OPERATIONAL INSTRUCTIONS FOR THE CASH GRANT SYSTEM
Notice No. 200839, Feb. 13, 2008
Amended by Notice No. 2008182, Jul. 22, 2008
Notice No. 2009327, Aug. 21, 2009
Notice No. 2010299, May 3, 2010
Notice No. 201225, Jan. 17, 2012
Notice No. 2012163, Mar. 26, 2012
Notice No. 2014304, Jun. 27, 2014
Notice No. 2017519, Oct. 30, 2017
Notice No. 2018360, Jun. 26, 2018
Notice No. 2019676, Nov. 29, 2019
Notice No. 2020542, Sep. 10, 2020
Notice No. 2023227, Dec. 4, 2023
CHAPTER I GENERAL PROVISIONS
The purpose of these Instructions is to prescribe the details of cash grants for foreign investment that contributes to the development of the national economy, in accordance with Article 14-2 of the Foreign Investment Promotion Act (hereinafter referred to as the “Act”) and Articles 20-2 through 20-4 of the Enforcement Decree of that Act (hereinafter referred to as the “Decree”).
| Article 2 (Scope of application) |
| (1) | Cash grants to foreign-invested companies shall be governed by these Instructions, except as otherwise provided in the Act, the Decree, or the Enforcement Rule (hereinafter referred to as the “Rule”; and hereinafter collectively referred to as "statutes and regulations"). |
| (2) | Matters necessary for cash grants to foreign-invested companies except as provided in the statutes and regulations and these Instructions shall be determined by the Minister of Trade, Industry and Energy, following deliberation by the Foreign Investment Committee (hereinafter referred to as the "Investment Committee"). |
| Article 3 (Definitions of terms) |
| (1) | The terms used in these Instructions are defined as follows: |
| 1. | The term "applicant" means a foreigner who intends to receive a cash grant (including a foreign-invested company under Article 2 (1) 4 (d) of the Act); |
| 2. | The term "new investment" means cases where a foreigner establishes a factory facility or a place of business in cases of any business other than the manufacturing business (hereinafter referred to as "factory facility, etc.") or where the existing foreign investor invests in a different type of business in the second unit of the Korean Standard Industrial Classification (provided, this shall be disapproved within the financial or insurance business (65-67)); and the replacement of all existing factory facilities, etc. to perform new business through the merger of factory facilities, etc. shall be deemed a new investment; provided, this shall not apply to the new establishment of factory facilities, etc. by means of separation, merger, etc. of the existing factory facilities, etc.; |
| 3. | The term "investment for expansion" means the domestic expansion of a factory facility, etc. and an essential increase in the total floor area of the factory facility, etc., employment, etc.; but this shall not apply to the new establishment of a factory facility, etc. by means of separation, merger, etc. of the existing factory facilities, etc.; provided, the installment of factory equipment in an idle area that can be used for new or additional manufacturing facilities in an existing domestic factory shall be also deemed an investment for expansion; |
| 4. | The term “investment in new industry conversion” means the replacement of the existing factory facilities with new ones falling under any of the items of Article 20-2 (5) 4 of the Decree, which is deemed to meet the following standards and to significantly contribute to the development of the domestic industry and technology: |
| a. | Where the foreign investment of a foreign-invested company or the average turnover of an overseas parent company for the last 5 years is at least 3 trillion won, or the average turnover of a foreign-invested company for the last 3 years is at least 100 billion won; |
| b. | Where the amount of foreign investment is at least 30 million U.S. dollars; |
| c. | Where the employment of at least 80/100 of regular workers in the existing factory facilities is maintained; |
| 5. | The term "contract period for cash grants (hereinafter referred to as "contract period")" means the sum of the investment period and the period of business operation; |
| 6. | The term "investment period" means the period from the date the contract is concluded to the last day of the year in which the implementation and execution of investment and the implementation of employment are completed according to an investment plan and an employment plan; |
| 7. | The term "period of business operation" means the period for the execution or implementation of an investment plan, employment plan, etc., which shall be 5 years after the investment period; where the investment plan, employment plan, etc. set in the beginning are not fulfilled, the business shall not be deemed to be in operation; |
| 8. | The term "first-time employment" means employment for which the period of purchasing employment insurance is up to 12 months; |
| 9. | The term "business in the high-tech industry" means "business" prescribed in Article 14-2 (1) 5 of the Act; |
| (2) | Except as provided in paragraph (1), the terms used in these Instructions shall be prescribed by the Act. |
