GUIDELINES FOR OPERATION OF FOREIGN INVESTMENT ZONES
Wholly Amended by Public Announcement No. 2011377, Jul. 25, 2011
Amended by Public Announcement No. 2012447, Sep. 18, 2012
Public Announcement No. 2012515, Nov. 14, 2012
Public Announcement No. 201345, Apr. 17, 2013
Public Announcement No. 2013275, Sep. 26, 2013
Public Announcement No. 2014417, Aug. 22, 2014
Public Announcement No. 2015008, Dec. 31, 2014
Public Announcement No. 2015200, Mar. 27, 2015
Public Announcement No. 2015371, Jun. 30, 2015
Public Announcement No. 2016376, Jul. 18, 2016
Public Announcement No. 201842, Jan. 23, 2018
Public Announcement No. 2018359, Jun. 25, 2018
Public Announcement No. 2018628, Dec. 27, 2018
Public Announcement No. 2019691, Dec. 10, 2019
Public Announcement No. 2020219, Mar. 31, 2020
Public Announcement No. 2020541, Sep. 10, 2020
Public Announcement No. 2021771, Nov. 8, 2021
Public Announcement No. 2023857, Dec. 4, 2023
SECTION 1 General Provisions
The purpose of these Guidelines is to prescribe matters mandated by the Foreign Investment Promotion Act, which provides for the designation, development, management, and cancellation of designation of foreign investment zones (hereinafter referred to as the "Act"), and the Enforcement Decree of that Act (hereinafter referred to as the "Decree"), and matters necessary for the enforcement thereof.
The terms used in these Guidelines are defined as follows:
| 1. | The term "complex foreign investment zone" means a zone designated to lease or transfer land therein exclusively to foreign-invested companies under Article 18 (1) 1 of the Act; |
| 2. | The term "individual foreign investment zone" means a zone designated to meet the demand of a foreign investor who intends to make an investment therein under Article 18 (1) 2 of the Act; |
| 3. | The term "services-based foreign investment zone" means a zone designated to lease or transfer land therein to foreign-invested companies engaged in a service business under Article 18 (1) 3 and 4 of the Act; |
| 4. | The term "management agency" means a Mayor/Do Governor, etc. who manages a foreign investment zone under Article 18-3 (1) of the Act; |
| 5. | The term "project plan" in Article 20 means the amount of foreign investment and the area for construction of a factory, compared with the limit on occupancy prescribed in Article 15; |
| Article 3 (Purchase and registration of site) |
| (1) | The site for a foreign investment zone shall be purchased jointly by the State and a local government, and the ratio of sharing the purchase price shall be governed by provisions of the Guidelines for Subsidization of Financial Funds by the State for the Foreign Investment Inducement Activities of Local Governments. |
| (2) | A down payment for the purchase of a site in a foreign investment zone shall be shared 50:50 between the State and a local government, and the remaining balance of the purchase price of the site shall be paid pro rata to the result of the occupancy of foreign-invested companies, in cases of a complex foreign investment zone, or paid based upon the agreed date in cases of an individual foreign investment zone. The State may pay its share through a local government. |
| (3) | The State and a local government shall enter their ownership shares in the cadastral record or registration ledger according to the share ratio of the land purchase price. |
| (5) | With respect to a site (share) for which the purchase price has been paid pro rata to the occupancy rate of a complex foreign investment zone under paragraph (2), the transfer of its ownership shall be registered by making the State or the local government a registered titleholder at the time of payment of the price. |
| (6) | If the occupancy rate or the purchase price payment ratio (the ratio of the already paid price including the down payment to the total purchase price) is at least 95 percent, the State or a local government shall pay the remaining price in full and register the transfer of the ownership. |
| Article 4 (Eviction of leased site and buildings) |
| (1) | Where a lease contract for a site is terminated due to the expiration of lease period, termination of the contract or other reasons, the occupant company shall donate the buildings and other facilities constructed on the leased site to the State or a local government or return the leased site and buildings after reinstating them, within the deadline determined by the management agency. |
| (2) | No occupant company shall claim compensation for any damage, etc. consequential to the termination of the contract under any pretext whatever, nor any expenses incurred in returning to the original state under paragraph (1), relocation expenses, and all other expenses. |
| Article 5 (Foreign Investment Support Center) |
A Foreign Investment Support Center (hereinafter referred to as the "Investment Support Center") shall be established in the Korea Industrial Complex Corporation (hereinafter referred to as the "Industrial Complex Corporation") in order to conduct efficient management of the present conditions of State property, public property, etc., as prescribed in the following subparagraphs, and the Investment Support Center shall be responsible to manage the status of all the foreign investment zones. A local government shall report the status of management to the Industrial Complex Corporation by the end of February each year and the Industrial Complex Corporation shall report the comprehensive management status to the Minister of Trade, Industry and Energy by the end of March each year:
| 1. | The Industrial Complex Corporation shall establish a plan for the operation of the Investment Support Center (including the operation of budget and human resources) and obtain approval from the Minister of Trade, Industry and Energy, by not later than the end of each fiscal year; |
| 2. | The operation period of the Investment Support Center shall be until March 31, 2021, and the Industrial Complex Corporation shall conduct comprehensive evaluation of the performance results of the Investment Support Center and determine on the termination or extension of the period not later than 3 months before the expiration of the operation period and obtain approval from the Minister of Trade, Industry and Energy. |
SECTION 2 Designation and Management of Complex Foreign Investment Zones
| Article 6 (Procedures for designation of complex foreign investment zones) |
| (1) | A designation plan under Article 18 (1) 1 of the Act shall be prepared in Form 1. |
| (2) | The Minister of Trade, Industry and Energy shall examine whether the requirements for designation prescribed in Article 7 are fulfilled and other relevant matters on the basis of a designation plan submitted by a Mayor/Do Governor and submit the designation plan to the Foreign Investment Committee as an agenda. |
| Article 7 (Requirements for designation of complex foreign investment zones) |
| (1) | In designating a complex foreign investment zone (hereinafter referred to as "complex investment zone"), the principle of equity among zones of Cities/Dos shall be taken into consideration and the following requirements shall be fulfilled: |
| 1. | Development of a complex shall have been completed for immediate occupancy in the zone to be newly designated, and the demand of foreign-invested companies for the occupancy specified in their reports on investment shall be at least 60/100 of the area of the complex, and the minimum size of the designation shall be at least 80,000 square meters; provided, if the occupancy rate of a foreign investment zone existing in the same metropolitan municipality is less than 80/100, new designation or alteration of designation shall be restricted; and in an area other than the Seoul Metropolitan area defined in subparagraph 1 of Article 2 of the Seoul Metropolitan Area Readjustment Planning Act (hereinafter referred to as "non-Seoul Metropolitan area") a foreign investment zone may be designated, if the demand of foreign-invested companies for the occupancy specified in their reports on investment is at least 30/100 and the express demand for occupancy is at least 50/100 of the size of the complex; |
| 2. | In order to expand an existing zone, at least 80 percent of the existing designated zone has been contracted for the occupancy, and a complex for expansion shall have been developed for the immediate occupancy and the demand of foreign-invested companies for the occupancy specified in their reports on investment shall not be less than 60/100 of the area of the complex; provided, the same shall not apply to cases where there is explicit large-scale demand for sites exceeding the remaining area. |
| (2) | When submitting a plan for new designation or expanded designation of a complex investment zone in the region, a Mayor/Do Governor shall append a report on the examination of the validity thereof taking into comprehensive consideration the viability of foreign investment to be induced, effects on regional development, effects on national economy such as increased employment, effects of subsidization of financial funds, etc. |
| Article 8 (Entrustment of management of complex investment zone) |
| (1) | In principle, management shall be performed by a management agency; provided, where necessary for the specialization and efficiency of the management of a complex investment zone, management thereof may be entrusted to the Industrial Complex Corporation established under Article 45-17 of the Industrial Cluster Development and Factory Establishment Act (hereinafter referred to as the "Industrial Cluster Act"), and where a management agency has consulted with the Minister of Trade, Industry and Energy, it may be entrusted to an agency other than the Industrial Complex Corporation. |
| (2) | The head of an agency entrusted with management shall formulate and apply detailed guidelines for operation to facilitate the performance of the affairs prescribed in Article 9. |
