FOREIGN INVESTMENT AND FOREIGN CAPITAL INDUCEMENT ACT

Article 1(Purpose) #

The purpose of this Act is to contribute to the sound development of the national economy by inducing or protecting foreign capital such as foreign investment.

[This Article Wholly Amended by Act No. 5256, Jan. 13, 1997]

Article 2(Definitions) #

The definitions of the terms used in this Act shall be as follows: <Amended by Act No. 4316, Jan. 14, 1991; Act No. 4814, Dec. 22, 1994; Act No. 5256, Jan. 13, 1997; Act No. 5538, May 25, 1998>

1. “Foreigner” means an individual who is a foreign national, a juristic person organized under the laws of a foreign country (hereinafter referred to as “foreign juristic person”), or an economic cooperation organization;

2. “Korean Citizen” means an individual who is a national of the Republic of Korea: Provided, That the provisions of this Act relevant to foreigners shall also apply to a Korea citizen who is a permanent resident of a foreign country;

3. “Korean Juristic Person” means a juristic person (including a local government) established under the Acts of the Republic of Korea;

3-2. “Foreign investment” means to fall under any of the following items:

(a) Ownership by a foreigner, under this Act, of stocks or quotas of a Korean juristic person or enterprise which is controlled by the Korean citizens for the purpose of establishing continuous economic relations as prescribed in the Presidential Decree, such as participation in managerial activities of juristic persons (including juristic persons which are being formed) or enterprises concerned ; and

(b) Loans for the period of time exceeding five years pursuant to the Presidential Decree provided by an overseas parent enterprise of a foreigner-invested enterprise referred to in subparagraph 5, or a enterprise which has relations with such parent enterprise with regard to contributions of assets, for the purpose of exercising substantial influence upon management of such foreigner-invested enterprise.

4. “Foreign investor” means a foreigner who owns stocks or quotas in accordance with this Act;

5. “Foreigner-invested enterprise” means an enterprise in which a foreign investor has made an investment;

6. “Objects of investment” means any of the following items to be invested by a foreign investor for subscribing for stocks or owning quotas in accordance with this Act:

(a) Foreign means of payment as prescribed by the Foreign Exchange Control Act, domestic means of payment arising in exchange therefor or such domestic means of payment as prescribed by the Ordinance of the Minister of Finance and Economy;

(b) Capital goods;

(c) Fruit accruing from stocks or quotas acquired in accordance with this Act;

(d) Industrial property rights or any other technology equivalent thereto and any right to use it; and

(e) Remaining assets distributed to a foreigner following the liquidation of local branches or offices of a juristic person where the foreigner transforms such branches or offices into a domestic juristic person by closing them.

7. “Capital goods” means machinery as industrial facilities (including ships, vehicles, airplanes, etc.), equipment, facilities, tools, parts, accessories, livestock, seeds, trees, fish and shellfish, as well as raw materials and spare parts which the competent Minister (referring to the head of the central administrative agency in charge of the project concerned; hereinafter the same shall apply) deems necessary for the initial test operation (including experimental projects) of the industrial facilities induced, including freight and insurance fees to be incurred by such inducement, and the technology or service to construct a facility or to provide advice;

8. “Raw materials” means raw materials, and other materials necessary for key industries or agriculture, forestry and fisheries, as well as freight and insurance fees to be incurred by such inducement;

9. “Foreign capital” means any of the following items, prior to the cancellation by the Minister of Finance and Economy of the nature of foreign capital:

(a) Objects of investment as referred to in subparagraph 6;

(b) Technology introduced under a technology introduction contract; and

(c) Capital goods, raw materials, foreign means of payment induced in accordance with loans (including loans as referred to in subparagraph 3-2 (b) above) contract or a public loan agreement, and domestic means of payment, capital goods or raw materials acquired in exchange therefor.

10. “Loan contract” means a contract in which a Korean citizen or Korean juristic person either borrows a foreign means of payment or induces capital goods or raw materials in the form of a long-term settlement from a foreigner (excluding an economic cooperation organization) and which falls within the scope as prescribed by Presidential Decree;

11. “Public loan agreement” means a contract or an agreement in which the government of the Republic of Korea either borrows a foreign means of payment or induces capital goods, raw materials, etc. under an export credit arrangement from a foreign government, economic cooperation organization, foreign juristic person or in which Korean juristic person either borrows a foreign means of payment or induces capital goods, raw materials, etc. under an export credit arrangement from a foreign government or economic cooperation organization;

12. “Technology introduction contract” means a contract in which a Korean citizen or Korean juristic person takes over industrial property rights or any other technology from a foreigner, or induces the right to use thereof and which falls within the scope as prescribed by the Presidential Decree;

13. “Borrower” means the government of the Republic of Korea, a Korean citizen, or a Korean juristic person who has an obligation (excluding a guarantee obligation) to a lender under a loan contract or a public loan agreement, or the one who assumes his obligation;

14. “Subleasee” means one who subleases all or part of a public loan in which the government of the Republic of Korea is a borrower and carries out the loan project concerned; and

15. “Lender” means a foreign government, a foreigner who has a claim against a borrower under a loan contract or a public loan agreement, or the one to whom such claim is assigned.

Article 3(Criteria for Inducement of Foreign Capital) #

(1) A Korean citizen, Korean juristic person, or a foreigner may induce foreign capital in accordance with this Act, excluding any of the following subparagraphs: <Amended by Act No. 5256, Jan. 13, 1997>

1. When it causes trouble to the safety of the nation and the maintenance of public order;

2. When it has a negative effect upon the sound development of the national economy;

3. When it violates the Acts and subordinate statutes of the Republic of Korea; and

4. Where it causes harm to the sanitation and health of the people, to the conservation of the environment, or to the good morals and manners.

(2) The Government shall not approve, permit, or accept a report of the foreign capital inducement falling under any of subparagraphs of paragraph (1). <Amended by Act No. 5256, Jan. 13, 1997>

Article 4(Guarantee of Overseas Remittance) #

The overseas remittance of dividends of profit accruing from the stocks or quotas acquired by a foreign investor, sales proceeds of the stocks or quotas, principal, interest and fees to be paid under a loan contract or a public loan agreement, and royalties to be paid under a technology introduction contract shall be guaranteed in accordance with the contents of the approval, permission, acceptance of the report, or the agreement at that time of the remittance. <Amended by Act No. 5256, Jan. 13, 1997>

Article 5(National Treatment) #

(1) A foreign investor and a foreigner-invested enterprise shall be treated equally as a Korean citizen or a Korean juristic person with regard to its business, except where especially stipulated by other Acts.

(2) The provisions of the Acts on the tax exemption or reduction, which is applicable to a Korean citizen or a Korean juristic person, shall also apply equally to a foreign investor, a foreignerinvested enterprise, a lender and a licenser of technology under Article 23, except where especially stipulated by other Acts.

Article 6(Guarantee on Property Invested by Foreigners) #

The property rights of a foreign investor and a foreigner-invested enterprise shall be guaranteed in accordance with the provisions of the Acts.

Article 6-2(Principles of Liberalization of Foreign Investment) #

No foreigner shall be restricted in conducting foreign investments in the Republic of Korea, except for cases on which restrictions are inflicted by this Act or other Acts and subordinate statutes.

[This Article Newly Inserted by Act No. 5256, Jan. 13, 1997]

Article 7(Foreign Investment by Acquirement of New Stocks, etc.) #

(1) A foreigner shall file reports with the Minister of Finance and Economy, in cases where he intends to invest foreign capital by way of acquiring stocks or quotas newly issued by Korean juristic persons (including juristic persons which are being formed) or enterprises which are controlled by the Korean citizens. <Amended by Act No. 5256, Jan. 13, 1997; Act No. 5538, May 25, 1998>

(2) Notwithstanding the provisions of paragraph (1), if a foreign investor invests the fruits referred to in subparagraph 6 (c) of Article 2 in such foreigner-invested enterprise, he shall report to the Minister of Finance and Economy within thirty days from the date of investment. <Newly Inserted by Act No. 4814, Dec. 22, 1994; Act No. 5256, Jan. 13, 1997; Act No. 5538, May 25, 1998>

[This Article Wholly Amended by Act No. 4519, Dec. 8, 1992]

Article 7-2(Acceptance of Reports on Foreign Investment by Acquisition of New Stocks, etc) #

(1) The Minister of Finance and Economy shall, upon receiving a report referred to in Article 7 (1), determine whether he accepts it, within the period as prescribed by the Presidential Decree, and notify the reporter thereof. <Amended by Act No. 4584, Dec. 10, 1993; Act No. 4814, Dec. 22, 1994; Act No. 5256, Jan. 13, 1997; Act No. 5538, May 25, 1998>

(2) If no notification of whether the report is accepted is made in the period of determination as referred to in paragraph (1), the report shall be considered to have been accepted on the date on which such period expires.

(3) Deleted. <by Act No. 5256, Jan. 13, 1997>

(4) If deemed necessary for accepting the report as referred to in Article 7 (1), the Minister of Finance and Economy may attach any conditions thereto. <Amended by Act No. 4814, Dec. 22, 1994; Act No. 5256, Jan. 13, 1997; Act No. 5538, May 25, 1998>

(5) Matters other than those as referred to in paragraphs (1) through (4), which are necessary for acceptance of report on foreign investment shall be determined by the Presidential Decree. <Newly Inserted by Act No. 4584, Dec. 10, 1993>

(6) In case of accepting reports referred to in Article 7 (1), the Minister of Finance and Economy shall accept reports within the period as referred to in paragraph (1) above, except for cases falling under any of subparagraphs of Article 3 (1) (including cases where requirements for the admission of foreign investments referred to in Article 9 are not fulfilled).

