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South Korea To Develop Its Free Economic Zones

by Mary Swire,, Hong Kong

10 December 2014

The Ministry of Trade, Industry and Energy has disclosed that South Korea is involved in a push to increase the attractiveness of its eight free economic zones (FEZs) for foreign direct investment (FDI), by using their tax and tariff exemptions.

Foreign investments in FEZs are able to receive such incentives as 100 percent national corporate tax and local property tax exemptions for three years from the generation of operating revenues, and 50 percent for two more years thereafter; and a 100 percent tariff exemption for five years on imported capital goods. Possible extensions of those exemption periods may also be granted.

In addition, foreign employees and executives working in those investments will be given tax benefits. They may elect to receive either a 30 percent tax exemption on total salary income or a fixed 17 percent income tax rate.

It has been indicated that the FEZs (which have been in operation since 2003) will be further deregulated, and will, in the future, operate on the basis of a negative list of investments for FDI purposes.

The objective of the Government's action, it is said, is to provide companies with an optimal environment to engage in global business activities from the FEZs. As part of an official aim to promote South Korea as a Northeast Asian business hub, it is hoped to counteract the new economic zones being established in Taiwan and China.

In particular, it is hoped to attract more FDI from China after the new bilateral free trade agreement comes into operation next year.

TAGS: individuals | expatriates | tax | investment | business | property tax | tax incentives | foreign direct investment (FDI) | employees | tariffs | corporation tax | tax rates | Korea, South | tax breaks | trade | individual income tax | free trade zone

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