| (3) | In order to evaluate important matters for the management of foreign investment zones, a management agency may establish and operate an evaluation committee comprised of not exceeding 10 related specialists (hereinafter referred to as the "Evaluation Committee") and, if there is a separate committee related to attracting investment, such committee may be substituted for the Evaluation Committee; provided, where management is entrusted under the proviso of paragraph (1), the head of an agency entrusted with management shall establish and operate the Evaluation Committee, except where the management agency intends to establish and operate it. |
| Article 9 (Management of State and public property in complex investment zones) |
| (1) | Where a management agency has entrusted the management of a complex investment zone under Article 8, the Minister of Trade, Industry and Energy or a Mayor/Do Governor shall entrust the entrusted agency with the following affairs among the affairs related to the management of the State and public property in the relevant investment zone, pursuant to Article 29 of the State Property Act and Article 117 (3) of the Local Autonomy Act: |
| 1. | Selection of companies that intend to take occupancy in the complex investment zone; |
| 2. | Affairs related to the conclusion of occupancy contracts (including lease contracts in cases of a complex for lease; hereinafter the same shall apply) with occupant companies; |
| 3. | Imposition and collection of rents and rental security deposits of occupant companies, and decision on reduction or exemption thereof; |
| 4. | Management of property in the complex investment zone; |
| 5. | Other affairs incidental to the lease and operation of the complex investment zone. |
| (2) | An entrusted agency shall establish and manage separate accounts for the management of State and public property; and its revenue shall be the aggregate of the income accrued from the management of State and public property, such as rents collected from occupant companies, while its expenditure shall be entrustment fees payable for the entrustment (which shall be allocated based on the ratios of entrusted property). |
| (3) | Entrustment fees under paragraph (2) shall be appropriated preferentially for the expenses to be incurred for the appropriate management of State and public property; provided, in the case of the Industrial Complex Corporation, the use shall be governed by a separate contract. |
| (4) | An entrusted agency shall report the annual management status of State and public property to the Minister of Trade, Industry and Energy and the head of a local government who have entrusted the management of the relevant property, by the end of January of the following year. |
| (5) | An agency entrusted with State and public property shall settle accounts on a fiscal-year basis; and where the revenue referred to in paragraph (2) exceeds the expenditure, it shall be required to pay the difference, and where the expenditure exceeds the revenue, the difference shall be paid to the entrusted agency. |
| Article 10 (Establishment of master plans for management of complex investment zones) |
| (1) | A management agency shall establish a master plan for the management of complex investment zones specifying the following matters (hereinafter referred to as "master plan") under Article 33 of the Industrial Cluster Act and manage it after obtaining approval from the Minister of Trade, Industry and Energy: |
| 1. | Matters concerning the sizes of the complex investment zones to be managed; |
| 2. | Matters concerning the zones by each use of land; |
| 3. | Matters concerning the arrangement of factories by category of business; |
| 4. | Matters concerning the categories of business eligible for occupancy under Article 11; |
| 5. | Matters concerning the qualifications for, and priority order of, occupancy under Article 12; |
| 6. | Matters concerning the limit on occupancy under Article 15; |
| 7. | Matters concerning the reduction or exemption of rents under Article 18 (the methods of applying a reduction or exemption rate for each complex based on the shares owned by the State and the local government); |
| 8. | Other matters necessary for the management of complex investment zones. |
| (2) | Upon granting approval under paragraph (1), the Minister of Trade, Industry and Energy shall publicly notify such fact; provided, where the management agency is a Mayor/Do Governor, such public notice shall be given by the Mayor/Do Governor. |
| Article 11 (Categories of business eligible for occupancy) |
Categories of business eligible to take occupancy in a complex investment zone shall be as follows; and categories of business eligible to take occupancy in each zone shall be specified in a master plan for management referred to in Article 10: | 5. | Other categories of business that a management agency determines, taking account of the industrial characteristics of the relevant region. |
| Article 12 (Qualifications for and priority order of occupancy) |
| (1) | A foreign-invested company that meets the following requirements shall be eligible to take occupancy in a complex investment zone: |
| 1. | It shall be a company invested solely by foreigners, or a joint venture company in which the share of a foreign-invested company is at least 30 percent (50 percent, in cases of business falling under subparagraph 4 of Article 11) of the total number of voting stocks or total amount of contribution and the amount of foreign investment therein shall be at least 100 million won; |
| 3. | It shall fall under any of the cases specified in Article 23 (3) 1 and 2; |
| 4. | It shall contribute to the sound development of the national economy; |
| 5. | No existing foreign-invested factory shall be relocated; provided, in either of the following cases, such factory may be relocated with approval from the person having the authority to manage the relevant complex foreign investment zone: |
| (a) | Where it relocates from a foreign investment zone to another foreign investment zone; |
| (b) | Where a foreign-invested company increases the foreign investment by at least 30 percent of the total number of voting stocks or total amount of contribution; |
| (c) | Where a foreign-invested company establishes or expands factory facilities by additionally using its unappropriated earned surplus under Article 2 (1) 4 (d) of the Act by at least 30 percent of the total number of voting stocks or total amount of contribution. |
| (2) | Notwithstanding paragraph (1), taking occupancy in a complex investment zone may be restricted in any of the following cases: |
| 1. | Where the maintenance of national security and public order is compromised; |
| 2. | Where any harm is caused to public health and sanitation or environmental conservation or public morals and customs are substantially undermined; |
| 3. | Where any statutes or regulations of the Republic of Korea are violated. |
| (3) | Priority order to take occupancy in a complex investment zone shall be as follows: |
| 1. | Business prescribed in the subparagraphs of Article 11, the priority order of which is prescribed in that Article; |
| 2. | A company that employs above the industrial average; |
| 3. | In cases falling under the same category of business, a company whose amount of foreign investment is higher; |
| 4. | Where the above conditions are met equally, the company which has the higher ratio of foreign investment. |
| Article 13 (Occupancy contracts) |
| (1) | An occupancy contract shall be concluded under Article 26-2 (3) and (4) of the Decree. Even when the details of the project plan submitted as at the time of concluding the occupancy contract are changed, the payment of the changed investment amount, the construction of a factory in the changed area for construction thereof, etc. shall be completed within the original period for fulfillment prescribed in Article 20 (2). |
| (2) | If a company that wishes to take occupancy in a complex investment zone requests the conclusion of an occupancy contract for such occupancy, the management agency shall hear the project manager's opinion on review under Article 21-2 of the Enforcement Decree of the Foreign Investment Promotion Act (applicable only where the amount of foreign investment is at least 3 million U.S. dollars); determine whether the requested matter conforms to the provisions of Articles 11 and 12; have the matter deliberated on by the Evaluation Committee; and determine whether to enter into an occupancy contract; provided, where the amount of foreign investment by the company that wishes to take occupancy is at least the amount of foreign investment specified in the subparagraphs of Article 25 (1) of the Decree or where the area occupied by the company is at least 50/100 of the minimum size of designation prescribed in Article 7 (1) 1, the management agency shall conclude an occupancy contract following deliberation thereon by the Foreign Investment Committee. The management agency shall not be allowed to conclude an occupancy contract if the need for support with respect to a site is not recognized upon deliberation by the Foreign Investment Committee. |
| (3) | Occupancy contracts referred to in paragraph (1) for a complex for lease shall include lease contracts. |
| (4) | Where the Evaluation Committee deliberates on matters requested by a company that wishes to take occupancy with regard to an occupancy contract, its project plan, etc. under paragraph (2), it may also deliberate on the financial soundness of such company. In such cases, the standards for evaluation shall be in accordance with those specified in Appendix 5 and an evaluation report shall be prepared in Form 6. |
| Article 14 (Termination of occupancy contracts) |
Matters regarding the termination of an occupancy contract shall be governed by Article 26-2 (5) and (6) of the Decree.
