Many guides say that registering as a foreign-invested enterprise (FIE) in Korea brings tax reductions, but the picture is different as of 2026. The corporate and income tax reduction applies only to companies that applied by December 31, 2018, and the acquisition and property tax reduction only to those that applied by December 31, 2025, so neither is open to new applicants. What remains is the customs duty exemption on business capital goods and the site and cash support under the Foreign Investment Promotion Act.
What is a foreign-invested enterprise?
Under the Foreign Investment Promotion Act, a foreign-invested enterprise is a company in which a foreign investor has invested. Foreign investment includes a foreigner acquiring shares or equity in a Korean company to establish a lasting economic relationship, such as participating in management (either newly issued or already issued shares), as well as loans of five years or more from an overseas parent company and similar lenders. Having a foreign CEO does not by itself make a company an FIE; foreign investment notification and registration are required.
2026 benefits at a glance
| Benefit | Status in 2026 |
|---|---|
| Corporate / income tax reduction | Ended — applies only to applications filed by Dec. 31, 2018 |
| Acquisition / property tax reduction | Ended — applies only to applications filed by Dec. 31, 2025 |
| Customs duty exemption on capital goods | Current — eligible business, new-share investment and exemption application required |
| State/public property lease and rent reduction | Current — available if requirements are met (discretionary) |
| Cash grants | Current — decided through negotiation and Foreign Investment Committee review (discretionary) |
Current benefit ①: Customs duty exemption on capital goods
Capital goods that an FIE imports for an eligible business may still be exempt from customs duties. The customs exemption comes from the Restriction of Special Taxation Act, not the Foreign Investment Promotion Act.
- Eligible businesses: businesses involving technology in new growth engine industries, and businesses located in Foreign Investment Zones, Free Economic Zones or the Saemangeum project area, among others designated by the Restriction of Special Taxation Act
- Eligible goods: capital goods needed for that business (machinery, equipment, facilities and similar industrial assets) as specified by Presidential Decree
- Type of investment: the investment must be a foreign investment in which the foreign investor acquires newly issued shares or equity, and the goods must be imported as stated in the notification filed under the Foreign Investment Promotion Act. Buying existing shares does not qualify.
- Taxes exempted: for some businesses, such as those involving new growth engine technology, customs duty, individual consumption tax and VAT; for others, such as businesses in Free Economic Zones or the Saemangeum area, customs duty
- Application: the exemption is not automatic — an exemption application must be filed as prescribed by Ministry of Finance and Economy ordinance
The statute does not set an exemption period (a number of years).
Current benefit ②: Site support and cash grants
- Lease of state/public property: land, factories and other property owned by the state, local governments or public institutions may be leased to foreign-invested companies by private contract, for a term of up to 50 years. As a rule, a minimum foreign investment ratio must be met and maintained.
- Rent reduction: rent may be reduced for state-owned land in Foreign Investment Zones, national industrial complexes, general/urban high-tech industrial complexes and agro-industrial complexes, and for land owned by local governments.
- Cash grants: the state and local governments may provide cash support for qualifying foreign investments, such as building or expanding factory facilities for new growth engine technology, high-tech products, or materials, parts and equipment, or creating new jobs above a set threshold. The amount is not a fixed percentage; it is set through negotiation and review by the Foreign Investment Committee.
- Local government subsidies: local governments may pay employment subsidies and similar support to foreign-invested companies under their ordinances.
The law says these measures "may" be provided, so they are discretionary. Meeting the requirements does not by itself mean support will be given; the relevant authorities review each case.
After registration — recovery risk
Exempted taxes are recovered if, after the exemption, the company's foreign investment registration is cancelled, the contributed goods are used for a purpose other than the one notified or are disposed of, the foreign investor transfers shares to a Korean national or Korean company, the business closes, or the notified contribution or employment falls short of the required standard.
If you plan to change the shareholding structure or the business, it is safer to confirm that the requirements will still be met before you act.
FAQ
Q. Does registering as an FIE reduce corporate tax?
Not as of 2026. The corporate and income tax reduction for foreign investment applies only to companies that applied by December 31, 2018, and new applications are not possible.
Q. Can I still get local tax (acquisition/property tax) reductions?
The local tax reduction for foreign investment applies only where a reduction application was filed by December 31, 2025 and a reduction decision was granted. New applications cannot be made in 2026.
Q. Which law is the basis for an FIE's customs duty exemption?
The customs exemption provision of the Restriction of Special Taxation Act. The Foreign Investment Promotion Act defines foreign investment and the notification procedure, while the exemption requirements are set by the Restriction of Special Taxation Act.
Q. Can a service-sector FIE qualify for the customs exemption?
It depends not on the industry label but on whether the business is an eligible business under the Restriction of Special Taxation Act and whether the capital goods it needs are imported as notified.
Consultation
With FIE benefits, determining eligibility comes before procedure. A-One Administrative Agency prepares foreign investment notification, FIE registration and company incorporation together with you.
- Phone: 02-309-3107
- KakaoTalk: alexkorea
- Address: 43, Cheonho-daero 101-gil, Gwangjin-gu, Seoul
Fees vary by case and will be explained in detail during a initial consultation.