<Newly Inserted by Act No. 5256, Jan. 13, 1997; Act No. 5538, May 25, 1998>

[This Article Wholly Amended by Act No. 4519, Dec. 8, 1992]

Article 7-3 #

Deleted.<by Act No. 5256, Jan. 13, 1997>

Article 7-4(Changes in Contents of Acceptance of Reports on Foreign Investment by Acquirement of New Stocks, etc.) #

(1) Where any foreign investor intends to change matters as prescribed by the Presidential Decree, such as foreign investment amount or foreign investment method from among contents reported and accepted in accordance with the provisions of Article 7 (1), he shall file in advance reports with the Minister of Finance and Economy: Provided, That where he intends to change projects to manage, he shall file reports with the Minister of Finance and Economy prior to the registration of foreigner-invested enterprise as referred to in Article 12. <Amended by Act No. 5256, Jan. 13, 1997; Act No. 5538, May 25, 1998>

(2) The provisions of Article 7-2 shall be applied mutatis mutandis to the acceptance of reports as referred to in paragraph (1). <Amended by Act No. 4814, Dec. 22, 1994; Act No. 5256, Jan. 13, 1997>

[This Article Newly Inserted by Act No. 4316, Jan. 14, 1991]

Article 8(Report, etc. on Acquisition of Stocks or Quotas by Merger, Division, etc.) #

(1) If a foreign investor intends to acquire stocks or quotas falling under any of the following subparagraphs, he shall file reports thereon with the Minister of Finance and Economy: <Amended by Act No. 4316, Jan. 14, 1991; Act No. 5256, Jan. 13, 1997; Act No. 5538, May 25, 1998>

1. When a foreign investor acquires stocks to be issued as a result of a transfer of reserved fund or revaluation reserve into the capital of the foreigner-invested enterprise concerned;

2. When a foreign investor acquires the stocks or quotas of a remaining or newly incorporated juristic person after a merger with another enterprise in exchange for his stocks or quotas of the foreigner-invested enterprise concerned at the time of such merger;

3. Deleted; <by Act No. 5256, Jan. 13, 1997>

4. When a foreigner purchases or acquires by means of inheritance, bequest or donation of the stocks or quotas of a foreigner-invested enterprise registered under Article 12 from a foreign investor; and

5. When a foreign investor converts convertible debentures which have received an approval of a loan contract in accordance with Article 19 (1), into stocks.

(2) In the case of filing of reports in accordance with the provisions of paragraph (1) above, the Minister of Finance and Economy shall make a determination, within the period of time as prescribed by the Presidential Decree, as to whether to receive and confirm such reports, and shall give notice with regard to such determination to a person who filed reports. <Amended by Act No. 5256, Jan. 13, 1997; Act No. 5538, May 25, 1998>

(3) In the case of absence of notification of receipt and confirmation of reports within the period as prescribed in paragraph(2) above, it shall be deemed that reports be received and confirmed on the date on which the period expires. <Newly Inserted by Act No. 5256, Jan. 13, 1997>

Article 8-2(Foreign Investment by Acquirement of Existing Stocks, etc.) #

(1) Deleted. <by Act No. 5538, May 25, 1998>

(2) Where a foreigner (including a person in special relationship as prescribed in the Presidential Decree; hereinafter the same shall apply) intends to make foreign investment by way of acquiring the stocks or quotas issued by enterprises managed by Korean citizens or Korean juristic persons, he shall report to the Minister of Finance and Economy in advance. <Amended by Act No. 5538, May 25, 1998>

(3) Where a foreigner intends to make foreign investment by way of acquiring the existing stocks of a military contractors enterprise or a national infrastructural industry enterprise as prescribed by the Presidential Decree(hereinafter referred to as a “enterprise requiring individual assessment”), he shall obtain permission from the Minister of Finance and Economy in advance. <Amended by Act No. 5538, May 25, 1998>

(4) Where a foreigner acquires existing stocks of an enterprise requiring individual assessment, the Minister of Finance and Economy shall grant permission pursuant to the provisions of paragraph (3) above in the case of satisfaction of requirements falling under each of the following subparagraphs: <Amended by Act No. 5538, May 25, 1998>

1. Where the acquirement by the foreigner does not exceed 15 percent of the total number of issued stocks or quotas of such enterprise; or

2. Where the foreigner does not become the largest shareholder of such enterprise.

(5) Where he desires to acquire existing stocks of an enterprise which is operating businesses subject to restrictions on investment rates by foreigners as referred to in Article 9 (referring to rate of stocks or quotas owned by foreign investors with reference to stocks or quotas of a foreignerinvested enterprise; hereinafter the same shall apply), a foreigner may acquire them within the range of investment rates by foreigner for such enterprise.

(6) Deleted. <by Act No. 5523, Feb. 24, 1998>

(7) A person who has acquired the existing stocks in contravention of the provisions of paragraph (3), (5), or (8) may not exercise his voting rights out of the existing stocks, and the Minister of Finance and Economy may order the person who has acquired the existing stocks in contravention of the provisions of paragraph (3), (5), or (8) to transfer the existing stocks concerned under the conditions as prescribed in the Presidential Decree. <Amended by Act. No. 5523, Feb. 24, 1998; Act No. 5538, May 25, 1998>

(8) Where a foreigner makes foreign investment by way of acquiring existing stocks of an enterprise that is managed by Korean citizens or Korean juristic persons through inheritance, testation, or gifts, the foreigner shall report to the Minister of Finance and Economy. <Amended by Act No. 5538, May 25, 1998>

(9) Methods of computation of maximum acquirement of existing stocks or other matters necessary for the acquirement of existing stocks by a foreigner in conformity with this Article shall be determined by the Presidential Decree.

[This Article Newly Inserted by Act No. 5256, Jan. 13, 1997]

Article 8-3(Receipt and Confirmation of Report on Foreign Investment by Acquirement of Existing Stocks) #

(1) Deleted. <by Act No. 5538, May 25, 1998>

(2) In the event of filing of reports or an application for permission in conformity with the provisions of Article 8-2 (2), (3), or (8), the Minister of Finance and Economy shall make a determination as to whether to receive and confirm reports or to grant permission within the period of time as prescribed by the Presidential Decree, and shall notify the person filing reports or making an application. <Amended by Act No. 5538, May 25, 1998>

(3) The Minister of Finance and Economy shall consult, in advance, with the competent Minister before making a decision as to whether to grant permission referred to in paragraph(2). <Amended by Act No. 5538, May 25, 1998>

(4) Where the Minister of Finance and Economy deems necessary for receipt and confirmation of reports or permission as referred to in paragraph (2), he may attach conditions to such receipt and confirmation or approval. <Amended by Act No. 5538, May 25, 1998>

(5) In the case of receipt and confirmation of reports in conformity with the provisions of Article 8-2 (2) or (8), the Minister of Finance and Economy shall receive and confirm reports within the period of time as prescribed in the provisions of paragraph (2), excluding cases falling under any subparagraph of Article 3 (1) (including circumstances in which requirements for the admission of foreign investment pursuant to the provisions of Article 9 are not fulfilled). <Amended by Act No. 5538, May 25, 1998>

[This Article Newly Inserted by Act No. 5256, Jan. 13, 1997]

Article 8-4(Foreign Investment by Long-Term Loan Method) #

The provisions of Chapter Ⅲ shall apply to foreign investments in accordance with the provisions of subparagraph 3-2 (b) of Article 2.

[This Article Newly Inserted by Act No. 5256, Jan. 13, 1997]

Article 9(Scope of Restrictions on Foreign Investment) #

The scope of business categories for which foreign investments may or may not be allowed because of falling under any of subparagraphs of Article 3(1), rates of foreign investment in the business categories concerned, timing for the admission of foreign investments, qualifications for parties concerned of joint venture investment in the Republic of Korea, or other requirements for the admission of foreign investments shall be determined by the Presidential Decree.

[This Article Wholly Amended by Act No. 5256, Jan. 13, 1997]

Article 10(Report, etc. of Foreign Investment) #

If a nonresident (referring to the nonresident as prescribed by the Foreign Exchange Control Act) desires to make a return, application, report, etc. as prescribed by this Act in connection with a foreign investment, he shall do it by designating a resident (referring to the resident as prescribed by the Foreign Exchange Control Act) as his representative.