| Article 15 (Limit on occupancy) |
The limit on sale in lots and lease of a complex investment zone shall be as follows:
| 1. | The area for construction of a factory with which an occupant company should comply shall be the area of a site calculated by applying the standard area ratio of a factory of the relevant category of manufacturing business (in cases of a category of business whose standard area ratio of a factory is less than 12 percent, the area ratio of 12 percent shall apply) publicly notified pursuant to subparagraph 2 of Article 8 of the Industrial Cluster Act; and where the company wishes to relocate the factory into a site smaller than the area for construction of a factory falling under the standard area ratio of a factory, it may be allowed to take occupancy in a site, the size of which is calculated pursuant to the same formula. In such cases, the land corresponding to the ratio that exceeds the area ratio allowed for the occupancy compared with the area ratio for construction of a factory, shall be subject to the imposition of the rent under Article 17 (3) from the time of the occupancy; |
| 2. | The area for lease for each company in a complex investment zone shall be determined by a master plan for management referred to in Article 10, taking into consideration the characteristics of each complex, and the amount of foreign investment to be made by an occupant company (such amount shall be based on Korean won) shall be at least 100/100 of the value of the leased site; |
| 3. | In examining an occupancy contract, a management agency shall calculate an optimum site area so that it may not rent an excessive area. |
| (1) | A management agency may conclude an occupancy contract with a company that takes occupancy in a complex for lease for a period of up to 50 years. In such cases, a renewal contract shall be concluded every 10 years, and the amount of foreign investment, the area for construction of a factory, etc. among the terms and conditions of the renewal contract mean the amount and area as at the time of concluding the initial occupancy contract. |
| (2) | An occupant company that intends to conclude a renewal contract under paragraph (1) shall request the management agency to conclude a renewal contract by not later than 3 months before the expiration of the occupancy contract, and the management agency shall examine whether the company has fulfilled its project plan and extend the contract unless any special reason exists. |
| (3) | An occupant company shall neither use the site for purposes other than those prescribed in the occupancy contract nor conduct any act of disposition, such as the sale, lease, and exchange of a building, without the written consent of the management agency. |
| (4) | If requested by an occupant company, the management agency may conduct the following acts with the consent of the Minister of Trade, Industry and Energy: |
| 1. | Any act causing changes to a right, such as the sublease and transfer of the leased site; |
| 2. | Any act of changing the form, quality, etc. of the leased site. |
| Article 17 (Rents, rental security deposits) |
| (1) | An annual rent in a complex investment zone shall be determined by the Minister of Trade, Industry and Energy, following consultation with the Minister of Economy and Finance and a Mayor/Do Governor, in an amount calculated by multiplying the acquisition value (referring to the publicly announced individual land price, where a publicly announced individual land price under the Act on the Public Announcement of Real Estate Values exceeds the acquisition value; hereinafter the same shall apply) of the relevant complex investment zone each year by 10/1000 of such value or a higher rate. |
| (2) | A rental security deposit shall be an amount calculated by multiplying the acquisition value of the relevant complex investment zone by 50/1000 of such value or a higher rate; such deposit shall be paid in cash; and the payment thereof may be replaced by submission of a guarantee insurance policy or a payment guarantee issued by a bank, if requested by an occupant company. |
| (3) | The rent paid by an occupant company that has failed to fulfill the amount of foreign investment and the area for construction of a factory applied when determining the limit on occupancy under Article 15, that has failed to meet the qualifications for occupancy prescribed in Article 12 (1), and that is subject to the termination of the occupancy contract for any ground prescribed in Article 14, shall be determined by the Minister of Trade, Industry and Energy, following consultation with the Minister of Economy and Finance and a Mayor/Do Governor, in an amount calculated by multiplying the acquisition value by 50/1000 of such value or higher rate. |
| (4) | An occupant company shall pay the rent for the year of occupancy in an amount calculated by the month (if the number of days of use is less than a month, it shall be calculated by the day) from the time the contract is concluded to the year end and pay the rental security deposit in an amount prescribed in paragraph (2). When concluding a renewal contract, the rental security deposit already paid shall be settled by applying the rental security deposit prescribed in paragraph (2) as at the time the renewal contract is concluded. The rent for the following year shall be paid by December 31 of the preceding year, and the management agency shall issue a notice of payment of the rent by not later than November 30 of the preceding year. |
| (6) | Where any article on the ground of a foreign investment zone is acquired through an auction or under any other Act, no rent shall be imposed on the person who has acquired the real rights thereover during the period for concluding an occupancy contract prescribed in Article 40 (1) of the Enforcement Rule of the Industrial Cluster Act and the period for transfer prescribed in Article 40 (2) of that Enforcement Rule; provided, where a person who conducts such act as the possession and use of a real right over an article on the ground shall be subject to the imposition of the rent under Article 17 (3). |
| Article 18 (Reduction or exemption of rents) |
| (1) | The rent payable by an occupant company may be reduced or exempted under Article 13-2 (1) and (3) of the Act. In applying a rate of reduction or exemption in such cases, the investment amount that has been paid in full to invest in the relevant factory, etc. shall be construed as the amount of foreign investment, and the time 1 month before notice of payment of the rent is given shall be construed as the date of occurrence of the legal ground for calculation of the number of employees regularly employed under Article 7-2 of the Enforcement Decree of the Labor Standards Act, and companies subject to the application of rents under Article 17 (3) shall be excluded from those eligible for the reduction or exemption of rents. |
| (2) | A management agency shall establish criteria for the reduction and exemption of rents of each complex as prescribed in paragraph (1) and reflect them in a master plan for management referred to in Article 10. |
| (3) | An occupant company that intends to have its rent reduced or exempted under paragraph (1) shall file an application with the management agency, appending documents substantiating the ground therefor, and the reduction or exemption of the rent shall apply starting from the month in which the decision on reduction or exemption is made. |
| (4) | Even if a management agency decides to reduce or exempt rents under paragraph (1), an occupant company shall pay the rent fixed before the reduction or exemption is granted until the completion of the construction of its factory, and the management agency shall return the reduced or exempted rent to the company after confirming the completion of the construction of its factory. |
| (5) | A management agency shall ascertain whether the leased site with its contract expired pursuant to Article 4 (1) has been reinstated and whether rents have been fully paid and then shall return the rental security deposit collected under Article 17 (2) with interest thereon. |
| (6) | Reduction or exemption of the rent for a project for which the decision on tax reduction or exemption has been made under the Act on Restriction on Special Cases concerning Taxation out of the reduction or exemption of the rent under the former part of paragraph (1) shall be limited to a place of business that operates a business (technology) eligible for tax reduction or exemption, and the period of reduction or exemption shall be 10 years. The subsequent rate of reduction or exemption shall be subject to the application of Article 13-2 (1) and (3) of the Act depending on the amount of foreign investment and the number of persons employed. |
| (7) | Where a business (technology) eligible for tax reduction or exemption and a business other than that are operated together at a place of business that operates a business (technology) eligible for tax reduction or exemption referred to in the middle part of paragraph (6), the rents shall apply respectively. In such cases, the ratio of the business (technology) eligible for tax reduction or exemption and the business other than that shall be calculated by the Evaluation Committee taking into consideration the amount of investment of each business, etc. |
| Article 19 (Recovery of reduced or exempted rents) |
Any of the following occupant companies shall be subject to redemption of rents reduced or exempted under Article 18: | 1. | Where a decision on the reduction or exemption has been obtained by substantiating a false fact, the reduced or exempted rent shall be recovered retroactively from the date on which the reduced or exempted rent began to apply; |
| 2. | Where a company fails to meet the criteria for the reduction or exemption of the rent after the decision on the reduction or exemption of the rent has been made, or where it becomes subject to imposition of rent under Article 17 (3), it shall be recovered retroactively from the date on which the grounds therefor has occurred. |
| Article 20 (Fulfillment of project plans) |
| (1) | A company that takes occupancy in a complex investment zone shall faithfully comply with the limit on occupancy prescribed in Article 15. |
| (2) | The period for fulfillment of the project plan of an occupant company shall be 5 years from the date the occupancy contract is concluded, and whether it is fulfilled shall be judged by the remaining amount of foreign investment and building area as at the time 5 years pass or thereafter. |
| (3) | No occupant company shall dispose of the land purchased with a subsidy provided by the State or a local government within 5 years after the conclusion of the contract for sale in lots; and where it is disposed of within 10 years after the conclusion of such contract, an amount equivalent to the rate of a subsidy granted by the State or a local government out of the sale price shall be recovered. |
| (4) | Where a company taking occupancy in a complex investment zone that has rented any land in such zone fails to meet the amount of foreign investment during the period for fulfillment prescribed in paragraph (2), the management agency shall apply the rent prescribed in Article 17 (3) retroactively from the date of occurrence of the reason for falling short of the amount of foreign investment compared with the limit on occupancy and shall not apply a rate of reduction or exemption prescribed in Article 18; provided, in extenuating circumstances, the company may be allowed, following consultation with the Minister of Trade, Industry and Energy, to meet the amount of foreign investment within a period not exceeding 1 year from the expiration date of the period for fulfillment (in cases of special areas for responding to an industrial crisis designated under Article 10 of the Special Act on Response to Local Industrial Crisis and Recovery of Local Economy, referring to the period of such designation), and the rent prescribed in Article 17 (3) shall apply for such period for the excessive area retroactively from the date such reason occurs. |
| (5) | Where an occupant company fails to comply with the area for construction of a factory, the management agency shall apply the rent prescribed in Article 17 (3) retroactively from the date of occurrence of the reason for falling short of the area for construction of a factory compared with the limit on occupancy and shall not apply a rate of reduction or exemption prescribed in Article 18; provided, in extenuating circumstances, it may be allowed, following consultation with the Minister of Trade, Industry and Energy, to comply with the area for construction of a factory within a period not exceeding 1 year from the expiration date of the period for fulfillment, and the rent prescribed in Article 17 (3) shall apply for such period for the excessive area retroactively from the date of occurrence of such reason. |
| (6) | Where an occupant company fails to perform a project plan under paragraph (2) and returns the industrial land within 5 years, it shall pay a rent prescribed in Article 17 (3) by the day retroactively from the date of conclusion of the occupancy contract until the date of termination thereof for the part which has not been complied with, and the whole amount of the rent reduced or exempted under Article 18 shall be recovered. |
