor tax, special excise
tax, traffic tax, special tax for rural development, education tax.

Excluded are exemption for traffic violations and the application of the Act on the Honorable Treatment of Persons of Distinguished Services to Independence.

Incentives for lease

– Exceptionally cheap lease price expected (one-fifth of the lease price in other regions);
– Maximum 100% reduction of lease for foreign-invested companies;
– Up to 50 years lease possible for national and public land and permission to construct
permanent facilities.

Facilitated notification procedure for the logistics of various value-added, such as the use and consumption of foreign goods as
well as the moving and transfer of goods between the companies within the FTZ.