If you are looking into Korea's "foreign investment tax credit", the first thing to check is whether the program is still open. Under current law, the corporate and income tax reduction for foreign investment applies only to companies that applied by December 31, 2018, and the acquisition and property tax reduction applies only where a reduction application was filed by December 31, 2025 and a reduction decision was granted. Companies making a new investment in 2026 cannot apply for either reduction. This article separates the programs that have ended from those you can still use.
Ended ①: Corporate and income tax reduction
The foreign investment reduction under the Restriction of Special Taxation Act reduced corporate and income tax on income from businesses such as those involving new growth engine technology or located in Foreign Investment Zones and Free Economic Zones. The law limits it to "foreign-invested companies that applied for tax reduction by December 31, 2018." Setting up a company or filing a foreign investment notification now does not open a new application.
Ended ②: Acquisition and property tax reduction
The foreign investment reduction under the Restriction of Special Local Taxation Act likewise applies only where a reduction application was filed "by December 31, 2025" and a reduction decision was granted. A company investing for the first time in 2026 cannot use it for acquisition or property tax on business real estate.
Still available ①: Exemption from customs duties, etc.
The customs duty exemption under the Restriction of Special Taxation Act remains in force with no application deadline in its text. The requirements are as follows.
- 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 such as "for N years." The exemption applies when the capital goods are imported in line with the notified investment.
When exempted taxes are recovered
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.
Still available ②: Cash grants and site support
These are not tax reductions, but the Foreign Investment Promotion Act provides current support measures.
- 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.
Frequently asked questions
Q. If I set up a company in 2026, can I get a corporate tax reduction?
No. The corporate and income tax reduction for foreign investment applies only to companies that applied by December 31, 2018, so new applications are not possible.
Q. How many years does the customs duty exemption last?
The statute does not set an exemption period. It applies, after an exemption application, when eligible capital goods are imported in line with the notified foreign investment.
Q. Does buying shares in an existing Korean company qualify for the customs exemption?
The exemption assumes a foreign investment that acquires newly issued shares or equity. Buying already issued shares does not qualify.
Q. How much cash support can I receive?
The law does not fix a rate or amount. The amount is set through negotiation with the investor and review by the Foreign Investment Committee, and whether support is given depends on that review.
Consultation
Whether your planned business is eligible for the customs exemption, and whether your investment method and notification meet the requirements, should be checked before you invest. A-One Administrative Agency prepares foreign investment notifications and company incorporation procedures together with you.
- Phone: 02-309-3107
- KakaoTalk: alexkorea
- Address: 1F, 43, Cheonho-daero 101-gil, Gwangjin-gu, Seoul
Fees vary by case and will be explained in detail during a initial consultation.