| Article 4 (Ratio of financial support) |
The financial support for cash grants shall be borne by the State and local governments in the following ratio:
| 1. | Purchase costs of or rents for land or buildings: 30:70 for the Seoul Metropolitan area and 60:40 for a Non-Seoul Metropolitan area; |
| 2. | Employment subsidies and education and training subsidies: 50:50 (provided, the employment subsidies for interns in the field of technology shall be fully provided by the State); |
| 3. | Building costs, purchase costs of capital goods and research equipment and materials, installation costs of infrastructure, and research and development costs: 30:70 for the Seoul Metropolitan area and 60:40 for a Non-Seoul Metropolitan area; |
| 4. | Purchase costs of or rents for buildings for research and development facilities: 30:70 for the Seoul Metropolitan area and 60:40 for a Non-Seoul Metropolitan area; |
| 5. | In cases of business in the high-tech industry or the research and development field, the ratio of financial support borne by the State under subparagraphs 1 through 4 may be increased by 10 percentage points; |
| 6. | In cases of business in the fields of national strategic technologies and high-tech strategic technologies, the ratio of financial support borne by the State under subparagraphs 1 through 5 may be increased by 10 percentage points. |
CHAPTER II APPLICATION FOR CASH GRANTS
| Article 5 (Requirements for and foreign investment subject to cash grants) |
The following amounts of foreign investment shall be excluded from the requirements for cash grants:
| 1. | The amount of foreign investment falling under of Article 2 (1) 4 (b) of the Act; |
| Article 6 (Application for cash grants) |
| (1) | An applicant shall submit to the Minister of Trade, Industry and Energy an application for cash grants and the attached documents (hereinafter referred to as "application") pursuant to Article 20-3 (1) of the Decree. |
| (2) | A project manager shall submit a written opinion regarding cash grants to the applicant. |
| (3) | "Other matters determined by the Minister of Trade, Industry and Energy" in Article 20-3 (1) 5 of the Decree means the following: |
| 1. | Major business performance and the financial standing of the applicant (current status of the parent company and overseas subsidiaries, a business report, etc.); |
| 2. | The total amount of investment and the amount of foreign investment; |
| 3. | A location plan (including the area, size, acquisition method, costs, etc.); |
| 4. | An annual investment plan for the next 5 years (by fixed asset item, such as land, buildings, and equipment); |
| 5. | An annual plan for raising investment funds and working funds for the next 5 years (classifying them into insourcing, outsourcing, cash grants, etc.); |
| 6. | A detailed business plan (including the details of the business, products, the details and level of technology, production process, front and back industries, and detailed business relationships with the parent company and subsidiaries); |
| 7. | The current status and prospects of supply and demand in the domestic and overseas markets (including the expected competing companies in the domestic and overseas markets and prospects thereof); |
| 8. | Estimated financial statements for the next 5 years (including a detailed estimate of the cost elements constituting sales cost and sales, and evidentiary materials); |
| 9. | An annual new employment plan and an all-inclusive table for the next 5 years (including the number of persons in the field of natural sciences and engineering by academic background, the number of persons by wage level, the average wage level compared to the same type of industry, etc., and classifying into regular and temporary employment, and local residents and foreigners); |
| 10. | Reasons for selecting the Republic of Korea as a country for investment (including merits and demerits compared to alternative target countries); |
| 11. | Effects of contribution to the regional and national economy for the next 5 years (including production, export and domestic sales, size of direct and indirect employment, tax payment, front and back integrative effects in regard to procurement sources for raw and subsidiary materials and sales contacts, whether to function as the Asian regional headquarters, etc.); |
| 12. | Where the applicant files an application to establish or expand a research facility or has a research and development plan, a research and development plan for the next 5 years (including education and training expenses, whether to establish an affiliated research institute, the size of research and development personnel by academic background, the size of research and development investment, joint research with domestic companies or research institutes, etc.); |
| 13. | Other necessary matters. |
| (4) | An investment plan shall be prepared according to Form 1 and may be submitted based on the fiscal year of the relevant foreign-invested company. |
| (5) | An application filed by an applicant shall be protected as a business secret and shall not be disclosed without his or her consent except as necessary for examination for cash grants. |