[This Article Wholly Amended by Act No. 4814, Dec. 22, 1994]

Article 11(Payment of Object of Investment) #

(1) The foreign investor shall complete the payment of the object of the investment within two years after the report referred to in Article 7 (1) is accepted : Provided, That in case of projects as prescribed by the Presidential Decree, for the reason that those are accompanied by large-scale capital, the period of payment may be determined differently. <Amended by Act No. 4814, Dec. 22, 1994; Act No. 5256, Jan. 13, 1997>

(2) The period of payment as referred to in paragraph (1) may be extended with the approval of the Minister of Finance and Economy. <Amended by Act No. 5256, Jan. 13, 1997; Act No. 5538, May 25, 1998>

(3) Where a foreign investor fails to make contributions of objects within the period of time as prescribed in paragraph (1), it shall be deemed that reports filed in accordance with the provisions of Article 7 (1) have not been received and confirmed. <Newly Inserted by Act No. 5256, Jan. 13, 1997>

[This Article Wholly Amended by Act No. 4316, Jan. 14, 1991]

Article 12(Registration of Foreigner-Invested Enterprise) #

(1) If a foreign investor completes payment in accordance with Article 11, he shall make a registration of foreigner-invested enterprises under the conditions as prescribed by the Presidential Decree. The same shall apply to capital increase. <Amended by Act No. 4814, Dec. 22, 1994>

(2) Where a foreign investor acquires existing stocks, etc. in conformity with the provisions of Article 8-2 (referring to the cases in which the price for such existing stocks, etc. are cleared up), he shall apply for a registration of foreigner-invested enterprise under the conditions as prescribed by the Presidential Decree. <Newly Inserted by Act No. 5256, Jan. 13, 1997>

Article 13(Restriction, etc. on Disposal of Capital Goods) #

(1) If a foreign investor or a foreigner-invested enterprise desires to transfer or lend any capital goods, introduced after being examined and confirmed by the competent Minister under Article 36, or use them for the purpose other than those reported and accepted, he shall, in advance, report to the Minister of Finance and Economy, except in such cases as prescribed by the Presidential Decree. <Amended by Act No. 4584, Dec. 10, 1993; Act No. 4814, Dec. 22, 1994; Act No. 5256, Jan. 13, 1997; Act No. 5538, May 25, 1998>

(2) If a foreigner-invested enterprise registered under Article 12 desires to operate any business other than the reported and accepted one, it shall, in advance, report to the Minister of Finance and Economy, except in such cases as prescribed by the Presidential Decree. <Amended by Act No. 4584, Dec. 10, 1993; Act No. 4814, Dec. 22, 1994; Act No. 5256, Jan. 13, 1997; Act No. 5538, May 25, 1998>

(3) If a foreigner-invested enterprise registered under Article 12 desires to acquire stocks or quotas of other enterprises, it shall, in advance, report to the Minister of Finance and Economy, except in such cases as prescribed by the Presidential Decree. <Amended by Act No. 4584, Dec. 10, 1993; Act No. 5256, Jan. 13, 1997; Act No. 5538, May 25, 1998>

(4) Where a foreigner-invested enterprise desires to do such acts as referred to in paragraphs (1) through (3), if falling under the criteria as determined by the Presidential Decree, it shall, in advance, obtains the permission of the Minister of Finance and Economy. <Amended by Act No. 4584, Dec. 10, 1993; Act No. 5256, Jan. 13, 1997; Act No. 5538, May 25, 1998>

(5) In the case of filing of reports in accordance with the provisions of paragraphs (1) through (3), the Minister of Finance and Economy shall make a determination as to whether to receive and confirm reports within the period of time as prescribed in the Presidential Decree and notify the person who has filed reports. <Newly Inserted by Act No. 5256, Jan. 13, 1997; Act No. 5538, May 25, 1998>

(6) In the case of absence of notification of receipt and confirmation of reports within the period of time as prescribed in paragraph(5) above, it shall be deemed that reports be received and confirmed on the date on which the period of time expires. <Newly Inserted by Act No. 5256, Jan. 13, 1997>

[This Article Wholly Amended by Act No. 4316, Jan. 14, 1991]

Article 13-2(Use of Foreigner-Invested Fund) #

(1) No foreign investor or foreigner-invested enterprise shall use the invested fund for the purpose other than the authorized or reported and accepted one. <Amended by Act No. 4814, Dec. 22, 1994; Act No. 5256, Jan. 13, 1997>

(2) In order to make the fund introduced by a foreign investor or foreignerinvested enterprise be used in conformity with the purpose of the authorization or acceptance of the report, the Minister of Finance and Economy may take necessary measures for the management, etc. of the induced fund. <Amended by Act No. 4814, Dec. 22, 1994; Act No. 5256, Jan. 13, 1997; Act No. 5538, May 25, 1998>

[This Article Newly Inserted by Act No. 4316, Jan. 14, 1991]

Article 14(Reduction and Exemption of Corporate Tax, etc.) #

(1) Where a foreign investment intending to carry on any enterprise falling under any of the following subparagraphs, is conformed to such criteria as determined by the Presidential Decree, the corporate tax, income tax, acquisition tax, property tax and aggregate land tax shall be reduced or exempted, respectively, under the conditions as prescribed in paragraphs (2) through (5):

1. Business accompanied by high technology requisite for augmenting the international competitive power of domestic industry;

2. Business moving in the free export zone as prescribed by the Act on the Establishment of Free Export Zones; and

3. Business which is inevitable to reduce or exempt the taxes to induce any foreign investment, and which is prescribed by the Presidential Decree.

(2) With respect to the corporate tax or income tax on a foreigner-invested enterprise, the tax only on the income accruing from carrying on a business which is the object of reduction and exemption of the corporate tax or income tax under paragraph (1), shall be reduced or exempted as follows: <Amended by Act No. 5256, Jan. 13, 1997>

1. In case of the business as referred to in paragraph (1) 1, in the taxable year ending within five years from the taxable year in which the first income accrues from the business after commencement thereof (if no income accrues from the business until the taxable year in which the day on which five years expire, is included, the taxable year in which the day on which five years expire, is included), the sum of the amounts (hereinafter in this paragraph referred to as “tax amount to be reduced or exempted”) calculated by multiplying the amount equivalent to the corporate tax or income tax on the business income (referring to the amount calculated by multiplying the total calculated tax amount by the rates of the income accruing from carrying on the business as referred to in paragraph (1) 1, to the total tax base), by the ratio of foreign investment (referring to the ratio of stocks or quotas owned by foreign investor to those of the enterprise concerned; hereinafter the same shall apply), shall be reduced or exempted, and in the taxable year ending within three years thereafter, the tax amount equivalent to 50/100 of the tax amount to be reduced or exempted; and

2. In case of the business as referred to in paragraph (1) 2 or 3, in the taxable year in which the commencement day of business is included, and in that ending within three years thereafter, the total of the tax amounts to be reduced or exempted shall be reduced or exempted, and in the taxable year ending within two years thereafter, the tax amount equivalent to 50/100 of the tax amount to be reduced or exempted.

(3) The corporate tax or income tax on any dividend accruing from stocks or quotas acquired by a foreign investor shall be reduced or exempted in the ratio of the income accruing from carrying on the business which is the object of the reduction and exemption of the corporate tax or income tax under paragraph (1), to the income in each taxable year of the foreignerinvested enterprise, as follows:

1. With respect to the dividend received from an enterprise carrying on the business as referred to in paragraph (1) 1, the total tax amount shall be reduced or exempted, while the total corporate tax or income tax is reduced or exempted under paragraph (2) 1, and the tax amount equivalent to 50/100, while the tax amount equivalent to 50/100 of the corporate tax or income tax is reduced or exempted; and

2. With respect to the dividend received from the enterprise carrying on the business as referred to in paragraph (1) 2 or 3, the tax amount equivalent to 50/100 shall be reduced or exempted, while the corporate tax or income tax is reduced or exempted under paragraph (2) 2.

(4) With respect to the acquisition and property taxes on any property acquired and held by a foreigner-invested enterprise to carry on a reported and accepted business, the tax amount thereof shall be reduced or exempted, and with respect to the aggregate land tax, the tax base shall be deducted, as follows: <Amended by Act No. 5256, Jan. 13, 1997>

1. Reduction, exemption or deduction on any property acquired and held for carrying on the business as referred to in paragraph (1) 1:

(a) In case of the acquisition and property taxes, the total amount calculated by multiplying the calculated tax amount of the property by the ratio of the foreign investment (hereinafter in this paragraph and paragraph (5) referred to as “tax amount to be reduced or exempted”), shall be reduced or exempted within five years as of the commencement date of the business, and the tax amount equivalent to 50/100 of the tax amount to be reduced or exempted, within three years thereafter; and

(b) In case of the aggregate land tax, the total amount calculated by multiplying the tax base of the property by the ratio of the foreign investment (hereinafter referred to as “amount to be deducted”) shall be deducted from the tax base during five years as of the commencement date of the business, and the amount equivalent to 50/100 of the amount to be deducted during three years thereafter.

2. Reduction, exemption or deduction on the property acquired and held to carry on the business as referred to in paragraph (1) 2 or 3:

(a) In case of the acquisition and property taxes, the tax amount equivalent to 50/100 of the tax amount to be reduced or exempted, within five years as of the commencement date of the business, shall be reduced or exempted; and

(b) In case of the aggregate land tax, the tax amount equivalent to 50/100 of the amount to be deducted for five years as of the commencement date of the business shall be deducted from tax base.

(5) Notwithstanding the provisions of paragraph (4), if there is any property acquired and held by a foreigner-invested enterprise with the intention of using for the business as referred to in each subparagraph of paragraph (1), prior to the commencement date of the business, the amount of the acquisition and property taxes on such property shall be reduced or exempted, and with respect to the aggregate land tax, the tax base thereof shall be deducted, as follows:

1. Reduction, exemption or deduction on the property acquired and held to carry on the business as referred to in paragraph (1) 1:

(a) In case of the acquisition tax on the property acquired after the decision on the reduction or exemption of the tax is made under paragraph (7), the total tax amount to be reduced or exempted, shall be reduced or exempted;

(b) In case of the property tax, the total tax amount to be reduced or exempted, shall be reduced or exempted for five years after acquisition of the property, and the tax amount equivalent to 50/ 100 of the tax amount to be reduced or exempted for three years thereafter; and

(c) In case of the aggregate land tax, the total amount to be deducted, shall be deducted from the tax base for five years after the acquisition of the property, and the amount equivalent to 50/100 of the amount to be deducted for three years thereafter.