| (7) | Where any site is rented with a long-term loan as part of the amount of foreign investment by calculating the limit on occupancy prescribed in Article 15, if the company fails to meet the limit on occupancy due to repayment of the long-term loan, the rent prescribed in Article 17 (3) shall apply. |
| (8) | A management agency shall regularly check and verify the fulfillment of the project plan referred to in paragraph (1), and compile and include the result thereof when reporting the status of management under Article 5. |
| (9) | Where a company fails to fulfill the limit on occupancy within the period prescribed in paragraph (4) or (5), the management agency shall terminate the occupancy contract as prescribed in Article 14; provided, even if it fails to meet the limit on occupancy due to the withdrawal, etc. of foreign investment, if the management agency deems it necessary to retain the company continuously, for such reasons as the development of the regional economy, the impossibility of recovering the site or building, etc., the company shall be allowed to continuously occupy and use the same but subject to the imposition of the rent prescribed in Article 17 (3), and the rate of reduction or exemption under Article 18 shall not apply. |
| Article 21 (Maintenance of qualifications for occupancy) |
| (1) | Where an occupant company fails to meet any of the qualifications for occupancy after the occupancy of a complex investment zone in extenuating circumstances, such as the withdrawal of a foreign share, the management agency may allow it, following consultation with the Minister of Trade, Industry and Energy, to meet the qualifications for occupancy within a period not exceeding 2 years (in cases of special areas for responding to an industrial crisis designated under Article 10 of the Special Act on Response to Local Industrial Crisis and Recovery of Local Economy, referring to the period of such designation). In such cases, the occupant company shall be subject to the application of the rent prescribed in Article 17 (3) for the excessive area from the time it fails to meet the qualifications for occupancy, and the rate of reduction or exemption under Article 18 shall not apply. |
| (2) | Where an occupant company fails to meet the qualifications for occupancy during the period prescribed in paragraph (1), the management agency shall terminate the occupancy contract under Article 14; provided, the occupant company that is in operation falls under any of the following cases, it shall be allowed to continue to occupy the relevant zone but subject to the application of the rent prescribed in Article 17 (3), and the rate of reduction or exemption under Article 18 shall not apply: |
| 1. | Where an occupant company fails to fulfill any of the requirements for occupancy due to the withdrawal of a foreign investment share, if the management agency deems it necessary to retain the occupant company continuously for such reasons as the development of the regional economy, the impossibility of recovering the site or building, etc.; |
| 2. | Where the amount of foreign investment is at least 500,000 U.S. dollars even if the share has changed, due to capital increase, etc., to less than the share rate of foreign investment prescribed in Article 12 as the qualifications for occupancy. |
| (3) | Notwithstanding paragraphs (1) and (2), where an occupant company fails to maintain the qualifications for occupancy as it only increases its domestic capital to install factory facilities, machinery, facilities, or equipment without a decrease in the amount of foreign investment after fulfilling the project plan prescribed in Article 20 (1) (limited to where such increase in domestic capital is at least 10 percent of the total number of voting stocks or total amount of contribution under Article 12 (1) 1), the rate of reduction or exemption under Article 18 shall apply. |
| (4) | In cases of occupant companies that have purchased land at a price not exceeding the cost of development (or purchase price, etc.), the amount prescribed in Article 20 (3) shall be recovered. |
| Article 22 (Occupancy system for subcontractors) |
| (1) | Where an occupant company (referring to a company in which the share of foreign investment is at least 30 percent) requests the management agency to allow its subcontractor, in which there is no share of foreign investment, to use part of a factory of the relevant occupant company to shorten the process or to save cost, etc., the management agency may allow the occupancy with the consent of the Minister of Trade, Industry and Energy under Article 16 (4), following evaluation of the Evaluation Committee. |
| (2) | A management agency may conclude an occupancy contract with a subcontractor allowed for occupancy under paragraph (1), within the remaining period of the lease of the occupant company at the request of the relevant occupant company, and shall conclude a renewal contract every 5 years. |
| (3) | The area allowed for a subcontractor to take occupancy shall not exceed 30 percent of the total building area of the factory of the relevant occupant company, and the rent shall be imposed on the subcontractor within the limit of the area of the site corresponding to the ratio of the total building area of the factory to be used. |
| (4) | The rent imposed on a subcontractor that takes occupancy under paragraphs (1) through (3) shall be as stipulated in Article 17 (3), and the area occupied by a subcontractor within the place of business of an occupant company shall be excluded from the area subject to the rent imposed on the occupant company. |
| Article 22-2 (Conclusion of renewal contracts) |
Where an occupant company that intends to conclude a renewal contract under Article 16 (1) for continuous occupancy and use in a complex investment zone, the renewal contract shall be concluded with the management agency applying the matters prescribed in the Act, Decree, Guidelines, etc. valid as at the time of the conclusion thereof.
| Article 22-3 (Cancellation of designation of complex foreign investment zones) |
| (1) | Where a complex foreign investment zone fulfills the following requirements, a Mayor/Do Governor may request the Foreign Investment Committee to deliberate on the cancellation of the designation: |
| 1. | At least 15 years (where the complex has been expanded several times, this period shall be reckoned from the date on which at least 2/3 of the total area was designated) shall have lapsed since it was designated as a complex foreign investment zone; |
| 2. | The occupancy rate (referring to the rate of the area occupied by occupant companies compared with the designated area) of the complex foreign investment zone shall be at least 90/100; |
| 3. | All of the occupant companies in the complex foreign investment zone shall have consented to the cancellation of the designation of the relevant complex foreign investment zone. |
| (2) | In requesting the cancellation of designation of a complex foreign investment zone, a Mayor/Do Governor shall comprehensively analyze the effect on the inducement of foreign investment, regional economy, etc., and formulate the measures therefor. |
| (3) | Where the Foreign Investment Committee adopts a resolution for the cancellation of the designation of a complex foreign investment zone, a Mayor/Do Governor shall cancel the designation within 15 days from the date of resolution of the Foreign Investment Committee. |
| (4) | Upon cancelling designation of a complex foreign investment zone under paragraph (3), a Mayor/Do Governor shall publicly notify such fact in the Official Gazette or an official report and notify the Minister of Trade, Industry and Energy, the Commissioner of the National Tax Service, the Commissioner of the Korea Customs Service, and the head of the relevant Si/Gun/Gu thereof within 10 days from the cancellation date. |
| (5) | A complex foreign investment zone developed into a general industrial complex, etc. under Article 18-3 (2) of the Act shall be deemed continuously designated as a general industrial complex, etc. even after the cancellation of the designation as a foreign investment zone. |
| (6) | Upon cancellation of designation of a complex foreign investment zone, the qualifications as an occupant company in a complex foreign investment zone fulfilling the requirements for the reduction and exemption of rent and tax prescribed respectively in the Act, the Decree, and Chapter V of the Act on Restriction on Special Cases concerning Taxation shall be deemed lost. |
| Article 22-4 (Occupancy system for entities engaged in new and renewable energy power generation business) |
| (1) | Where any occupant company requests the management agency to allow an entity engaged in electricity generation business under subparagraph 3 of Article 2 of the Electric Utility Act (including occupant companies) using new or renewable energy under Article 2 of the Act on the Promotion of the Development, Use and Diffusion of New and Renewable Energy to use part of the site, factory, etc. of the occupant company, the management agency may allow such entity to take occupancy with consent from the Minister of Trade, Industry and Energy under Article 16 (4), following evaluation of the Evaluation Committee. In such cases, the occupant company shall conclude a contract for the modification of terms and conditions of occupancy with the management agency; provided if an entity engaged in electricity generation business under subparagraph 3 of Article 2 of the Electric Utility Act using new or renewable energy under Article 2 of the Act on the Promotion of the Development, Use and Diffusion of New and Renewable Energy transfers or acquires a license for electric utility business, changes its business zone, or conducts any other relevant act, consent thereto shall be obtained from the relevant occupant company and the Minister of Trade, Industry and Energy. |
| (2) | A management agency may conclude an occupancy contract with the entity engaged in electricity generation business which is allowed for occupancy under paragraph (1) for a period not exceeding the remaining lease period of the relevant occupant company at the request of the company. |
| (3) | Where an occupant company intends to install a solar power generation facility for in-house purpose at its leased site, factory, etc., it may install them only at the relevant place of business without undergoing evaluation process and obtaining consent from the Minister of Trade, Industry and Energy referred to in paragraph (1) and the rent therefor shall be included in that for the relevant place of business without being calculated separately. |
| (4) | The area that an entity engaged in electricity generation business may be allowed to occupy under paragraph (1) shall not exceed 30 percent of the building area of the factory, and the rent under Article 17 (3) shall be paid within the limit of the area of the site equivalent to the ratio of the building area of the factory to be used by the entity but the area occupied by the entity shall be excluded from the area subject to the rent imposed on the occupant company; provided, the area allowable for occupancy and the rent shall not apply to an entity engaged in solar power generation business that utilizes external walls, etc. of an existing factory. |
| Article 22-5 (Additional use of unleased sites) |
| (1) | Where an occupant company that has concluded a renewal contract under Article 22-2 files a request for additional use of any unleased site, etc. located in the same complex without investing an amount equivalent to 100/100 of the amount of foreign investment, the management agency may allow the additional use thereof for the remaining lease period of the occupant company after consulting with the Minister of Trade, Industry and Energy, following evaluation of the Evaluation Committee. |
| (2) | Where a management agency intends to allow additional use of any unleased site, etc. under paragraph (1), it may allow it after examining whether matters prescribed in guidelines, etc., such as the qualifications for occupancy under Article 12 and limit on occupancy under Article 15, are fulfilled; and taking into consideration the expansion of existing facilities, effects of the investment in a new business, effects on the increase of employment, development of regional economy, etc. |
| (3) | For an additionally used site, a management agency shall apply a rent prescribed in Article 17 (3) and the rate of reduction or exemption under Article 18 shall not apply; provided, where foreign investment is induced in an amount corresponding to the value of the additionally used site, it shall impose a rent prescribed in Article 17 (1) and may apply a rate of reduction or exemption under Article 18. The additional site, too, shall be subject to the fulfillment of the criteria for the area for construction of a factory prescribed in subparagraph 1 of Article 15 (minimum ratio of area: 12 percent). |
| Article 22-6 (Establishment of complex zones) |