| (6) | Where an applicant fails to meet the requirements prescribed in Article 6, the Minister of Trade, Industry and Energy may require the applicant to supplement his or her application or reject such application; provided, the expenses incurred in preparing the application shall be borne by the applicant. |
| (7) | The Minister of Trade, Industry and Energy shall organize a cash grant limit calculation committee under Article 10 after undergoing the evaluation of an application for cash grants under Article 8 within 60 days from the date of receipt of the application for cash grants under paragraph (1); provided, the period required to supplement an application under paragraph (6) shall not be included in the processing period. |
| (1) | An applicant may enter into negotiations on cash grants after submitting an application. However, he or she may have consultation on cash grants even before submitting the application. In such cases, the applicant shall make a written or verbal request for consultation to the Minister of Trade, Industry and Energy. |
| (2) | Upon receiving an application or a request for consultation, the Minister of Trade, Industry and Energy shall immediately designate a public official to be in charge of the consultation or negotiation (hereinafter referred to as "negotiation") (hereinafter referred to as "person in charge of negotiations") and notify the applicant thereof and shall request the President of the Korea Trade-Investment Promotion Agency to designate a project manager under Article 21-2 (1) of the Decree. |
| (3) | Upon receipt of an application, the Minister of Trade, Industry and Energy shall immediately notify the head of the relevant local government thereof and request the designation of a person in charge of negotiations. |
| (4) | A person in charge of negotiations may inquire in advance opinions of the relevant departments, agencies, etc. to identify the effects, etc. of an applicant's business subject to cash grants on the domestic industry. |
| Article 8 (Evaluation of application) |
| (1) | The Minister of Trade, Industry and Energy shall evaluate an application according to the evaluation table provided in Appendix 1, as to whether the foreign investment accompanies high technology, the effects of technology transfer, the size of job creation, whether the foreign investment overlaps with any domestic investment, the effects on the regional and national economy, the viability of investment, etc. |
| (2) | The Minister of Trade, Industry and Energy may organize and operate an Evaluation Committee to conduct technical, financial, and industrial evaluations pursuant to paragraph (1). |
| (3) | The Minister of Trade, Industry and Energy may organize and operate a Prior Evaluation Committee based on the evaluation table for re-investment of unappropriated earned surplus as the amount to be recognized as an investment provided in Appendix 1 before a meeting of the Evaluation Committee is held, in order to check the financial standing of an applicant regarding an application for cash grants for foreign investment under Article 2 (1) 4 (d) of the Act. |
| (4) | The Minister of Trade, Industry and Energy shall not disclose to the public the details of the decisions on applications by the Prior Evaluation committee and the Evaluation Committee and any negotiation agenda for cash grants. |
| Article 9 (Organization and operation of Evaluation Committee) |
| (1) | The Evaluation Committee shall be comprised of at least 5 but up to 12 members, and the chairperson shall be elected by the Committee. |
| (2) | The Minister of Trade, Industry and Energy shall commission members of the Evaluation Committee from among the following persons: |
| 1. | A person with extensive expertise of and experience in foreign investment; |
| 2. | A person with extensive expertise of and experience in any relevant field, which are required to conduct technical, financial and industrial evaluations for applicant companies. |
| (3) | A person in charge of negotiations of the Ministry of Trade, Industry and Energy shall serve as the secretary of the Evaluation Committee. |
| (4) | Meetings of the Evaluation Committee shall commence with the opening by the chairperson of the Evaluation Committee; and whether to provide cash grants for an applicant company shall be determined by an affirmative vote of at least 2/3 of the members of the Evaluation Committee, if the average evaluation score of the members is 60 points or more after the chairperson gathers consensus from the evaluation members who conduct technical, financial, and industrial evaluations for such applicant company. |
| (5) | Where necessary, the chairperson of the Evaluation Committee may give the applicant an opportunity to explain to evaluation members about the relevant business eligible for cash grants. |
| (6) | Evaluation members shall not leak to the outside any information learned in the course of conducting evaluations and shall submit an assurance of confidentiality to the Minister of Trade, Industry and Energy. |