2. Reduction, exemption or deduction on the property acquired and held to carry on the business as referred to in paragraph (1) 2 or 3:

(a) In case of the acquisition tax on the property acquired after the decision on the reduction or exemption of the tax is made under paragraph (7), the tax amount equivalent to 50/100 of the tax amount to be reduced or exempted, shall be reduced or exempted;

(b) In case of the property tax, the tax amount equivalent to 50/100 of the tax amount to be reduced or exempted, shall be reduced or exempted for five years as of the acquisition date of the property; and

(c) In case of the aggregate land tax, the amount equivalent to 50/100 of the amount to be deducted, shall be deducted from the tax base for five years after the acquisition date of the property.

(6) Where a foreign investor or a foreigner-invested enterprise desires to obtain the reduction or exemption as referred to in paragraphs (2) through (5), an application for reduction or exemption shall be filed with the Minister of Finance and Economy not later than the end of the taxable year in which the commencement day of the business of such foreignerinvested enterprise is included (in case of a capital increase, the day on which two years expire after the report on the foreign investment is accepted, or the authorization is granted). <Amended by Act No. 5256, Jan. 13, 1997; Act No. 5538, May 25, 1998>

(7) The Minister of Finance and Economy shall, upon receiving the application for reduction or exemption as referred to in paragraph (6), determine whether the reduction or exemption is granted, after consulting with the competent Minister, and notify the applicant: Provided, That with respect to the reduction or exemption of the acquisition, property and aggregate land taxes as referred to in paragraphs (4) and (5), he shall consult with the Minister of Government Administration and Home Affairs. <Amended by Act No. 5256, Jan. 13, 1997; Act No. 5538, May 25, 1998>

(8) The provisions of paragraphs (2) through (5) shall not apply to foreign investments pursuant to the provisions of Article 8-2. <Newly Inserted by Act No. 5256, Jan. 13, 1997>

[This Article Wholly Amended by Act No. 4814, Dec. 22, 1994]

Article 15(Exemption and Reduction of Customs Duties, etc.) #

(1) Where the following capital goods (excluding those as determined by the Presidential Decree) required for the business as prescribed in each subparagraph of Article 14 (1), are introduced according to the contents reported and accepted under Article 7 or 7-4, the customs duties, the special consumption tax and the value-added tax shall be exempted or reduced, but in case of the business as prescribed in Article 14 (1) 1, the amount of such taxes shall be exempted, and in case of the businesses as prescribed in subparagraphs 2 and 3 of the said paragraph of the said Article, the tax amount equivalent to 50/100 thereof shall be reduced and exempted: <Amended by Act No. 5256, Jan. 13, 1997>

1. Capital goods which a foreigner-invested enterprise introduces by means of foreign or domestic means of payment contributed by foreign investors;

2. Capital goods which a foreign investor introduces by means of object of investment; and

3. Capital goods which a foreign investor introduces by means of dividend received from foreigner-invested enterprise.

(2) If a foreign investor or a foreigner-invested enterprise desires to obtain the reduction or exemption as referred to in paragraph (1), an application for reduction or exemption shall be made under the conditions as prescribed by the Presidential Decree.

(3) The provisions of paragraph(1) shall not apply to foreign investments pursuant to the provisions of Article 8-2. <Newly Inserted by Act No. 5256, Jan. 13, 1997>

[This Article Wholly Amended by Act No. 4814, Dec. 22, 1994]

Article 16(Exemption or Reduction of Tax on Capital Increase) #

(1) Where a foreigner-invested enterprise increases its capital, the provisions of Articles 14 and 15 shall apply mutatis mutandis to the tax exemption or reduction on such increased capital: Provided, That with respect to an application for tax reduction and exemption in conformity with the criteria as determined by the Presidential Decree, the consultation with

the competent Minister may be omitted. <Amended by Act No. 4316, Jan. 14, 1991; Act No. 4584, Dec. 10, 1993>

(2) Tax exemption or reduction of stocks acquired by a foreign investor as a result of a transfer of reserved fund or revaluation reserves into capital in accordance with Article 8 (1) 1 shall follow the tax exemption or reduction of the original stocks which were the basis of such acquisition. <Amended by Act No. 4814, Dec. 22, 1994; Act No. 5256, Jan. 13, 1997>

(3) In application of the provisions of paragraph (1), the beginning day of business shall be the day on which the modified registration on the capital increase is made. <Newly Inserted by Act No. 4584, Dec. 10, 1993>

Article 17(Additional Collection of Taxes) #

(1) In case of falling under any of the following subparagraphs, the chief of the revenue office shall collect additionally any income or corporate tax reduced or exempted under Article 14 (2) under the conditions as prescribed by the Presidential Decree: <Amended by Act No. 4814, Dec. 22, 1994; Act No. 5256, Jan. 13, 1997>

1. Where the registration is cancelled under the provisions of Article 18 (1);

2. Where reported and accepted contents, or conditions concomitant with acceptance of the report are not fulfilled;

3. Where a foreign investor transfers stocks or quotas owned under this Act to a Korean citizen or Korean juristic person; and

4. Where a foreigner-invested enterprise discontinues its business.

(2) In case of falling under any of the following subparagraphs, the chief of the revenue office or customs collector shall collect additionally the tariffs, the special consumption tax and the value-added tax reduced or exempted under Article 15 under the conditions as prescribed by the Presidential Decree: <Amended by Act No. 4814, Dec. 22, 1994; Act No. 5256, Jan. 13, 1997>

1. Where the registration is cancelled under Article 18 (1);

2. Where the foreign capital is used or disposed for the purposes other than those reported and accepted;

3. Where the authorized or reported and accepted contents, or conditions concomitant with the report and acceptance are not fulfilled;

4. Where the foreign investor transfers stocks or quotas owned under this Act to a Korean citizen or Korean juristic person; and

5. Where the foreigner-invested enterprise discontinues its business.

(3) In case of falling under any of the following subparagraphs, the head of the local government shall collect additionally the acquisition, property and aggregate land taxes reduced or exempted under Article 14 (4) and (5) under the conditions as prescribed by the Presidential Decree. In this case, if it falls under subparagraph 2, the tax amount equivalent to the amount corresponding to the deficient rate shall be collected additionally: <Amended by Act No. 4814, Dec. 22, 1994; Act No. 5256, Jan. 13, 1997>

1. Where the enterprise as prescribed in Article 14 (5) fails to pay the object of investment within the period as prescribed in Article 11;

2. Where the ratio of stocks or quotas of the foreign investor becomes lower than that of stocks or quotas at the time of the reduction and exemption due to the change in the ratio of stocks or quotas of the foreign investor after the taxes are reduced or exempted under Article 14 (5);

3. Where the foreign investor transfers stocks or quotas owned under this Act to a Korean citizen or Korean juristic person after the taxes are reduced or exempted under Article 14 (4);

4. Where the reported and accepted contents or conditions concomitant with the report and acceptance are not fulfilled;

5. Where the registration is cancelled under Article 18 (1); and

6. Where the foreigner-invested enterprise discontinues its business.

(4) The range of tax amount to be collected additionally under paragraphs (1) through (3) shall be determined by the Presidential Decree. <Newly Inserted by Act No. 4519, Dec. 8, 1992>

(5) In case of falling under any of the following subparagraphs, the reduced or exempted tax amount may not be collected additionally under the conditions as prescribed by the Presidential Decree: <Newly Inserted by Act No. 4519, Dec. 8, 1992; Act No. 4814, Dec. 22, 1994; Act No. 5256, Jan. 13, 1997; Act No. 5538, May 25, 1998>

1. Where a foreigner-invested enterprise is dissolved due to a merger and thereby the registration of foreigner-invested enterprise is cancelled;

2. Where the capital goods introduced and being used with the customs duties, etc. exempted or reduced under Article 15 becomes unuseful for the primary object due to any natural disaster, terrestrial uphe aval, other inevitable reason, depreciation, technological progress, change in economic conditions, etc., and are thereby used or disposed of for any purpose other than primary object with the approval of the Minister of Finance and Economy;

3. Where owned stocks or quotas are transferred to a Korean citizen or Korean juristic person for the purpose of fulfilling the conditions concomitant with the acceptance of report on the foreign invest, or opening the foreigner-invested enterprise to the public under the Securities and Exchange Act; and

4. Where it is deemed that the object of tax reduction and exemption is accomplished, and it is prescribed by the Presidential Decree, excluding those as referred to in subparagraphs 1 through 3.

[This Article Wholly Amended by Act No. 4316, Jan. 14, 1991]

Article 17-2(Loan, etc. of National Property) #

(1) The Minister of Finance and Economy or the administration agency of national property may allow a foreigner-invested enterprise for which is made under Article 14 (1) 1, a decision on reduction and exemption of tax on land and factory owned by the State and other national property (hereinafter referred to as “land, etc.”), to use or benefit from them, or loan them to the enterprise (hereinafter referred to as “lease”), in the limit of twenty years, regardless of the provisions of Articles 27 (1) and 36 (1) of the State Properties Act. <Amended by Act No. 5256, Jan. 13, 1997; Act No. 5538, May 25, 1998>

(2) The provisions of Articles 27 (2) and 36 (2) of the State Properties Act shall be applicable mutatis mutandis to the renewal of the lease period of the land, etc. put to lease under paragraph (1).