| (1) | Where an occupant company that has fulfilled the qualifications for and limit on occupancy prescribed in Articles 12 and 15 requests the establishment of a complex zone under Article 33 (8) of the Industrial Cluster Act within a site, the management agency may allow such establishment with consent from the Minister of Trade, Industry and Energy, following evaluation of the Evaluation Committee. |
| (2) | In conducting evaluation by the Evaluation Committee under paragraph (1), the management agency shall examine and evaluate the purpose of the establishment of the complex zone, products of a foreign corporation in an equity investment relationship with the relevant foreign-invested company, whether the products are produced by the relevant foreign-invested company, etc. |
| (3) | The area to be allowed to establish a complex zone shall be less than 10 percent of the total floor area of the factory of the relevant occupant company; the rent shall be 5 percent of the acquisition value thereof; and the rate of reduction or exemption under Article 18 shall not apply; provided, in calculating the rent, the acquisition value shall be the higher of the average value of sites in the relevant industrial facility zone or that in the support facility zone. |
| (4) | A management agency may conclude an occupancy contract for facilities in the complex zone allowed to be established under paragraph (1) at the request of the relevant occupant company for a period not exceeding the remaining lease period of the occupant company, and shall conclude a renewal contract every 5 years. |
| (5) | Where a management agency allows a complex zone under paragraph (1), it shall reflect matters concerning the complex zone in the master plan for management. |
| Article 22-7 (Occupancy system for repatriating enterprises in non-Seoul Metropolitan areas) |
| (2) | Article 11 shall apply mutatis mutandis to categories of business of a repatriating enterprise in a non-Seoul Metropolitan area eligible to take occupancy, while Article 12 (3) 1 through 3 shall apply mutatis mutandis to the priority order of occupancy. In such cases, “amount of foreign investment” shall be construed as “amount of investment by a repatriating enterprise.” |
| (3) | A repatriating enterprise in a non-Seoul Metropolitan area that seeks to take occupancy shall conclude an occupancy contract with the management agency under Article 26-2 (3) and (4) of the Decree and the details of such occupancy contract shall include a contract for lease. Even where any change is made to the details of the project plan submitted when the occupancy contract is concluded, the payment of the changed investment amount by the repatriating enterprise, the construction of a factory in the changed area, etc. shall be completed within the initial period for fulfillment prescribed in Article 20 (2). |
| (4) | Articles 14 through 17 shall apply mutatis mutandis to matters regarding the termination of occupancy contracts, limit on occupancy, leases, rents, and rental security deposits, with the amount of foreign investment replaced by the amount of investment by a repatriating enterprise. |
| (5) | Rents paid by enterprises that take occupancy as repatriating enterprises in non-Seoul Metropolitan areas may be reduced or exempted under Article 13-2 (1) and (3) of the Act, and Articles 18 and 19 shall apply mutatis mutandis to matters regarding reduction or exemption of rents and recovery of the rents reduced or exempted, with the amount of foreign investment replaced by the amount of investment by the repatriating enterprise. |
| (6) | Articles 20, 22, 22-2, and 22-4 through 22-6 shall apply mutatis mutandis to matters regarding the fulfillment of project plans, the occupancy system for subcontractors, the conclusion of renewal contracts, the occupancy system for entities engaged in new and renewable energy power generation business, the additional use of unleased sites, etc., and the establishment of complex zones, with the amount of foreign investment replaced by the amount of investment by repatriating enterprises. |
| (7) | Articles 12 (1) and (2) and 21 shall not apply to enterprises that take occupancy as repatriating enterprises in non-Seoul Metropolitan areas. |
SECTION 3 Individual Foreign Investment Zones
| Article 23 (Criteria for designation of individual foreign investment zones) |
| (1) | The amount of foreign investment prescribed in the subparagraphs of Article 25 (1) of the Decree means the amount of foreign investment defined in Article 2 (1) 4 of the Act; provided, the amount of foreign investment paid in full before filing an application for the designation of an individual foreign investment zone (hereinafter referred to as "individual investment zone") shall be excluded therefrom. |
| (2) | Notwithstanding the proviso of paragraph (1), the amount of foreign investment paid in full shall be included in the amount of foreign investment, if it is acknowledged to have been used for the purpose of obtaining designation of a foreign investment zone, such as the purchase of real estates in the area desired to be designated as an individual investment zone. |
| (3) | "Where new factory facilities are installed" or "where new facilities are installed" in Article 25 (1) 1, 2, and 3 of the Decree respectively means any of the following cases: |
| 1. | Where any factory facility (referring to a place of business, in cases of business other than manufacturing business categorized in the Korean Standard Industrial Classification; hereinafter the same shall apply) is newly installed or where any machinery, installation, or equipment is newly installed in an existing building; |
| 2. | Where the same corporation installs any factory facility, machinery, installation, or equipment, the accounting of which can be conducted separately from the existing factory facilities; |
| 3. | Where any business activities are conducted with approval for use of a building under Article 22 of the Building Act after acquiring a building the construction of which is incomplete; provided, the Foreign Investment Committee may choose not to acknowledge it depending on the progress of the construction work. |
| (4) | "Number of full-time employees" in Article 25 (1) 4 (c) of the Decree means the number of employees who have paid income tax on earned income under the Income Tax Act each month. The criteria for the application of the number of full-time employees hereinafter shall be the same. |
| (5) | Where at least two foreign investors intend to obtain designation of an individual investment zone from a Mayor/Do Governor under Article 18 (2) of the Act, the relevant foreign investors shall conclude a contract for the implementation of the investment plan and the duties for fulfillment thereof between or among themselves. |
| (6) | The Foreign Investment Committee shall, by a resolution, verify as to whether the requirements prescribed in the subparagraphs of Article 25 (1) of the Decree are fulfilled. |
| (7) | Where the criteria for designation are not complied with due to the repayment of a long-term loan from the amount of foreign investment that has met the criteria for designation prescribed in the subparagraphs of Article 25 (1) of the Decree, a Mayor/Go Governor shall request the Foreign Investment Committee to cancel the designation of an individual foreign investment zone; provided, where the foreign investment fulfilling the criteria for designation is made within 6 months, the designation shall remain in effect. |
| Article 24 (Procedures for designation) |
| (1) | A designation plan under Article 18 (1) 2 of the Act shall be prepared in Form 2. |
| (2) | Article 11 of the Enforcement Decree of the Industrial Sites and Development Act shall apply mutatis mutandis to the procedures for hearing opinions under Article 25 (8) of the Decree; provided, opinions shall be deemed to have been heard, if the procedures for hearing opinions have already been finished as at the time the industrial complex is designated and developed and a foreign-invested company takes occupancy according to the relevant development plan. |
| (3) | Opinions shall be heard before a designation plan is submitted to the Minister of Trade, Industry and Energy. |
| (4) | The Minister of Trade, Industry and Energy shall prepare an evaluation report taking into comprehensive consideration the viability of foreign investment to be induced, effects on regional development, effects on the national economy such as the increased employment, effects of the provision of financial funds, etc. based on the designation plan submitted by a Mayor/Do Governor and submit it together with the designation plan to the Foreign Investment Committee as an agenda. |
| (5) | Where necessary, the Minister of Trade, Industry and Energy may request a Mayor/Do Governor to supplement his/her designation plan and request data necessary for the preparation of an evaluation report on the designation plan from the relevant Mayor/Do Governor or foreign investor. |
| (6) | The Foreign Investment Inducement Subcommittee established under Article 35 (4) of the Decree may provide support for necessary matters such as prior consultation with the Ministries related to the application for designation of an individual investment zone. |
| (7) | Where the Foreign Investment Committee adopts a resolution on the necessity for designation of an individual investment zone following deliberation made under Article 25 (9) of the Decree, a Mayor/Do Governor shall publicly notify such fact in the Official Gazette or official report under Article 18 (3) of the Act and send copies of related documents to the head of the relevant Si/Gun/Gu. |
| (8) | Where the Foreign Investment Committee rejects the designation following deliberation made under Article 25 (9) of the Decree, a Mayor/Do Governor shall notify the grounds therefor to the relevant foreign investor. |
| (9) | Where a Mayor/Do Governor intends to lend a site after the designation and public notice of an individual investment zone, he/she shall conclude a contract for lease of land (occupancy contract) reflecting the matters resolved upon by the Foreign Investment Committee and send 1 copy of the contract to the Minister of Trade, Industry and Energy. |
| Article 25 (Designation and development of individual investment zones in areas other than industrial complexes) |
| (2) | Where a Mayor/Do Governor intends to designate any business or facility set forth in Article 25 (1) 2 (b) of the Decree as an individual investment zone, he/she may do so after obtaining approval of a business plan under Article 15 of the Tourism Promotion Act. |
| (1) | A foreign-invested company that takes occupancy in an individual investment zone shall file a report with the competent Mayor/Do Governor on the status of the amount of foreign investment made in the immediately preceding year by the end of February of each year in Form 4. |
| (2) | A foreign-invested company whose place of business or factory has been designated as an individual investment zone due to the number of full-time employees shall file a report with the competent Mayor/Do Governor on the details of full-time employment during the immediately preceding year by the end of February of each year in Form 5. |
| (3) | A Mayor/Do Governor having jurisdiction over an individual investment zone shall check and confirm whether the foreign investment has been made according to the designation plan, compile the result thereof, and submit such result to the Industrial Complex Corporation by not later than March 15 each year, and the Industrial Complex Corporation shall report thereon to the Minister of Trade, Industry and Energy by the end of March. |
| (4) | Where an occupant company fails to perform any of its obligations under Article 25 (11) of the Decree, a Mayor/Do Governor having jurisdiction over an individual investment zone shall report such fact to the Minister of Trade, Industry and Energy within 10 days from the relevant date. |
| (5) | Where a foreign-invested company that has taken occupancy in an individual investment zone fails to meet any of the criteria for designation prescribed in Article 25 (1) and (5) of the Decree after fulfilling the designation plan, due to a change of the circumstances, it shall report such fact to the Mayor/Do Governor within 10 days from the date it fails to meet the criteria for designation; and the Mayor/Do Governor shall report thereon immediately to the Minister of Trade, Industry and Energy. |
| (6) | Except as provided in the Act, the Decree, and these Guidelines, Articles 30 through 45-2 of the Industrial Cluster Act shall apply mutatis mutandis to the management of an individual investment zone. |
| (7) | Where any site designated as an individual investment zone is lent to a foreign-invested company, a Mayor/Do Governor shall apply the provisions applicable to a company taking occupancy in a complex investment zone under Section 2 where there is any matter not separately prescribed in a contract concluded under Article 24 (9). |
Rents for an individual investment zone under Article 19 (8) of the Decree may be determined by the Foreign Investment Committee taking into consideration the effects on the national economy, etc.