| (7) | The Minister of Trade, Industry and Energy may pay allowances and travel expenses within the budget, to evaluation members who participate in the Committee meetings, on-site fact-finding surveys, etc. |
| (8) | The Minister of Trade, Industry and Energy may determine other details regarding the operation of the Evaluation Committee and the limit calculation committee upon approval from the Foreign Investment Committee under Article 27 of the Act. |
| (9) | The Minister of Trade, Industry and Energy shall organize the Prior Evaluation Committee referred to in Article 8 (3) with at least 2 members who have extensive expertise of and experience in the relevant field for the financial evaluation of an applicant company, and paragraphs (1) through (8) shall apply mutatis mutandis to other matters regarding the Prior Evaluation Committee. |
| (10) | Where a member of the Evaluation Committee or the Prior Evaluation Committee under paragraph (2) or (9) or an expert under Article 10 (4) (hereinafter referred to as "member") falls under any of the following cases, he or she shall be excluded from the resolution of the relevant agenda item, and file a motion for challenge or voluntarily recuse himself or herself from the resolution: |
| 1. | Where a member or his or her current or former spouse is a party to the relevant agenda item or is a joint right holder or joint obligor with a party to the agenda item; |
| 2. | Where a member is or was a relative of a party to the relevant agenda item; |
| 3. | Where a member has given testimony, made a statement, provided advice, conducted research, or provided service or appraisal on the relevant agenda item; |
| 4. | Where a member or a corporation to which the member belongs is or was the representative of a party to the relevant agenda item; |
| 5. | Where a member or his or her current or former spouse is serving as an executive officer or employee in the same institution as a party to the relevant agenda item. |
| Article 10 (Calculation of limit on cash grants) |
| (1) | The limit on cash grants shall be calculated according to the method specified in Appendix 2. |
| (2) | The Minister of Trade, Industry and Energy shall organize and operate a cash grant limit calculation committee (hereinafter referred to as "limit calculation committee") in order to calculate the limit on cash grants under paragraph (1), and the chairperson of the committee shall be determined through election among and by members. |
| (3) | The limit calculation committee under paragraph (2) shall be comprised of at least 5 members who are persons in charge of negotiations of the central ministries and the relevant local governments, the relevant experts, etc. |
| (4) | The Minister of Trade, Industry and Energy shall commission persons with expertise of and experience in foreign direct investment and subsidies, as the relevant experts prescribed in paragraph (3). |
| (5) | Any member who has participated in the calculation of the limit on cash grants shall not leak to the outside any information learned in the course of the calculation and shall submit an assurance of confidentiality to the Minister of Trade, Industry and Energy. |
| (6) | The limit on cash grants shall be calculated by totaling the cash grants provided by the State and local governments (hereinafter referred to as the "Government"). Where the Government provides any rented land to an applicant, the rent reduced or exempted until the expiration of a contract period for cash grants shall be counted in the limit on cash grants pursuant to Article 19 (4) of the Decree. |
| (7) | Where the Government provides any rented land to an applicant, a financial support referred to in Article 14 of the State Financial Support Standards shall not be provided to compensate for the difference between the sale price and the land preparation cost. |
| (8) | Grants according to the standards for providing state financial support to local governments for attracting foreign investment (hereinafter referred to as the "State Financial Support Standards"), subsidies for promoting regional investment, and cash grants shall not be provided in duplicate to an applicant for the same item, and the total amount of support shall not exceed the limit on cash grants prescribed in Appendix 2 regarding the amount of foreign investment to be attracted through the relevant support. |
| Article 11 (Determination of cash grants) |
| (1) | The Minister of Trade, Industry and Energy shall prepare a written recommendation for cash grants which includes the following, based on the details of decisions by the Evaluation Committee and the limit calculation committee pursuant to Articles 8 and 10: |
| 1. | Opinions on the necessity for cash grants; |
| 2. | The amount of payment; |
| (2) | The Minister of Trade, Industry and Energy shall present a written recommendation for cash grants to the Investment Committee through consultation with the Minister of Economy and Finance and the head of the relevant local government. |