(3) Notwithstanding the provisions of Article 24 (3) of the State Properties Act, if any land owned by the State is leased under paragraph (1), it shall be permitted to construct any factory and other permanent facilities on such land. In this case, the lease shall be made on the condition that the facilities are contributed to the State, or returned to the State after restoring to the original state, when the contract of lease is terminated.

(4) Notwithstanding the provisions of Articles 25 (1) and 38 of the State Properties Act, the fees or rents of the land, etc. leased under paragraph (1) shall, if necessary, may be indicated in foreign currency under the conditions as prescribed by the Presidential Decree.

[This Article Newly Inserted by Act No. 4814, Dec. 22, 1994]

Article 17-3(Gratuitous Lease, etc. of Exclusive Complex for Foreign Enterprises) #

(1) In the case of lease of lands, etc. falling under any of the following subparagraphs to foreigner-invested enterprises carrying out businesses as provided for in the Presidential Decree, the Minister of Finance and Economy or the administration agency of national property may, through the consultation with the Minister of Commerce, Industry and Energy, afford reduction of or exemption from fees or rents of such land, etc. in accordance with the Presidential Decree, despite the provisions of Article 36 of the Industrial Placement and Factory Construction Act and Article 38 of the Industrial Sites and Development Act: <Amended by Act No. 5454, Dec. 13, 1997; Act No. 5538, May 25, 1998>

1. Land, etc. owned by the State situated in an exclusive complex for foreign enterprises pursuant to the provisions of Article 35-3 (1) of the Industrial Placement and Factory Construction Act; or

2. Land, etc. situated in the national industrial complexes pursuant to the provisions of Article 6 of the Industrial Sites and Development Act.

(2) The period of lease of land, etc. leased to foreigner-invested enterprises with the benefit of reduction or exemption from fees or rents pursuant to the provisions of paragraph(1) may be determined within 20 years, despite the provisions of Article 38 of the Industrial Sites and Development Act. <Amended by Act No. 5454, Dec. 13, 1997>

[This Article Newly Inserted by Act No. 5256, Jan. 13, 1997]

Article 18(Cancellation, etc. of Permission) #

(1) The Minister of Finance and Economy may cancel permission or eliminate registration, where a foreign investor or foreigner-invested enterprise falls under any of the following subparagraphs: <Amended by Act No. 5538, May 25, 1998>

1. Where a foreign investor fails to comply with the provisions of Article 8-2 (7);

2. Where a foreigner-invested enterprise registered in accordance with the provisions of Article 12 closes its businesses or has not carried out services for two or more consecutive years;

3. Where a foreigner-invested enterprise registered in accordance with the provisions of Article 12 or permitted under the provisions of Article 8-2 (3) fails to comply with corrective orders or other necessary measures as referred to in Article 39 (3);

4. Where there take place grounds of dissolution of a foreigner-invested enterprise registered in accordance with the provisions of Article 12 or permitted under the provisions of Article 8-2 (3);

5. Where a foreign investor has made an application for the cancellation of permission; or

6. Where a foreign investor has made an application for the elimination of registration under the conditions as prescribed by the Presidential Decree.

(2) Where a foreign investor (including a specially related person as provided for in the Presidential Decree; hereinafter in this Article the same shall also apply), subject to the cancellation of permission or elimination of registration of foreign investments for reasons of contents as falling under the provisions of paragraph (1) 1 above (hereinafter referred to as “sanctions”), or to sanctions pursuant to the provisions of subparagraph 3 of the said paragraph, files reports on or applies for permission of foreign investments pursuant to the provisions of this Act not later than 3 years from the date of receipt of such sanctions, the Minister of Finance and Economy may refuse to receive and confirm reports or grant permission. <Amended by Act No. 5538, May 25, 1998>

(3) Where a foreign investor (excluding a person who is subject to the provisions of paragraph(2)) files reports or applies for permission under this Act not later than 5 years from the date on which he violates the provisions of Article 8-2, the Minister of Finance and Economy may refuse to receive and confirm reports or grant permission. <Amended by Act No. 5538, May 25, 1998>

[This Article Wholly Amended by Act No. 5256, Jan. 13, 1997]

Article 18-2(Transfer, etc. of Stocks or Quotas) #

(1) Where a foreign investor transfers any stocks or quotas acquired under Article 7, 7-4, 8, or 8-2 to another person, or reduces stocks or quotas owned by him through a reduction of capital by retirement of stocks or quotas, he shall report to the Minister of Finance and Economy under the conditions as prescribed by the Presidential Decree. <Amended by Act No. 5256, Jan. 13, 1997; Act No. 5538, May 25, 1998>

(2) Where the permission of a foreign investment is cancelled, or the registration thereof is eliminated, under the provisions of subparagraphs of Article 18 (1), the foreign investor shall transfer the stocks or quotas owned by him to a Korean citizen or Korean juristic person, within six months after the permission is cancelled, or the registration is eliminated: Provided, That if there is any inevitable reason, the period of transfer may be extended in the limit of six months, with the approval of the Minister of Finance and Economy. <Amended by Act No. 5256, Jan. 13, 1997; Act No. 5538, May 25, 1998>

(3) Where a foreign investor fails to complete the payment of objects of investment within the period of time as provided for in Article 11(1), or where a foreign investor who has filed reports on foreign investments pursuant to the provisions of Article 7 (1), but has not applied for registration thereof in accordance with the provisions of Article 12 fails to comply with corrective orders or other necessary measures as provided for in the Article 39 (3), he shall transfer stocks or quotas owned by him to Korean citizens or Korean juristic persons within 6 months from the date on which the payment period of investment expires pursuant to the provisions of Article 11(1) or the date on which he fails to comply with corrective orders or necessary measures as provided for in Article 39 (3): Provided, That where there are unavoidable reasons, the period of time may be extended in the limit of 6 months with the approval of the Minister of Finance and Economy. <Newly Inserted by Act No. 5256, Jan. 13, 1997; Act No. 5538, May 25, 1998>

(4) In the case of filing of reports in accordance with the provisions of paragraph (1) above, the Minister of Finance and Economy shall make a determination as to whether to receive and confirm such reports, within the period of time as prescribed by the Presidential Decree, and shall give notice with regard to such determination to a person who has filed reports. <Newly Inserted by Act No. 5256, Jan. 13, 1997; Act No. 5538, May 25, 1998>

(5) In the case of absence of notification of receipt and confirmation of reports within the period of time as prescribed in paragraph (4) above, it shall be deemed that reports have been received and confirmed at the expiration of the period of time. <Newly Inserted by Act No. 5256, Jan. 13, 1997>

[This Article Wholly Amended by Act No. 4814, Dec. 22, 1994]

Article 18-3(Comprehensive Administrative Support to Foreign Investment) #

(1) In order to carry out comprehensively the civil affairs administration, information, counselling, settlement of grievance, and other administrative support affairs which are related to the foreign investment, the Minister of Finance and Economy may operate an administrative support division in which public officials under the jurisdiction of the Ministry of Finance and Economy and other central administrative agencies, and Special Metropolitan City, Metropolitan Cities, or Dos (hereinafter referred to as a “City/ Do”) work jointly (hereinafter referred to as “comprehensive foreign investment support center”). <Amended by Act No. 5256, Jan. 13, 1997; Act No. 5538, May 25, 1998>

(2) The Minister of Finance and Economy may request that the chief of related central administrative agencies, and the Special Metropolitan City Mayor, Metropolitan City Mayors, or Do governors (hereinafter referred to as the “Mayor/Do governor”) to have public officials under their jurisdiction work as resident or dispatched ones at the comprehensive foreign investment support center. <Amended by Act No. 5256, Jan. 13, 1997; Act No. 5538, May 25, 1998>

(3) Matters other than those as referred to in paragraphs (1) and (2), which are necessary for the operation of a comprehensive foreign investment support center, shall be determined by the Presidential Decree. <Amended by Act No. 5256, Jan. 13, 1997>

[This Article Newly Inserted by Act No. 4814, Dec. 22, 1994]

Article 18-4(Establishment of Foreign Investment Promotion Organ) #

(1) In order to positively induce foreign investment, and efficiently support foreigner-invested enterprises, the Mayor/Do governor may establish the foreign investment promotion organ (hereinafter referred to as “foreign investment promotion office”) under the conditions as prescribed by the Presidential Decree. <Amended by Act No. 5256, Jan. 13, 1997>

(2) One foreign investment promotion officer and necessary public officials shall be assigned to the foreign investment promotion office, under the conditions as prescribed by the Presidential Decree.

(3) Deleted. <by Act No. 5256, Jan. 13, 1997>

(4) Matters other than those as referred to in paragraphs (1) and (2), which are necessary for the establishment and operation of the foreign investment promotion office, shall be determined by the Presidential Decree. <Amended by Act No. 5256, Jan. 13, 1997>

[This Article Newly Inserted by Act No. 4814, Dec. 22, 1994]

Article 18-5(Special Case on Settlement, etc. of Civil Petition Affairs related to Construction of Factory) #

(1) With respect to civil petition affairs which are related to the construction of factory by a foreigner-invested enterprise, and the object of which can be realized only with the permission, authorization, license, approval, designation, release, report, recommendation, consultation, etc. of many related agencies pursuant to related Acts and subordinate statutes (hereinafter in this Article and Article 18-6 referred to as “permission, etc.”), the foreign investment promotion officer shall have the related agencies examine en bloc and jointly such matters in order to settle them rapidly and harmoniously.