| Article 26-3 (Limit on occupancy) |
Notwithstanding Article 26 (7), the amount of foreign investment (such amount shall be based on Korean won) to be met by a company taking occupancy in an individual investment zone shall be at least 200/100 of the value of the leased site.
| Article 27 (Cancellation of designation) |
| (1) | Where the Foreign Investment Committee adopts a resolution to cancel the designation of an individual investment zone, a Mayor/Do Governor shall cancel the designation within 15 days from the date the Foreign Investment Committee adopts the resolution. |
| (2) | Upon cancellation of the designation of an individual investment zone under paragraph (1), a Mayor/Do Governor shall publicly notify such fact in the Official Gazette or official report and notify the Minister of Trade, Industry and Energy, the Commissioner of the National Tax Service, the Commissioner of the Korea Customs Service, and the head of the relevant Si/Gun/Gu thereof within 10 days from the cancellation date. |
| (3) | An individual investment zone developed into a general industrial complex, etc. under Article 18-3 (2) of the Act shall be deemed continuously designated as a general industrial complex, etc. even after the cancellation of the designation of an individual investment zone. |
| (4) | Where the designation of an individual investment zone to be developed into a general industrial complex, etc. under Article 18-3 (2) of the Act is canceled before the development of such individual investment zone into a general industrial complex, etc. is commenced, the relevant Mayor/Do Governor shall promptly determine whether to cancel the designation of a general industrial complex, etc. or to develop it, taking into consideration the necessity to develop the general industrial complex, etc., the possibility of sale in lots, etc. |
| (5) | Where a foreign-invested company that has taken occupancy in an individual investment zone under Article 18 (1) 2 and (2) of the Act fails to meet the criteria for designation under Article 25 (1) or (5) of the Decree, the criteria for designation may be met by inducing a new foreign-invested company. |
| (6) | Where it is intended to meet the criteria for designation under paragraph (5), the designation plan shall be subject to prior deliberation by the Foreign Investment Committee. |
| (7) | A Mayor/Do Governor shall publicly notify a modified designation plan under Article 18 (4) of the Act. |
| (8) | Upon cancellation of the designation of an individual investment zone, the qualifications as an occupant company in an individual investment zone fulfilling the requirements for the reduction and exemption of rent and tax prescribed respectively in the Act, the Decree, and Chapter V of the Act on Restriction on Special Cases concerning Taxation, shall be deemed lost. |
SECTION 4 Designation and Management of Services-based Foreign Investment Zones
| Article 28 (Procedures for designation of services-based foreign investment zones) |
| (1) | A plan for designation of a services-based foreign investment zone (hereinafter referred to as "services-based investment zone") under Article 18 (1) 3 and 4 of the Act shall be prepared in Form 3. |
| (2) | The Minister of Trade, Industry and Energy shall examine a designation plan submitted by a Mayor/Do Governor about whether the requirements for designation prescribed in Article 29 are fulfilled and submit the designation plan to the Foreign Investment Committee as an agenda item. |
| Article 29 (Requirements for designation of services-based foreign investment zones) |
| (1) | In designating a services-based investment zone, the principle of equity among zones of Cities/Dos shall be taken into consideration and the requirements prescribed in paragraph (2) shall be fulfilled: |
| (2) | A newly or additionally designated zone (site) or building shall be available for immediate occupancy, and the demand of foreign-invested companies for occupancy shall be explicitly specified in their reports on investment; provided, in designating a certain space of State or public property (including a building) beforehand, the demand for occupancy specified in their reports on investment shall be secured at a rate of at least 30 percent of the designated size. |
| (3) | When submitting a plan for new designation or additional designation of a services-based investment zone in the region, a Mayor/Do Governor shall append a report on examination of the validity thereof taking into comprehensive consideration the viability of foreign investment to be induced, effects on regional development, effects on the national economy such as the increase of employment, effects of provision of financial funds, etc. |
| Article 30 (Management of services-based investment zones) |
| (1) | Where a foreign-invested company that has taken occupancy fails to meet the qualifications for occupancy under Article 34 or the criteria for the fulfillment of the project plan under Article 44 after the occupancy due to a change of circumstances, a Mayor/Do Governor shall report such fact to the Minister of Trade, Industry and Energy within 10 days from the date on which it fails to meet such criteria. |
| (2) | Where any site and building designated as a services-based investment zone are lent to a foreign-invested company, a Mayor/Do Governor shall apply the provisions applicable to a company taking occupancy in a complex or individual foreign investment zone under Section 2 or 3, to any matter not separately prescribed in the contract concluded under Article 35. |
| Article 31 (Entrustment of management of services-based investments zones) |
| (1) | In principle, management shall be performed by a Mayor/Do Governor who is a management agency; provided, where necessary for the specialization and efficiency of the management of a services-based investment zone, the management thereof may be entrusted to an agency having abundant capacity for and experience in the management of the relevant zone. |
| (2) | The head of an agency entrusted with management shall formulate and apply detailed guidelines for operation to facilitate the performance of the affairs prescribed in Article 32. |
| Article 32 (Management of State and public property in services-based investment zones) |
| 1. | Evaluation related to the selection of companies that intend to take occupancy in the services-based investment zone; |
| 2. | Affairs related to the conclusion of occupancy contracts (including lease contracts in cases of a complex for lease; hereinafter the same shall apply) with occupant companies; |
| 3. | Imposition and collection of rents and rental security deposits of occupant companies, and decision on reduction or exemption thereof; |
| 4. | Management of property in the services-based investment zone; |
| 5. | Other affairs incidental to the lease and operation of the services-based investment zone. |
| (2) | An entrusted agency shall establish and manage separate accounts for the management of State and public property; and its revenue shall be the aggregate of the income accrued from the management of State and public property, such as rents collected from occupant companies, while its expenditure shall be entrustment fees payable for the entrustment (which shall be allocated based on the ratios of entrusted property). |
| (3) | The entrustment fee under paragraph (2) shall be used preferentially for the expenses to be incurred in the appropriate management of State and public property. |
| (4) | An entrusted agency shall file a report with the Minister of Trade, Industry and Energy or a Mayor/Do Governor who has entrusted the management of State and public property, by the end of February of the following year, appending the annual status of the management of the relevant property and an audit report of an external specialized agency. |
| (5) | An agency entrusted with State and public property shall settle accounts on a fiscal-year basis; and where the revenue referred to in paragraph (2) exceeds the expenditure, it shall be required to pay the difference, and where the expenditure exceeds the revenue, the difference shall be paid to the entrusted agency. |
| Article 33 (Categories of business eligible to take occupancy in services-based investment zones) |
The scope of categories of business eligible to take occupancy in a services-based investment zone shall be as follows:
| 1. | The scope of research and development service business under Article 18 (1) 3 and 4 of the Act shall be the business categorized as the Research and Experimental Development on Natural Sciences and Engineering (Class No. 7011, 7012, and 7013) under the Korean Standard Industrial Classification publicly notified by the Commissioner of the Statistics Korea; |
| 2. | Business prescribed in Article 25 (3) 1, 1-2, and 2 of the Decree; |
| 3. | The scope of cultural industries under Article 25 (3) 4 of the Decree shall be the industries specified in Appendix 1; |
| 4. | The scope of tourism business under Article 25 (3) 5 of the Decree shall be the industries specified in Appendix 2. |
| Article 34 (Qualifications for and priority order of occupancy) |
| (1) | A foreign-invested company that meets each of the following requirements shall be eligible to take occupancy in a services-based investment zone: |
| 1. | A company invested solely by foreigners, or a joint venture company in which the share of a foreign-invested company is at least 30 percent of the total number of voting stocks or total amount of contribution and its amount of foreign investment is at least 100 million won; |
| 2. | It shall be registered as a foreign-invested company under Article 21 of the Act by the time the occupancy contract is concluded under Article 35 (1); |
| 3. | Its place of business shall be newly constructed, or established separately from the existing one, to enable separate accounting by the same corporation; provided, the existing place of business shall not be relocated, except for the case where it moves to another services-based investment zone within a services-based investment zone. |
| (2) | The minimum number of persons to be employed by each industry as a requirement for taking occupancy in a services-based investment zone shall be as specified in Appendix 3. |
| (3) | A Mayor/Do Governor may establish separate guidelines for the designation of services-based investment zones and the evaluation and selection of occupant companies; and may establish an evaluation committee to conduct selection based on the regional characteristics. |
| (4) | In cases of a foreign investment zone designated under the proviso of Article 29 (2), the priority for occupancy shall be given in the order of a company which employs more persons, a company in which the amount of foreign investment is higher, and a company in which the ratio of foreign investment is higher. |
| Article 35 (Occupancy contracts) |