| (3) | Cash grants shall be determined through deliberation and decision by the Investment Committee and shall be executed after a contract for cash grants is concluded; provided, where the amount of cash grants excluding the amount of relocation support is less than 1 billion won, a contract for cash grants may be concluded through deliberation and decision by a Foreign Investment Working Committee under Article 27 (3) of the Act (hereinafter referred to as “Working Committee”). |
| (4) | An applicant shall assume responsibility for all actions taken by himself or herself before a contract for cash grants is concluded. |
| Article 12 (Conclusion of contracts) |
| (1) | Where it is determined to provide cash grants under Article 11 or 15, the Minister of Trade, Industry and Energy shall conclude a contract for cash grants with the head of the relevant local government and the applicant, by reflecting the Operational Instructions for the Cash Grant System and the statutes and regulations related to foreign investment promotion. |
| (2) | The contract shall be interpreted in accordance with the statutes and regulations of the Republic of Korea, and the relevant parties thereto shall be subject to the courts and trial jurisdiction of the Republic of Korea. |
| (3) | Where an investment plan is submitted based on the fiscal year of an applicant pursuant to Article 6 (4), a contract for cash grants may be concluded based thereon, and the period specified in Article 3 (1) 4 or 18 (1) may be adjusted based on the fiscal year. |
| Article 13 (Payment method for cash grants) |
| (1) | The Government may pay cash grants in a lump sum within 1 year or in up to 10 installments within 5 years from the date the contract is concluded, and an applicant shall open a separate account and perform accounting for the cash grants received, clearly distinguishing it from his or her own revenue and expenditure. |
| (2) | For installment payments, a contract for cash grants shall specify an investment expenditure plan that includes the details of cash-granted assets, an expenditure schedule of cash grants, and the deadline for the acquisition of fixed assets necessary for the business, such as land, buildings, and machinery and equipment (hereinafter referred to as "investment expenditure plan"), and the time limit for the commencement of business (or production). |
| (3) | Where an applicant is paid cash grants in installments, the applicant shall submit an application which includes the size, purpose, details, etc. of the cash grants for the relevant year; the Government shall pay the grants, within the scope of cash grants agreed upon by the contract for cash grants, in accordance with the following methods, after evaluating the implementation results of the investment expenditure plan, execution results of the cash grants, etc. but may adjust the amount of and timing for payment; and the State may pay its share of the grants in installments via a local government: |
| 1. | Purchase costs of land under Article 20-2 (1) 1 of the Decree (hereinafter referred to as "land purchase costs") shall be paid after concluding a contract for purchase of the land, by dividing them into intermediate payment or final payment, and the rents under that subparagraph (hereinafter referred to as "rents") shall be paid in accordance with the rental contract concluded between the applicant and the proprietor of the rented land or its entrusted manager; |
| 2. | Education and training subsidies and employment subsidies under Article 20-2 (1) 5 of the Decree (hereinafter referred to as "education and training subsidy" and "employment subsidy," respectively) shall be paid based on the evaluation of implementation results of the employment plan during the investment period; |
| 3. | Building costs, purchase costs of capital goods and research equipment and materials, and installation costs of infrastructure, such as electricity and communications facilities, under Article 20-2 (1) 2 through 4 of the Decree (hereinafter referred to as “building costs,” “purchase costs of facilities and equipment,” and “installation costs of infrastructure,” respectively) shall be paid based on the evaluation of the implementation results of the investment expenditure plan. |
| (4) | The Government shall secure a collateral necessary for the recovery of subsidies before paying cash grants, and such collateral may include a mortgage, provisional registration, or the submission of instruments for guarantee under the subparagraphs of Article 37 (2) of the Enforcement Decree of the Act on Contracts to Which the State Is a Party (excluding securities and beneficiary certificates under subparagraphs 2, 6, and 7 of that paragraph). If the Government deems that there are no issues with the execution of the collateral, it may adjust the collateral value according to the contract period and payment method of a company. |
| (5) | Except as provided in these Instructions, other matters regarding the payment methods and return of cash grants shall be prescribed by the Subsidy Management Act, the Local Finance Act, the Act on Local Government Subsidy Management, etc. |