(2) As used in paragraph (1), the term “civil petition affairs related to the construction of factory” by a foreigner-invested enterprise, means any of the following subparagraphs: <Amended by Act No. 5091, Dec. 29, 1995; Act No. 5256, Jan. 13, 1997>

1. Approval on the construction of factory as prescribed in Article 13 (1) of the Industrial Placement and Factory Construction Act;

2. Deleted;〈by Act No. 5091, Dec. 29, 1995〉

3. Approval on an operational plan as prescribed in Article 21 (1) of the Support for Small and Medium Enterprise Establishment Act;

4. Permission, etc. as prescribed in subparagraphs of Article 13 (3) of the Industrial Placement and Factory Construction Act, and subparagraphs of Article 22 (1) of the Support for Small and Medium Enterprise Establishment Act; and

5. Permission, etc. related to other factory construction, and prescribed by the Presidential Decree.

(3) Upon receiving the civil petition affairs documents falling under any of subparagraphs of paragraph (2) from a foreigner-invested enterprise, the head of the Si/Gun/Gu (referring to the autonomous Gu; hereinafter the same shall apply) and the heads of other related agencies shall send without delay a copy of such documents to the Mayor/Do governor concerned.

(4) Any foreigner-invested enterprise may file the civil petition affairs documents falling under any of subparagraphs of paragraph (2), with the foreign investment promotion officer or the chief of comprehensive foreign investment support center (hereinafter referred to as the “chief of comprehensive foreign investment support center”) of the Mayor/Do governor concerned. In this case, the foreign investment promotion officer or the chief of comprehensive foreign investment support center shall transfer such documents without delay to the heads of the Si/Gun/Gu concerned or the heads of other related agencies, and check the situation of settlement so that the civil petition affairs be settled rapidly and harmoniously. <Amended by Act No. 5256, Jan. 13, 1997>

(5) Matters other than those as referred to in paragraphs (1), (3) and (4), which are necessary for settlement of civil petition affairs as referred to in subparagraphs of paragraph (2), shall be determined by the Presidential Decree.

[This Article Newly Inserted by Act No. 4814, Dec. 22, 1994]

Article 18-6(Special Case on Transaction Period of Civil Petition Affairs related to Factory Construction) #

(1) Notwithstanding the provisions of other Acts, the head of the Si/Gun/ Gu or other related agency shall settle the civil petition affairs falling under any of subparagraphs of Article 18-5 (2) within the following period: <Amended by Act No. 5256, Jan. 13, 1997>

1. In case of such insignificant civil petition affairs as determined by the Presidential Decree, ten days; and

2. In case of civil petition affairs excluding those as referred to in subparagraph 1, and those as determined by the Presidential Decree, thirty days.

(2) If there is any inevitable reason as prescribed by the Presidential Decree, the head of the Si/Gun/Gu or other related agency may extend only once respectively the transaction period in the limit of ten days in case of the civil petition affairs as referred to in paragraph (1) 1, and twenty days in case of those as referred to in paragraph (1) 2.

(3) If there is no notification of whether the permission, etc. is granted within the transaction period as referred to in paragraphs (1) and (2), the permission, etc. on the civil petition affairs excluding those as determined by the Presidential Decree shall be considered to have been granted on the following day of the date on which the transaction period ends. In this case, the head of the Si/Gun/Gu or other related agency shall deliver the document attesting that the permission, etc. is granted, to the applicant or reporter, within five days and notify a foreign investment promotion officer or the chief of comprehensive foreign investment support center thereof. <Amended by Act No. 5256, Jan. 13, 1997>

[This Article Newly Inserted by Act No. 4814, Dec. 22, 1994]

Article 18-7(Collection and Drawing Up of Statistical Data on Foreign Investments) #

(1) The Minister of Finance and Economy may request the Mayor/Do Governor or foreigner-invested enterprises to provide data, statistics, etc. necessary for the purpose of the analysis of influences by foreign investments upon the national economy, such as economic growth, balance of payments, employment, etc. <Amended by Act No. 5538, May 25, 1998>

(2) The Mayor/Do governor or foreigner-invested enterprises to whom the Minister of Finance and Economy has asked for the submission of data, statistics, etc. relating to foreign investments in accordance with the provisions of paragraph(1) shall comply with such request unless there are particular reasons to the contrary. <Amended by Act No. 5538, May 25, 1998>

(3) Public officials taking charge of collecting or drawing up data, statistics, etc. on foreign investments in accordance with the provisions of paragraphs (1) and (2) shall not let out the information on business secrets of such enterprises.

[This Article Newly Inserted by Act No. 5256, Jan. 13, 1997]

Article 19(Authorization of Loan Contract) #

(1) Where a Korean citizen or Korean juristic person enters into a loan contract with a foreigner (excluding economic cooperation organizations), the authorization of the Minister of Finance and Economy shall be obtained. The same shall also apply when any change in the contract happens: Provided, That in case of the loan pursuant to the provisions of subparagraph 3-2 (b) of Article 2, reports shall be filed with the Minister of Finance and Economy. The same shall also apply when any change in the contract happens. <Amended by Act No. 5256, Jan. 13, 1997; Act No. 5538, May 25, 1998>

(2) Where the Minister of Finance and Economy deems it necessary, he may attach conditions to the authorization or acceptance and confirmation of reports as referred to in paragraph (1). <Amended by Act No. 5256, Jan. 13, 1997; Act No. 5538, May 25, 1998>

(3) The loan contract authorized or reported and accepted pursuant to paragraph (1) shall be enforced within six months from the date of authorization: Provided, That this period may be extended with the approval of the Minister of Finance and Economy. <Amended by Act No. 5256, Jan. 13, 1997; Act No. 5538, May 25, 1998>

(4) With respect to the authorization referred to in paragraph (1) above, the Minister of Finance and Economy may give public notice of directives about the enterprise to be authorized, the use and limit of loan inducement, or other necessary matters. <Newly Inserted by Act No. 5256, Jan. 13, 1997; Act No. 5538, May 25, 1998>

Article 20(Restriction on Disposal of Foreign Capital, etc.) #

Anyone who intends to sell, transfer or lease foreign capital induced through a loan contract, or to use it for purposes other than those approved, shall obtain the permission of the Minister of Finance and Economy in advance: Provided, That if the durable years as prescribed by the Income Tax Act or the Corporate Tax Act has lapsed, or if the foreign capital is conformed to the criteria as determined by the Presidential Decree, it shall be reported to the Minister of Finance and Economy within the period as determined by the Ordinance of the Minister of Finance and Economy after the foreign capital is sold, transferred, leased, or used for any purpose other than that for which it is introduced. <Amended by Act No. 4584, Dec. 10, 1993; Act No. 5256, Jan. 13, 1997; Act No. 5538, May 25, 1998>

Article 21 #

Deleted.<by Act No. 4316, Jan. 14, 1991>

Article 22(Cancellation of Authorization) #

The Minister of Finance and Economy may cancel the authorization or acceptance and confirmation of reports when a borrower of a loan contract has failed to enforce the contract concerned within the period prescribed in Article 19 (3). <Amended by Act No. 5256, Jan. 13, 1997; Act No. 5538, May 25, 1998>

Article 23(Report of Technology Introduction Contract) #

(1) If a Korean citizen or Korean juristic person concludes a technology introduction contract with a foreigner, he shall report to the Minister of Finance and Economy. The same shall also apply to any change in the contract. <Amended by Act No. 5256, Jan. 13, 1997; Act No. 5538, May 25, 1998>

(2) The Minister of Finance and Economy shall, upon receiving a report under paragraph (1), decide whether he accepts the report within the period as prescribed by the Presidential Decree, and notify the reporter thereof. <Amended by Act No. 4316, Jan. 14, 1991; Act No. 4584, Dec. 10, 1993; Act No. 5256, Jan. 13, 1997; Act No. 5538, May 25, 1998>

(3) If no notification of whether the report is accepted is made in the settlement period as referred to in paragraph (2), the report shall be considered to have been accepted at the expiration of such settlement period. <Amended by Act No. 4316, Jan. 14, 1991>

(4) The technology introduction contract for which a report is accepted in accordance with paragraph (1) shall become effective within six months from the date of the acceptance of the report: Provided, That the period may be extended with the approval of the Minister of Finance and Economy. <Amended by Act No. 5256, Jan. 13, 1997; Act No. 5538, May 25, 1998>

(5) The technology introduction contract which has not become effective within the period referred to in paragraph (4) shall be deemed null and void.

