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What is FDI (Foreign Direct Investment)? |
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FDI stands for 'Foreign Direct Investment' that allows foreigners to acquire or invest in the stocks or equities of Korean corporation (1) or the company (2) run by Korean nationals in a bid to participate in the management of a corporation or company.
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foreign nationals acquire 10% or more of the total voting stocks issued or the total amount invested by (1) or (2).
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foreign nationals acquire less than a 10 percent stake and participate in the management of (1) or (2) as specified in agreements on joint investments or researches.
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loans with maturity of five years or longer is granted to foreign capital-invested companies(FDI companies) by their overseas parent company or by a company which has capital affiliation with the parent company.
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Regulations on Foreign Direct Investment |
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Investment
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The Foreign Investment Promotion Act (FIPA) |
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The Enforcement Decree of the Foreign Investment Promotion Act |
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The Enforcement Regulations of the Foreign Investment Promotion Act |
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Regulations on Foreign Investment |
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Foreign Exchange and External Transaction
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Flow of Capital to Korea and Foreign Countries |
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Foreign Exchange Transactions Act |
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External Trade Regulation |
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Foreign Direct Investment Notification |
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As specified in Article 5 and 6 of the Foreign Investment Promotion Act(FIPA), a foreigner should inform Korea Exchange Bank of investments prior to the commencement of business operations.
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It is deemed to be 'Foreign Direct Investment' only where a foreigner complies with the conditions as delineated in the FIPA. If satisfied as set forth in the FIPA, overseas remittances of principals, stock dividends and a foreign investor's property rights shall be guaranteed.
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Guarantee of overseas remittance of invested capital and dividends, as well as equal treatment as Korean nationals, shall be granted in accordance with FIPA.
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Guarantee of overseas remittance
Overseas remittance of stock dividends and equity owned by foreign investors; proceeds from sales; principal and interest paid from long-term loan contracts; and commissions and royalties paid pursuant to technology inducement contracts shall be guaranteed. (Article 3.1 of the FIPA)
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Equal treatment as Korean nationals
Foreign investors and their companies investing in Korea shall be treated on equal conditions as domestic investors and companies, unless otherwise provided in other laws. Foreign investors may enjoy more favorable treatment than Koreans do in terms of tax reductions and location of their company or factory sites. Except as otherwise provided in other laws, no restrictions shall apply to a foreign national in performing FDI activities in Korea.(Article 4.1 of FIPA)
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Tax Reduction and Exemption on Foreign Direct
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| Tax |
Businesses eligible for tax reductions |
Period |
Rates |
Reference |
| National Tax |
Hi-tech businesses or industry-supporting service businesses |
10 Years |
7 Years, 100%
Years, 50% |
Income Tax Corporate Tax |
| Businesses operating in Free Trade Zone |
5 Years |
3 Years, 100%
Years 50% |
| Local Tax |
Hi-tech businesses or industry-supporting service businesses |
8 Years |
5 Years, 100%
3 Years, 50% |
Acquisition tax/Registration tax/Property tax/Aggregate land tax on building and land acquired by FDI companies |
| Businesses operating in Free Trade Zone |
5 Years |
5 Years, 50% |
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Others
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Reductions and Exemption on Customs |
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Tax Reductions on Increase of Capital |
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Supports to Local Counties |
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