CHAPTER III PRIOR EXAMINATION OF CASH GRANTS
| Article 14 (Application for prior examination) |
| (1) | Where a foreign investor who intends to receive cash grants from the State pursuant to Article 14-2 (1) of the Act makes foreign investment falling under any of the following cases, the foreign investor may file an application for prior examination as to whether cash grants can be granted, etc. before filing an application for cash grants under Article 6: |
| 1. | Business in the field of national strategic technologies falling under Article 3 (1) 9; |
| 2. | Business in the field of high-tech strategic technologies falling under Article 3 (1) 10; |
| 3. | Where the amount of foreign investment is less than 5 million U.S. dollars. |
| (2) | Where a foreign investor referred to in paragraph (1) (hereinafter referred to as "applicant for prior examination") intends to apply for prior examination on cash grants, he or she shall submit an application for prior examination on cash grants in Form 4 (hereinafter referred to as "application for prior examination") and an investment plan for prior examination on cash grants in Form 5 (hereinafter referred to as "investment plan for prior examination") to the President of the Korea Trade-Investment Promotion Agency. In such cases, the investment plan for prior examination shall include the following matters: |
| 1. | The overview of an applicant for prior examination (current status of foreign investors and investment target companies, ownership structure diagram, etc.); |
| 2. | The total amount of investment and the amount of foreign investment; |
| 3. | Investment target areas and location plans; |
| 4. | Annual investment plans and financing plans for the next 5 years; |
| 5. | A plan for the implementation of new employment; |
| 6. | The current status of technologies (including whether the technologies constitute national strategic technologies or high-tech strategic technologies); |
| 7. | A research and development plan for the next 5 years (including human resources and cost input plans), if an application is filed for the purpose of constructing or expanding research facilities or a research and development plan exists; |
| 8. | A detailed business plan (details of business, products, current status of supply and demand in domestic and overseas markets, etc.); |
| 9. | Reasons for selecting the Republic of Korea as a country for investment (including the investment conditions and current status of support in alternative investment countries); |
| 10. | Expected effects of investment (the level of contribution to the local economy, carbon neutrality, etc.). |
| (3) | Where the details of an application for prior examination and an investment plan for prior examination under paragraph (2) are insufficient or additional data is required, the President of the Korea Trade-Investment Promotion Agency may request the applicant for prior examination to supplement them for a specified period not exceeding 15 days. |
| (4) | Where an applicant for prior examination fails to supplement and submit the documents within the period specified under paragraph (3), the President of the Korea Trade-Investment Promotion Agency may return the relevant application. |
| (5) | The documents submitted shall not be returned to the applicant for prior examination, and the details of the relevant documents shall not be disclosed without the consent of the applicant for prior examination, except for the purposes prescribed by statutes and regulations and these Instructions. |
| Article 15 (Procedures for prior examination) |
| (1) | Upon receipt of an application for prior examination under Article 14 (2), the President of the Korea Trade-Investment Promotion Agency shall examine whether an applicant for prior examination is eligible for cash grants and calculate the upper and lower limits of cash grants, taking into consideration the level of technology, effects of technology transfer, differentiation from domestic investment, possibility of investment outside the Republic of Korea, effects of job creation, effects on the local and national economy, appropriateness of location, etc. |
| (2) | The President of the Korea Trade-Investment Promotion Agency may refer to the opinions of relevant experts for the prior examination of cash grants under paragraph (1) and consult with the relevant government agencies, local governments, etc., if necessary. |
| (3) | The President of the Korea Trade-Investment Promotion Agency shall notify the Minister of Trade, Industry and Energy of the results of the examination, including whether cash grants can be granted for an application for prior examination and the upper and lower limits of cash grants, and the Minister of Trade, Industry and Energy may, if necessary, have the President of the Korea Trade-Investment Promotion Agency supplement the results of the examination. |
| (4) | The details of an application for prior examination shall not be disclosed to the public, and a person who participates in the prior examination shall not divulge any information he or she has learned in the course of the examination and shall submit a memorandum of confidentiality. |