| (1) | A person who intends to operate a business in a services-based investment zone shall conclude an occupancy contract with the management agency. Even when any modification is made to the details of the project plan submitted as at the time of concluding the occupancy contract, the payment of a changed investment amount shall be completed and a changed employment status etc. shall be fulfilled within the original period for fulfillment prescribed in Article 44 (2). |
| (2) | If a company makes a request to conclude an occupancy contract to take occupancy in a services-based investment zone, the management agency shall determine whether to allow the occupancy following internal deliberation. |
| (3) | An occupancy contract referred to in paragraph (1) shall be deemed to include a contract for lease of a site and buildings, in cases of State or public property. |
| (4) | When the ownership of an occupant company is expected to be changed due to business suspension, auction, etc., the management agency may impose a restriction on the modification of its project plan. |
| Article 36 (Termination of occupancy contracts) |
| (1) | Where an occupant company falls under any of the following cases, the management agency may terminate the occupancy contract: |
| 1. | Where any building (or part thereof) has been leased, if it fails to commence business without any reasonable ground; or where any site has been leased, if it fails to commence construction works within 1 year; |
| 2. | Where it becomes disqualified for occupancy prescribed in Article 34 (1) and (2); |
| 3. | Where it uses a site in violation of Article 38 (2) and (3); |
| 4. | When it disposes of the leased site or buildings at its own discretion, or it is impracticable to operate its business due to a public sale, auction, etc.; |
| 5. | Where a request for the commencement of company reorganization procedures or a petition for declaring bankruptcy is filed under the Debtor Rehabilitation and Bankruptcy Act against the occupant company; |
| 6. | Where it closes its business or fails to perform business activities for at least 6 consecutive months; |
| 7. | Where it fails to perform its duties specified in the contract or fails to pay a rent for at least 6 months; |
| 8. | Other cases where it fails to comply with the contract or violates any statutes, regulations, municipal ordinances, etc. |
| (2) | When the management agency intends to terminate an occupancy contract with an occupant company in accordance with the criteria prescribed in the subparagraphs of paragraph (1), it shall order the company to take corrective measures within 6 months and may terminate the occupancy contract if it fails to comply with such order; provided, in cases falling under any of paragraph (1) 3, 4 and 7, the occupancy contract may be terminated immediately. |
| (3) | A management agency that intends to terminate an occupancy contract under paragraph (1) shall hold a hearing. |
| Article 37 (Limit on occupancy) |
The limit on lease of a site and buildings in a services-based investment zone shall be as follows:
| 1. | The area for construction of buildings that an occupant company should comply with, shall be the area of a site calculated by applying 40 percent which is the standard ratio of construction area for categories of business other than manufacturing business pursuant to Article 5 of the Guidelines for Management of Industrial Complexes under Article 12 of the Industrial Cluster Act; and where the occupant company intends to take occupancy in a site the size of which does not exceed such ratio, it may be allowed to take occupancy in a site the size of which is calculated pursuant to the same formula. In such cases, the land corresponding to the ratio that exceeds area ratio allowed for the occupancy compared with the area ratio for construction, shall be subject to the imposition of the rent under Article 39 (2) from the time of the occupancy; |
| 2. | A company that takes occupancy in a services-based investment zone shall meet each of the criteria for the amount of foreign investment by lease area of each category of business specified in Appendix 4; |
| 3. | In examining an occupancy contract, a management agency shall calculate an optimum lease area so that it may not rent an excessive area; |
| 4. | Notwithstanding subparagraph 2, a subsidy for the rent for buildings shall be granted only when an amount of foreign investment reaches at least 100/100 of the total amount of the subsidy. |
| (1) | Where a services-based investment zone is a site for lease, a Mayor/Do Governor may conclude an occupancy contract for a period not exceeding 10 years in total, and the period for research and development service business shall be 50 years exceptionally, which is the same as that for manufacturing business. Where a services-based investment zone is any building for lease, an occupancy contract may be concluded with a foreign-invested company that intends to take occupancy for a period not exceeding 5 years in total; provided, in cases of a services-based investment zone, an occupancy contract may be renewed only once for a period not exceeding the former lease period. |
| (2) | No occupant company shall use any site and building for any purpose other than those prescribed in the occupancy contract nor conduct any act of disposition, such as the sale, lease (or sublease), and exchange of a site or a building, without the written consent of a Mayor/Do Governor. |
| (3) | If requested by an occupant company, a Mayor/Do Governor may engage in any of the following activities with the consent of the Minister of Trade, Industry and Energy: |
| 1. | Altering a right, such as subleasing or transferring the leased site or building; |
| 2. | Altering the form and/or quality of the leased site, or the structure, purpose of use, etc. of a building. |
| Article 39 (Rents for sites) |
| (1) | Article 17 (1) shall apply mutatis mutandis to rents and rental security deposits, where a services-based investment zone is a site for lease. |
| (2) | Notwithstanding Article 44 (2), the rent paid by any of the following occupant companies shall be determined by the Minister of Trade, Industry and Energy, following consultation with the Minister of Economy and Finance and a Mayor/Do Governor, in an amount calculated by multiplying the acquisition value (referring to the publicly announced individual land price, where a publicly announced individual land price under the Act on the Public Announcement of Real Estate Values exceeds the acquisition value; hereinafter the same shall apply) by 50/1000 of such value or higher rate: |
| 1. | An occupant company that has failed to fulfill the amount of foreign investment and the area for construction applied at the time of determining the limit on occupancy under Article 37; |
| 2. | An occupant company that has failed to meet the qualifications for occupancy prescribed in Article 34; |
| 3. | An occupant company that is subject to the termination of the occupancy contract for any ground under Article 36. |
| (3) | In order to rent a site which is the State or public property, an occupant company shall pay the rent for the year in which it takes occupancy, in an amount calculated by the month (if the number of days of use is less than a month, it shall be calculated by the day) and the rental security deposit in an amount prescribed in paragraph (1) by the time the contract is concluded, and pay the rent for the following year until December 31 of the preceding year. For such purpose, a Mayor/Do Governor shall issue a payment notice of the rent by not later than November 30 of the preceding year. |
| (5) | Where any article on the ground of a services-based investment zone is acquired through an auction or public sale, no rent shall be imposed on the person who has acquired the real rights thereover during the period for concluding an occupancy contract and the period for transfer; provided, where a person who engages in such activity as the possession, use, etc. of real rights over an article on the ground shall be subject to the imposition of the rent under paragraph (2). |
| Article 40 (Reduction or exemption of rents for sites) |
| (1) | The rent to be paid by an occupant company may be reduced or exempted under Article 13-2 (1) and (3) of the Act. In applying a rate of reduction or exemption in such cases, the investment amount completely paid to invest in the relevant place of business shall be construed as the amount of foreign investment, and companies subject to the application of rents under Article 39 (2) shall be excluded from those eligible for the reduction or exemption of rents. |
| (2) | An occupant company that intends to have its rent reduced or exempted under paragraph (1) shall file an application with the management agency, appending documents substantiating the ground therefor, and the reduction or exemption of the rent shall apply starting from the month in which the decision on reduction or exemption is made. |
| (3) | Even if a management agency decides to reduce or exempt a rent under paragraph (1), an occupant company shall pay the rent fixed before reduction or exemption is granted until the commencement of its business, and the management agency shall return the reduced or exempted rent to the occupant company after verifying the commencement of the business of the relevant company. |
| (4) | A management agency shall return a rental security deposit collected under Article 39 (1) after confirming that the leased site and buildings, the contract for which has been terminated under Article 4 (1), are reinstated. |
| (5) | Reduction or exemption of a rent for a project for which the decision on tax reduction or exemption has been made under the provisions of the Act on Restriction on Special Cases concerning Taxation out of the reduction or exemption of a rent under the former part of paragraph (1) shall be limited to the relevant place of business subject to the decision on tax reduction or exemption. |
| Article 41 (Recovery of reduced or exempted rents) |
Any of the following occupant companies shall be subject to the recovery of rents reduced or exempted under Article 40: | 1. | Where a decision on the reduction or exemption has been obtained by substantiating a false fact, the reduced or exempted rent shall be recovered retroactively from the date on which the reduced or exempted rent began to apply; |
| 2. | Where a company fails to meet the criteria for reduction or exemption of a rent after the decision on the reduction or exemption of the rent is made, or where it becomes subject to the application of the rent under Article 39 (2), it shall be redeemed retroactively from the date the grounds therefor occurred. |
| Article 42 (Subsidization of rents for buildings) |
| (1) | The State or a local government may grant a subsidy for the rent for buildings in a services-based investment zone. In such cases, the State or a local government may grant a subsidy in an amount not exceeding 50/100 of the standard rent referred to in paragraph (2); provided, in cases of buildings for categories of business prescribed in subparagraph 1 of Article 33 that are located in a university or college provided in Article 2 of the Higher Education Act, a subsidy may be granted in an amount not exceeding 75/100 of the standard rent. |