(6) Matters other than those as referred to in paragraphs (2) through (5), which are necessary for a report of a technology introduction contract and acceptance of the report, shall be determined by the Presidential Decree. <Newly Inserted by Act No. 4584, Dec. 10, 1993>

Article 24(Exemption of Tax on Technology Introduction Cost) #

(1) In case of a contract introducing a high technology indispensable to a build-up of the international competitive power of the domestic industry, and conformed to such criteria as determined by the Presidential Decree, the corporate tax or income tax on the price of the introduced technology, acquired by the supplier of the technology according to the contents of the contract, shall be exempted for five years as of the day on which the contract provides to pay the price for the first time. <Amended by Act No. 4814, Dec. 22, 1994>

(2) If the technology suppliers intends to have the tax exempted under paragraph (1), he shall make an application for exemption to the Minister of Finance and Economy at the same time as the report on such technology introduction contract. <Amended by Act No. 4519, Dec. 8, 1992; Act No. 5256, Jan. 13, 1997; Act No. 5538, May 25, 1998>

[This Article Wholly Amended by Act No. 4316, Jan. 14, 1991]

Article 25(Public Loan Inducement Program) #

(1) A governmental agency or a Korean juristic person who intends to induce foreign capital through a public loan agreement (hereinafter referred to as “public loan”) in accordance with this Act shall submit an application therefor to the Minister of Finance and Economy. <Amended by Act No. 5256, Jan. 13, 1997; Act No. 5538, May 25, 1998>

(2) Where the Minister of Finance and Economy receives an application referred to in paragraph (1), and decides to promote the public loan project, he shall make out a public loan inducement program specifying the contents of the projects, loan amounts, the expected lenders and terms and conditions and other necessary matters concerning each public loan project. <Amended by Act No. 5256, Jan. 13, 1997; Act No. 5538, May 25, 1998>

(3) The Government shall, in advance, obtain a resolution of the National Assembly on the public loan inducement program referred to in paragraph (2). In case where there happen reasons falling under any of the following subparagraphs on the public loan program approved by the National Assembly, it shall obtain another resolution of the National Assembly for them:

1. Where the amount of loan by each business exceeds that approved by the National Assembly;

2. Where the loan conditions by each business is more unfavorable than that approved by the National Assembly; and

3. Where the contents by each business are changed remarkably compared with those existing at the time of resolution of the National Assembly.

(4) The Minister of Finance and Economy shall without delay notify the applicants and related agencies of the decision as to whether he promotes the public loan inducement concerned in accordance with the public loan inducement program, for which a resolution of the National Assembly has been obtained. <Amended by Act No. 5256, Jan. 13, 1997; Act No. 5538, May 25, 1998>

Article 26(Conclusion of Public Loan Agreements) #

(1) The Minister of Finance and Economy shall, on behalf of the Government, carry out the negotiation and coordination for implementing the public loan inducement program referred to in Article 25 (2), and conclude public loan agreements after obtaining a resolution of the National Assembly pursuant to Article 25 (3): Provided, That if the borrower of public loan is a Korean juristic person, such juristic person shall conclude the public loan agreement. <Amended by Act No. 5256, Jan. 13, 1997; Act No. 5538, May 25, 1998>

(2) The public loan agreement concluded by a Korean juristic person pursuant to the proviso of paragraph (1) and various contracts which are related thereto and which directly affect the conclusion of the agreement concerned, shall be approved in advance by the Minister of Finance and Economy. This shall apply to any change thereto. <Amended by Act No. 5256, Jan. 13, 1997; Act No. 5538, May 25, 1998>

(3) The Minister of Finance and Economy may, pursuant to the provisions of the Presidential Decree, sublease a public loan which the Government borrowed, in whole or in part to governmental agency or a Korean juristic person which will carry out the project concerned. <Amended by Act No. 5256, Jan. 13, 1997; Act No. 5538, May 25, 1998>

(4) Upon concluding the public loan agreement pursuant to the provisions of paragraph (1), the Minister of Finance and Economy shall without delay give public notice of it in the Gazette. <Amended by Act No. 5256, Jan. 13, 1997; Act No. 5538, May 25, 1998>

Article 27(Restriction on Disposal of Foreign Capital, etc.) #

Anyone who intends to sell, assign or lease foreign capital induced through a public loan agreement or to use it for purposes other than those approved shall obtain in advance the permission of the Minister of Finance and Economy: Provided, That if the durable years as prescribed by the Income Tax Act or the Corporate Tax Act has lapsed, or if the foreign capital is conformed to the criteria as determined by the Presidential Decree, it shall be reported to the Minister of Finance and Economy within the period as determined by the Ordinance of the Prime Minister after the foreign capital is sold, assigned, leased, or used for a purpose other than one introduced. <Amended by Act No. 4584, Dec. 10, 1993; Act No. 5256, Jan. 13, 1997; Act No. 5538, May 25, 1998>

Article 28(Exemption of Taxes, Public Charges, etc.) #

(1) The taxes, public charges, etc. which are to be imposed upon the lenders directly in connection with the inducement of a public loan shall be exempted or reduced, under the conditions as provided for in the public loan agreement concerned.

(2) With respect to the remuneration paid to foreigners for the provision of technology or service in connection with the inducement of a public loan under Article 26, the income tax or corporate tax shall be exempted or reduced under the conditions as provided for in the public loan agreement concerned.

(3) The exemption or reduction of taxes, public charges, etc. referred to in paragraphs (1) and (2) may be waived upon the request made by a lender or technology supplier.

Article 29(Payment Guarantee) #

(1) A banking institution may issue payment guarantees for the obligations arising from a loan contract or a public loan agreement.

(2) The Government may issue payment guarantees for the obligations arising from a public loan agreement for those projects for which it is deemed to be difficult for banking institutions to issue payment guarantees.

(3) When the Government intends to issue the payment guarantee in accordance with paragraph (2), it shall obtain a resolution of the National Assembly in advance: Provided, That if matters regarding the issuance of payment guarantees by the Government are specified in the public loan inducement program for which a resolution of the National Assembly has been obtained pursuant to Article 25 (3), it shall be deemed that the Government have obtained the resolution of the National Assembly with respect to the issuance of payment guarantees for the projects concerned.

(4) Any person intending to obtain a payment guarantee by the Government pursuant to paragraph (2) shall apply to the Minister of Finance and Economy for the approval of the payment guarantee. <Amended by Act No. 5256, Jan. 13, 1997; Act No. 5538, May 25, 1998>

(5) The Minister of Finance and Economy shall, when granting the approval referred to in paragraph (4), obtain the approval of the President through deliberation by the State Council. <Amended by Act No. 5256, Jan. 13, 1997; Act No. 5538, May 25, 1998>

Article 30(Creation and Management of Security) #

The Minister of Finance and Economy shall acquire and manage the securities which are equivalent to the amount of payment guarantees of the Government approved pursuant to Article 29 (5) and the amount subleased pursuant to Article 26 (3): Provided, That this provision shall not apply to local governments, government-invested institutions and such persons as provided for by the Presidential Decree. <Amended by Act No. 5256, Jan. 13, 1997; Act No. 5538, May 25, 1998>

Article 31(Compulsory Disposal of Secured Property) #

(1) When a juristic person who obtained a payment guarantee by the Government to induce a public loan (hereinafter referred to as “governmentguaranteed juristic person”) fail, in whole or in part, to perform its obligations for which the payment guarantee was issued, the Minister of Finance and Economy may dispose of the secured property acquired pursuant to Article 30. This provision shall also apply to the sublease as provided for in Article 26 (3). <Amended by Act No. 5256, Jan. 13, 1997; Act No. 5538, May 25, 1998>

(2) Notwithstanding the provisions of the Civil Act and the Civil Procedure Act, the procedure for disposal of the secured property pursuant to paragraph (1) shall be governed by the example of the disposition on default of national taxes in arrears under National Tax Collection Act. <Amended by Act No. 5454, Dec. 13, 1997>

Article 32(Joint Liability of Executive Officers) #

(1) Directors or executive officers of a government-guaranteed juristic person or the borrower of sublease (excluding governmental agencies) shall be jointly and severally liable for the compensation of all losses incurred to the Government due to the government payment guarantee or the sublease of a public loan. In such case, such directors or executive officers, even if they are discharged from office, shall not be exempted from liability for losses incurred while they were in office.

(2) The collection of compensation pursuant to the provisions of paragraph (1) shall be governed by the example of the disposition on default of national taxes in arrears.

Article 33(Supervision of Government-guaranteed Juristic Persons, etc.) #

The Minister of Finance and Economy or persons designated by the Minister of Finance and Economy may, if it is deemed necessary for securing a claim for compensation in connection with a government payment guarantee or the sublease of public loans and for attaining the purposes of the public loan projects, inspect the state of business operations and the property of the government-guaranteed juristic person concerned or the borrower of the sublease concerned and may take necessary measures including a coverage for additional security. <Amended by Act No. 5256, Jan. 13, 1997; Act No. 5538, May 25, 1998>

Article 34(Report of Foreign Capital Inducement to National Assembly) #

The Minister of Finance and Economy shall prepare a report to the National Assembly concerning each of the following subparagraphs at least ninety days prior to the end of each fiscal year: <Amended by Act No. 5256, Jan. 13, 1997; Act No. 5538, May 25, 1998>

1. Matters regarding the present state of foreign capital inducement up to and including the previous year; and

2. Matters regarding the results of the execution of the public loan inducement program resolved by the National Assembly in accordance with Article 25 (3).

Article 35(Consultation) #

The Minister of Finance and Economy shall consult in advance with the competent Minister regarding those matters deemed important in granting authorization, acceptance of report(excluding the acceptance of reports in accordance with the provisions of Article 7-2), permission, approval, or cancellation in accordance with the provisions of this Act. <Amended by Act No. 4316, Jan. 14, 1991; Act No. 5256, Jan. 13, 1997; Act No. 5538, May 25, 1998>

Article 36(Examination and Confirmation of Introduced Foreign Capital) #

Where any capital goods introduced under this Act or capital goods, etc. which are reduced or exempted from taxes on the raw materials, etc., are conformed to the criteria as prescribed by the Presidential Decree, the competent Minister shall examine and confirm them, and may thereby refuse to allow the introduction of such capital goods or raw materials, etc.

