A Free Trade Zone (hereafter FTZ) is a zone for free manufacturing, logistics and distribution receiving benefits and incentives pursuant to relevant laws such as the Customs Act, and Foreign Trade Act. An FTZ is an area as defined in the Act on the Designation of Free Trade Zones. It is a new version of integrating the existing “Free Trade Zone”, which was focused on the manufacturing sector and the “Customs Free Zone”, focused on logistics.
The FTZs enjoy free customs clearance and exemption from customs and taxes. Furthermore, the carrying in and out of freight as well as simple manufacturing processes can be freely undertaken.
The foreign-invested companies in the FTZ, which are in the high-technology, industry-supporting sector, manufacturing companies with an investment of more than U$10 million, as well as companies in logistics with foreign investment of more than U$5 million, enjoy extensive tax benefits, cheap leases and other incentives when moving into the area.
The FTZs eligible for the benefits are the ones in Masan, Gunsan, Iksan, Daebul, Busan harbor, Gwangyang harbor, and parts of the Incheon harbor.
A foreign communications business can register as a special communications business. Or, it can conclude a contract with a key communications business or a special communications business in Korea and obtain approval from the Minister of Information and Communication to sell the telephone cards in Korea.
People falling into the following categories cannot possess more than 49% of total issued shares of the key communications companies:
– Foreign nationals or foreign governments;
– A company of which a foreign national or government is in possession of more than
15% of the total issued stocks and is the major stockholder.
A foreign national cannot become the majority shareholder of Korea Telecom.
– However, it is only possible when possessing less than 5% of shares.
There are two kinds of payment. The first is a one-off payment at the time of obtaining the permission for key industries, and another is an annual payment after business commencement. The annual payment is a fixed amount in correlation to the annual sales amount.
• One-off payment
– Only the companies in the wireless sector providing communications service
through the allocation of frequency follow the laws of radio waves.
• Annual payment
– Businesses with a sales amount of over KRW30 billion with profit in the previous
year after launching the business are subject to payment.
– The amount of payment is 0.5% of the sales amount of the previous year
(0.75% for businesses that fall under Art. 34 of the Business Act).
– The amount of payment for the present year is within the range of the net income
of the previous year.
Basic information about Korea’s IT industry can be found at the Korea Association of Information & Telecommunication’s Internet site www.kait.or.kr If additional information is required, just refer to the listed contact points.
For more detailed information on specific issues and topics related to the IT sector such as analyses of government policies or market developments, refer to the homepage of the Korea Information Strategy Development Institute at www.kisdi.re.kr
This institute regularly publishes research reports, white papers and detailed information about Korea’s IT industry in English.
Various benefits are given to start-up SMEs (for SMEs established outside the metropolitan area before Dec.31, 2006) and venture start-ups (confirmed as a venture start-up company by the SMBA within two years of its establishment). The benefits include reduction of national taxes such as corporate tax and income tax, as well as local taxes such as acquisition tax and registration tax.
|Art. 6 of the Special Tax Treatment Control Act||50% tax reduction from the tax year in which the initial profits were recorded until five years from the beginning of the following tax year.|
|Royalty Tax||Art. 116 of the Special Tax Treatment Control Act||No stamp duty for documents such as certificate, bank account or contract needed for the application of a loan at a financial institution, if the loan is applied for within two years of business establishment. However, the only businesses that are eligible are those established pursuant to the Support for Small and Medium Enterprise Establishment Act.|
|Registration Tax||Art. 119 of the Special Tax Treatment Control Act||No registration tax for assets needed for businesses that are acquired within two years after business establishment.|
|Special Tax for Rural Development||Art. 4 of the Special Tax for Rural Development Act||No Special tax for rural development (20% of tax reduction) is levied on tax reductions of corporate tax, acquisition tax, registration tax or income tax of the established SME.|
Comprehensive Land Tax
|Art. 121 of the Special Tax Treatment Control Act||50% reduction of property tax and comprehensive land tax for five years from the date of business establishment for assets in possession of the company and needed for the business activities of the company.|
• Small and Medium Business Administration, www.smba.go.kr
• Small Business Corporation, www.sbc.or.kr
• Information system for policy funds, www.finainfo.go.kr
Yes, a foreign-invested company is also eligible for the same benefits. If the company meets the requirements, then the foreign-invested company is eligible to apply without any additional procedure.More detailed information can be found in the following websites:
– Small and Medium Business Administration, www.smba.go.kr
– Small Business Corporation, www.sbc.or.kr
– National Tax Service, www.nts.go.kr
– Information system for policy funds, www.finainfo.go.kr
• To make use of the technology possessed by SME4s and promote the productization and commercialization of the technology as well as promote SMEs with focus on technological skills.
Amount of Benefits:
• KRW75 billion (based on the standards of 2004)
Eligibility for Benefits:
• Any SME, which has participated in a technology-supported business organized by a government agency such as the Small and Medium Business Administration (SMBA) within the last three years and has completed technology development successfully, and an Inno-Biz company selected by the SMBA.
• Any SME, which is in possession of a patent right within three years of its technology evaluation registration of the patent (including patent pending technology)
• Any SME, which wants to commercialize technology received through a transfer from a university or research institute in Korea or abroad within the past three years.
Range of Benefits
• For the production facilities and tests / evaluations needed for the mass production of products using the developed technology;
• For the operation of daily business activities and for the commercialization of the developed technology and the patent, such as purchase of raw material and market penetration costs.
Conditions of the Loan
• Annual interest rate of 4.9% (flexible rate);
• Repayment within a maximum of five years (including a two-year grace period);
• Amount of loan is KRW 500 million per year per company (KRW300 million for operating capital);
• The loan can be applied for directly at the Small Business Corporation (SBC).
• Application and Registration
– Application at a local office of the Small Business Corporation (SBC);
– In case of a loan through a reference, the SBC notifies the Korea Technology
Credit Guarantee Fund (Technology Evaluation Center) and requests an
• Investigation and Final Decision
– In case of a pure credit loan, a pre-evaluation will be made at the local office of
the SBC and an on-the-spot inspection will be conducted by the local office of
the SBC together with the local office of the SMBA before the final decision is
made by the Fund Selection Committee;
– In case of a loan through a reference by the Korea Technology Credit Guarantee
Fund, the final decision about the grant will be made after evaluation and
investigation of the technology in one of the 10 local technology evaluation
• Location of Application and Registration
– Local office of the Small Business Corporation (SBC)
The Small Business Corporation operates a website with a search function via keyword input. Over 30,000 small-medium enterprises in Korea are listed in the database categorized according to their products. It is also possible to apply online for a “free business matchmaking service” introducing the clients to appropriate domestic SMEs and providing services from negotiation and mediation to contract conclusion.
The website address is www. koreasme.org
Foreign companies looking for long-term partners, not only for joint, ventures but also in areas of technological and manufacturing cooperation, should refer to a professional matchmaker in the International Cooperation Division of the Small Business Corporation.
For further questions please call Seoul 82-2-769-6852/6853 or email to email@example.com.