| Article 16 (Notification of results of prior examination) |
| (1) | The President of the Korea Trade-Investment Promotion Agency shall notify an applicant for prior examination of the results of examination as to whether cash grants can be granted and the results of calculation of the upper and lower limits of cash grants within 30 days from the date of receipt of an application under Article 14 (2); provided, the period required to supplement documents shall not be included in the processing period. |
| (2) | The President of the Korea Trade-Investment Promotion Agency shall notify an applicant for prior examination that the results of prior examination under paragraph (1) may be different from the determination of cash grants under Article 14-2 of the Act and that it is not legally binding. |
| Article 17 (Measures following results of prior examination) |
| (1) | In order for an applicant for prior examination notified of the results of prior examination pursuant to Article 16 to receive cash grants from the State pursuant to Article 14-2 (1) of the Act, he or she shall submit an application for cash grants under Article 20-3 (1) of the Decree to the Minister of Trade, Industry and Energy, and, if necessary, may request consultation with the President of the Korea Trade-Investment Promotion Agency. |
| (2) | Articles 5 through 13 shall apply to other requirements for and foreign investment subject to cash grants, applications for cash grants, and the procedures for evaluation of applications, calculation of limits, etc.; provided, the submission of an application for cash grants under paragraph (1) shall be governed by Article 6, but the submission of a written opinion of a project manager under Article 6 (2) among the attached documents may be omitted. |
CHAPTER IV FOLLOW-UP MANAGEMENT
| Article 18 (Follow-up management of cash grants) |
| (1) | An applicant shall annually submit to the President of the Korea Trade-Investment Promotion Agency a report on the implementation of the contract for cash grants in Form 2 and a performance report on cash grants in Form 3, and shall submit to the President of the Korea Trade-Investment Promotion Agency a performance report on cash grants in Form 3 within 2 months after using the cash grants. In addition, where the provision of cash grants is completed, the applicant shall return the remaining balance of the cash grants from the relevant year and the interest accruing thereon to the relevant local government and the Ministry of Trade, Industry and Energy. |
| (2) | The President of the Korea Trade-Investment Promotion Agency shall annually inspect whether an applicant fulfills the obligations specified in the contract for cash grants for foreign investment, such as an investment and expenditure plan, an employment plan, and research and development, during the contract period under Article 3 and shall submit the results thereof to the head of the relevant local government and the Minister of Trade, Industry and Energy. |
| (3) | Cash grants to cover land purchase costs, rents, education and training subsidies, and employment subsidies shall be subject to follow-up management under Article 19 of the State Financial Support Standards; provided, paragraph (4) of that Article shall not apply to interns in the field of natural sciences and engineering. |
| (4) | Where the actual amount of foreign investment is less than the amount of foreign investment (based on US dollars) specified in a contract for cash grants, cash grants to cover building costs, purchase costs of facilities and equipment, and installation costs of infrastructure shall be adjusted by reducing the amount of cash grants in a corresponding ratio. |
| (5) | Where an applicant fails to fulfill the obligation of minimum employment agreed upon by the contract within the investment period and requests the extension of the period of employment implementation instead of returning the cash grants, such period may be extended by up to 2 years. |
| (6) | Notwithstanding paragraphs (1) through (4), the Government may provide additional cash grants to an applicant who has employed more than the number of persons originally contracted during the contract period for cash grants, following deliberation by the Foreign Investment Committee. |
| (7) | An applicant shall keep and manage the books stating the details of using subsidies and evidentiary documents until the expiration of the contract period and, if requested by the Government, he or she shall submit the books and evidentiary documents without delay. |
| (8) | An applicant who files an application for cash grants pursuant to Article 2 (1) 4 (d) of the Act shall establish a separate account for the amount to be recognized as a foreign investment by re-investing the unappropriated earned surplus, immediately after concluding a contract for cash grants. The Minister of Trade, Industry and Energy and the head of the relevant local government shall consider only the amount deposited in the said account as the amount of foreign investment and shall evaluate whether the applicant has implemented his or her investment and expenditure plan. |