[This Article Wholly Amended by Act No. 4316, Jan. 14, 1991]

Article 37 #

Deleted.<by Act No. 4584, Dec. 10, 1993>

Article 38(Report) #

(1) Anyone who has induced foreign capital in accordance with this Act shall submit a report of the inducement to the Minister of Finance and Economy not later than one month from the date of the inducement or customs clearance of the foreign capital concerned. <Amended by Act No. 5256, Jan. 13, 1997; Act No. 5538, May 25, 1998>

(2) The Minister of Finance and Economy and the competent Minister may order a foreign investor, a foreigner-invested enterprise, borrower, subborrower, technology licensee, the Governor of the Bank of Korea, the Governor of the Korea Development Bank, the heads of the relevant financial institutions and any other interested person to report those matters deemed necessary for inducing or managing the foreign capital in accordance with this Act. <Amended by Act No. 5256, Jan. 13, 1997; Act No. 5538, May 25, 1998>

Article 39(Investigation, Correction and Disposal) #

(1) Where it is deemed necessary in connection with the operation of this Act, the Minister of Finance and Economy may have public officials under his jurisdiction or the heads of the organization related to the inducement of foreign capital investigate the following matters: <Amended by Act No. 4316, Jan. 14, 1991; Act No. 4584, Dec. 10, 1993; Act No. 5256, Jan. 13, 1997; Act No. 5538, May 25, 1998>

1. Situation on the introduction, use, or disposal of foreign capital; and

2. Matters concerning the fulfillment of the contents authorized, permitted, or reported under this Act.

(2) Persons performing the investigation in accordance with paragraph (1) shall carry certificates indicating their authority and present them to the relevant persons.

(3) Where the Minister of Finance and Economy finds any unlawful or unreasonable fact about the introduction, use, or disposal of foreign capital or the fulfillment of contents authorized, permitted, or reported under this Act, he may order the person introducing or using the capital and other interested persons to correct it, or take other necessary measures. <Amended by Act No. 4316, Jan. 14, 1991; Act No. 4584, Dec. 10, 1993; Act No. 5256, Jan, 13, 1997; Act No. 5538, May 25, 1998>

Article 39-2(Hearing) #

Where the Minister of Finance and Economy intends to cancel the permission of a foreign investor pursuant to the provisions of Article 18 (1), or to cancel the authorization or the acceptance and confirmation of reports concerning a loan contract pursuant to the provisions of Article 22, he shall hold a hearing.

[This Article Newly Inserted by Act No. 5453, Dec. 13, 1997]

Article 40(Customs Clearance and Disposal of Foreign Capital) #

(1) Any person introducing foreign capital under this Act shall clear such foreign capital through customs and take it within the storage period provided for by the Customs Duties Act.

(2) Where a person introducing foreign capital fails to clear such foreign capital through customs and take it within the period provided for in paragraph (1), the customs collector may sell the capital in the manner prescribed by the Presidential Decree.

Article 41(Relationship with Other Acts) #

(1) Except where otherwise provided for in this Act, matters regarding foreign exchange and foreign transactions shall be subject to the provisions of the Foreign Exchange Control Act.

(2) With respect to any capital goods or raw materials, etc. introduced under this Act, and examined and confirmed by the competent Minister under Article 36, the examination and confirmation shall be considered as approval on import as prescribed by the Foreign Trade Act. <Amended by Act No. 4814, Dec. 22, 1994>

(3) Where a foreign investor invests in accordance with Article 11, he may make a contribution in kind. In this case, a certificate of completion of the investment, by which the Administrator of the Korea Customs Service confirms the fulfillment of the contribution in kind as well as the type, quantity, price, etc. of the object matters, shall be deemed the written inquiry report of an inspector in accordance with Article 203 of the Non-Contentious Case Litigation Procedure Act, notwithstanding the provisions of Article 299 of the Commercial Act. The same shall also apply to an increase in capital. <Amended by Act No. 4423, Dec. 14, 1991; Act No. 5454, Dec. 13, 1997>

(4) Korean citizen or Korean juristic person who intends to pursue a joint project with a foreign investor obtained report and acceptance under Article 7, may revaluate the objects of investment in accordance with the Assets Revaluation Act, with the first day of each month as the revaluation date, notwithstanding the provisions of Articles 4 and 38 of the Assets Revaluation Act. <Amended by Act No. 4316, Jan. 14, 1991; Act No. 4814, Dec. 22, 1994; Act No. 5256, Jan. 13, 1997>

(5) Where a Korean citizen or a Korean juristic person fails to pay the objects of investment revaluated in accordance with paragraph (4) within the period specified in Article 11, such objects shall be deemed not revaluated under the Assets Revaluation Act.

(6) The contents of a public loan agreement concluded in accordance with this Act shall be observed in accordance with the provisions of the contract concerned unless they violate other Acts.

(7) The validity of authorization, permission, approval, report, etc. as prescribed by this Act has no effect on any authorization, permission, approval, report, etc. as prescribed by other Acts related to the business. <Newly Inserted by Act No. 4316, Jan. 14, 1991>

Article 42(Relationship with International Treaties) #

This Act shall not be construed as amending or restricting the provisions of the international treaties concluded and promulgated by the Republic of Korea.

Article 43(Free Assistant Funds) #

Inducement and management of assistant funds, etc. supplied freely to the Government from foreign governments or international organizations, etc. shall be governed by the Presidential Decree.

Article 44(Delegation of Authority, etc.) #

The Minister of Finance and Economy or the competent Minister may delegate or entrust part of his authority provided for in this Act to the chiefs of the agencies relevant to the inducement of foreign capital under the conditions as prescribed by the Presidential Decree. <Amended by Act No. 5256, Jan. 13, 1997; Act No. 5538, May 25, 1998>

Article 45(Penal Provisions) #

A person who has violated Article 13, 20 or 27 shall be punished by imprisonment for not more than five years or a fine not exceeding fifty million won.

Article 46(Penal Provisions) #

A person who has refused or has rejected, obstructed or evaded an inspection or investigation under Article 33 or 39 (1) (including a representative in the case of an enterprise) shall be punished by imprisonment for not more than one year or a fine not exceeding ten million won.

Article 47(Penal Provisions) #

A person (including the representative of a enterprise in the cases of enterprises) falling under any of the following subparagraphs shall be punished by the imprisonment for not more than a year or by a fine not exceeding ten million won: <Amended by Act No. 5523, Feb. 24, 1998; Act No. 5538, May 25, 1998>

1. A person who fails to comply with the provisions of Articles 8-2 (2), (3), (5), or (8);or

2. A person who fails to respond to necessary measures or orders pursuant to the provisions of Article 33 or 39 (3).

[This Article Wholly Amended by Act No. 5256, Jan. 13, 1997]

Article 48(Penal Provisions) #

A person who submits false documents with regard to authorization, permission or report under this Act or makes a false report under Article 38 (1) shall be punished by imprisonment for not more three years or a fine not exceeding thirty million won.

Article 49(Penal Provisions) #

A person (including a representative in the case of an enterprise) who has unlawfully transmitted foreign capital abroad with regard to an overseas remittance or the inducement of foreign capital under this Act shall be punished by imprisonment for not less than one year or a fine not less than twice but not more than ten times the amount unlawfully transmitted. In this case, the foreign capital unlawfully transmitted shall be confiscated, and if confiscation is impossible, an amount equivalent thereto shall be collected additionally.

Article 50(Fine for Negligence) #

(1) Deleted. <by Act No. 5538, May 25, 1998>

(2) A person who does not submit the written inducement report as referred to in Article 38(1) within the time limit shall be punished by a fine for negligence not exceeding two million won.

(3) The fine for negligence under paragraph (2) shall be imposed and collected by the Minister of Finance and Economy under the conditions as prescribed by the Presidential Decree. <Amended by Act No. 5256, Jan. 13, 1997; Act No. 5538, May 25, 1998>

(4) A person who is dissatisfied with the imposition of a fine for negligence under paragraph (3) may file an objection with the Minister of Finance and Economy not later than thirty days. <Amended by Act No. 5256, Jan. 13, 1997; Act No. 5538, May 25, 1998>

(5) Where anyone subject to the disposition of fine for negligence as referred to in paragraph (3) files an objection in accordance with paragraph (4), the Minister of Finance and Economy shall, without delay, notify a competent court of the fact and the competent court which received a notification shall impose a fine for negligence in accordance with the Non-Contentious Case Litigation Procedure Act. <Amended by Act No. 5256, Jan. 13, 1997; Act No. 5538, May 25, 1998>

(6) Where an objection is not filed, nor is the fine for negligence paid within the period provided for in paragraph (4), such fine for negligence shall be collected pursuant to the example of the disposition on default of national taxes in arrears. <Amended by Act No. 5256, Jan. 13, 1997>

Article 51(Joint Penal Provisions) #

Where a representative of a juristic person or an agent, servant or another employee of a juristic person or an individual violates Articles 45 through 49 with regard to the business of such juristic person or such individual, such juristic person or such individual shall also be punished by the fine prescribed in each Article in addition to the punishment of the actual offender.

Article 52 #

Deleted.<by Act No. 4316, Jan. 14, 1991>

Article 53(Accusation) #

Any crime specified in Articles 45 through 49 shall not be prosecuted unless the Minister of Finance and Economy makes an accusation. <Amended by Act No. 5256, Jan. 13, 1997; Act No. 5538, May 25, 1998>