| Article 19 (Responsibilities of applicant) |
| (1) | An applicant shall directly or indirectly manage the relevant foreign-invested company and faithfully perform the obligations prescribed in the contract for cash grants and the investment and expenditure plan. |
| (2) | In order to ensure the recovery and replacement of all assets (including assets under construction), such as buildings, facilities, and equipment, to a satisfactory level, a damage insurance contract shall be concluded or measures corresponding thereto shall be taken. |
| (3) | Contracts for acquiring cash-granted assets shall be concluded by the means ensuring the efficient use of cash grants, such as open bidding, certified appraisal, or demand of at least 2 estimates. |
| (4) | In order to use a cash-granted asset for any purpose other than the relevant business or to transfer, exchange, lease, or offer it as collateral, an applicant shall obtain prior written approval from the Government. |
| (5) | No cash grant shall be misappropriated as dividends, royalty, etc., and the relevant foreign-invested company shall not provide debt guarantee for any purpose other than the relevant business. |
| (6) | An applicant shall provide sufficient information to ensure the review of the implementation of a contract during the contract period and shall submit to the Government an audit report prepared based on the relevant fiscal year by an auditor under subparagraph 7 of Article 2 and Article 9 of the Act on External Audit of Stock Companies (hereinafter referred to as "audit report subject to external audit“); provided, such report may be replaced by a report on the settlement of accounts prepared by the company and the evidential materials for accounting, if the amount of cash grants is less than 1 billion won. With respect to the research and development field, a report on the current status and outcomes of research and development activities shall be submitted each year, in addition to the report on the settlement of accounts. |
| Article 20 (Cancellation, withdrawal, reduction, and recovery) |
| (1) | Where a contract for cash grants is rescinded or terminated or the amount of cash grants is reduced or recovered due to the cancellation and withdrawal of cash grants under Article 20-4 (2) of the Decree, the amount to be returned by an applicant shall be as follows: |
| 1. | The amount shall be the largest among the total amount of cash grants where cash grants are canceled or withdrawn; the total amount of cash grants paid where the applicant is no longer able to operate the relevant business within the investment period; an amount calculated by multiplying the amount of cash grants by the non-implementation rate for the investment period where the applicant fails to fulfill the obligation to implement investment agreed upon by the contract within the investment period; an amount calculated by multiplying the amount of cash grants by the non-execution rate of investment where the applicant fails to fulfill the obligation to execute investment agreed upon by the contract within the investment period; and an amount calculated by multiplying the amount of cash grants by the non-employment rate where the applicant fails to fulfill the obligation of minimum employment agreed upon by the contract within the investment period; |
| 2. | Subparagraph 1 shall apply mutatis mutandis even where the applicant fails to fulfill his or her obligations agreed upon by the contract within the period of business operation; |
| 3. | Where the cash grants have to be fully or partially recovered, interest and incidental expenses subject to additional collection under the contract for cash grants shall be paid. |
| (2) | Where the Minister of Trade, Industry and Energy cancels or withdraws a contract for cash grants, reduces the amount of cash grants, or recovers the paid cash grants, he or she shall undergo the procedures for urging the fulfillment of the contract or vindication procedures for a specified period; provided, this shall not apply where the applicant requests the cancellation or withdrawal of the contract for cash grants. |
| Article 21 (Deadline for re-examination) |
The Minister of Trade, Industry and Energy shall examine the appropriateness of this Public Notice every 3 years, counting from January 1, 2024 (referring to the period that ends on December 31 of every 3rd year) and shall take measures, such as making improvements, in accordance with the Rules on the Issuance and Management of Directives and Established Rules.
ADDENDA <Public Notice No. 2023-227, Dec. 4, 2023>
Article 1 (Enforcement date)
This Public Notice shall enter into force on the date of its public notice.
Article 2 (Repeal of previous provisions)
The previous provisions (Public Announcement of the Ministry of Trade, Industry and Energy No. 2023-395, Apr. 26, 2023) shall be repealed at the same time of the enforcement of this Public Notice.
Article 3 (Miscellaneous)
Appendices 1, 2, and 3 shall not be disclosed.