| (2) | The amount of standard rent shall be the arithmetic means of the values appraised by at least 2 appraisal corporations among the appraisal corporations defined in the Act on Appraisal and Certified Appraisers; provided, where there is any existing standard rent for a State or public building or a building owned by a public institution, it may be applied after judging the propriety of the calculation details. |
| (3) | A subsidy for the rent for buildings shall be paid by the year applying a concept of ex-post settlement, and the subsidy for the relevant year shall be paid in the following year; provided, the period for subsidization of rent for buildings shall be the period of an occupancy contract prescribed in Article 38 (1) and shall not exceed 5 years. |
| (4) | An occupant company that intends to be granted a subsidy for the rent for buildings under paragraph (1) shall file an application for the subsidy with the management agency appending the documents substantiating the grounds therefor, such as evidentiary documents regarding the payment of the rent, and the amount of subsidy to be provided shall be calculated starting from when the occupancy contract is concluded by the occupant company. |
| (5) | In making a claim for the payment of the part paid at the expense of the State out of the expenses subsidized for the rent for buildings, a Mayor/Do Governor shall append a written resolution on subsidization and the documents substantiating the payment of the rent by the occupant company. |
| (6) | In any of the following cases, a subsidy for the rent for buildings shall be excluded from the period of payment of the subsidy, from the date such grounds occur: |
| 1. | An occupant company that has failed to fulfill the amount of foreign investment and the area for construction applied at the time of determining the limit on occupancy under Article 37; |
| 2. | An occupant company that has failed to meet the qualifications for occupancy prescribed in Article 34; |
| 3. | An occupant company that is subject to the termination of the occupancy contract for any ground under Article 36. |
| Article 43 (Recovery of Subsidized Rents for Buildings) |
In any of the following cases, an occupant company shall pay the subsidy received under Article 42, the amount of which shall be calculated by the day retroactively from the date the ground therefor occurred: | 1. | Where the decision to grant a subsidy is received by substantiating a false fact; |
| 2. | Where it fails to meet the criteria for subsidization of the rent for buildings after making a decision to grant it. |
| Article 44 (Fulfillment of project plans) |
| (1) | A company that takes occupancy in a services-based investment zone shall conscientiously comply with the limit on occupancy prescribed in Article 37. |
| (2) | The period for fulfillment of the project plan (amount of foreign investment, area for construction of buildings, and minimum number of persons to be employed) of an occupant company shall be 3 years from the date the occupancy contract is concluded. |
| (3) | Where an occupant company that has rented any land in a services-based investment zone fails to fulfill the amount of foreign investment during the period for fulfillment prescribed in paragraph (2), the management agency shall apply the following matters: |
| 1. | Regarding the site, the rent prescribed in Article 39 (2) shall apply, and the rate of reduction of exemption under Article 40 shall not apply; provided, in extenuating circumstances, the company may be allowed, following consultation with the Minister of Trade, Industry and Energy, to fulfill the amount of foreign investment within a period not exceeding 6 months from the expiration date of the period for fulfillment, and the rent prescribed in Article 39 (2) shall apply for such period for the area which is excessive compared with the amount of foreign investment prescribed in subparagraph 1 of Article 37; |
| 2. | Regarding the site, the rent under Article 39 (2) shall be paid retroactively, and the whole amount of the rent reduced or exempted under Article 40 shall be recovered; |
| 3. | As regards the buildings, the whole amount of a subsidy for rent provided to the company under Article 42 shall be recovered. |
| (4) | Regarding the site, where an occupant company fails to use all of the area for construction, the rent prescribed in Article 39 (2) shall apply only to the area of land exceeding 40 percent which is the standard ratio of construction area referred to in subparagraph 1 of Article 37. |
| (5) | Regarding the site, where it is leased with a long-term loan by calculating the limit on occupancy prescribed in Article 37 as part of the amount of foreign investment, if the company fails to meet the limit on occupancy due to repayment of the long-term loan, the rent prescribed in Article 39 (2) shall apply. |
| Article 45 (Maintenance of qualifications for occupancy) |
| (1) | Where an occupant company fails to meet the qualifications for occupancy prescribed in Article 34 (1) and (2) due to any extenuating circumstances, such as withdrawal of a foreign share, after it has taken occupancy in the services-based investment zone, the management agency may allow it, following consultation with the Minister of Trade, Industry and Energy, to meet the qualifications for occupancy within a period not exceeding 6 months. |
| (2) | As regards the site, the rent prescribed in Article 39 (2) shall apply from the time that it fails to meet the qualifications for occupancy prescribed in Article 34, and the rate of reduction or exemption under Article 40 shall not apply. |
| (3) | As regards buildings, the subsidization of rent under Article 42 shall cease to apply from the time it fails to meet the qualifications for occupancy. |
| (4) | If an occupant company fails to meet the qualifications for occupancy as it increases only its domestic capital for more domestic investment, without reducing the amount of foreign investment (limited to cases where the amount of foreign investment is at least ten percent of the total number of stocks or total amount of contribution referred to in Article 34 (1) 1) after fulfilling the project plan referred to in Article 44 (2), it shall be deemed to remain qualified for occupancy. |
| Article 46 (Occupancy of companies other than foreign-invested companies) |
| (1) | In any of the following cases, a Mayor/Do Governor may allow a company other than a foreign-invested company to take occupancy in a services-based investment zone designated under the proviso of the middle part of Article 29 (2) within the limit of 50 percent of the designated size: |
| 1. | Where it falls under a category of business eligible to take occupancy in a services-based investment zone prescribed in Article 33; |
| 2. | Where it is a subcontractor of an existing foreign-invested company that has taken occupancy and its occupancy is necessary to save costs and to establish a collaboration system. |
| (2) | A Mayor/Do Governor may conclude an occupancy contract with a company allowed to take occupancy under paragraph (1) at the request of the relevant occupant company for a period not exceeding the remaining lease period of the occupant company. |
| (3) | As regards buildings, no rent shall be subsidized under Article 42, but the standard rate of rent referred to in Article 42 (2) shall apply, and as regards the site, the rent prescribed in Article 39 (2) shall apply. |
| (4) | In allowing occupancy under paragraph (1), a Mayor/Do Governor shall consult with the Minister of Trade, Industry and Energy, following evaluation of the Evaluation Committee. |
SECTION 5 Supplementary Provisions
| Article 47 (Effective period) |
This public announcement shall remain effective until March 31, 2026, in light of any changes to statutes or regulations and real circumstances that need to be reviewed following the issuance of the public announcement pursuant to the Rules on the Issuance and Management of Directives and Established Rules.
ADDENDUM <Public Announcement No. 2010-218, May 4, 2010>
Article 1 (Enforcement date)
These Guidelines shall enter into force on the date they are resolved upon by the Foreign Investment Committee.
ADDENDA <Public Announcement No. 2015-8, Dec. 31, 2014>
Article 1 (Enforcement date)
These Guidelines shall enter into force on the date they are resolved upon by the Foreign Investment Committee.
Article 2 (Transitional measures)
| (1) | The qualifications for occupancy under Article 12 (1) shall be governed by the Guidelines in effect as at the time of occupancy. |
| (2) | Subparagraphs 1 and 2 of Article 15 shall not apply where there are no provisions on the limit on occupancy in the Guidelines in effect as at the time of occupancy. |
Article 3 (Relationship to previous Addenda)
Article 3 of the Addenda to the Guidelines for Operation of Foreign Investment Zones (Public Announcement of the Ministry of Trade, Industry and Energy No. 2014-417) shall be deleted.
ADDENDA <Public Announcement No. 2016-376, Jul. 19, 2016>
Article 1 (Enforcement date)
These Guidelines shall enter into force on the date they are resolved upon by the Foreign Investment Committee.
Article 2 (Applicability to imposition of rents on business eligible for tax reduction or exemption)
| (1) | The period of reduction or exemption of rent for a place of business that operates a business (technology) eligible for tax reduction or exemption under Article 18 (6) shall begin to apply to companies that conclude occupancy contracts after the date these Guidelines enter into force. |
| (2) | The imposition of rent for a business (technology) eligible for tax reduction or exemption and a business other than that under Article 18 (7) shall begin to apply from January 1, 2017. |
ADDENDUM <Public Announcement No. 2018-42, Jan. 23, 2018>
These Guidelines shall enter into force on the date they are resolved upon by the Foreign Investment Committee.
ADDENDUM <Public Announcement No. 2018-359, Jun. 25, 2018>
These Guidelines shall enter into force on the date they are resolved upon by the Foreign Investment Committee.
ADDENDA <Public Announcement No. 2018-628, Dec. 27, 2018>
Article 1 (Enforcement date)
These Guidelines shall enter into force on the date they are resolved upon by the Foreign Investment Committee.
Article 2 (Special cases concerning application)
Any postponement of fulfilling project plans and maintaining the qualifications for occupancy under Articles 20 (4) and 21 (1) shall begin to apply from August 2, 2018.
ADDENDUM <Public Announcement No. 2019-691, Dec. 10, 2019>
Article 1 (Enforcement date)
These Guidelines shall enter into force on the date they are resolved upon by the Foreign Investment Committee.
ADDENDUM <Public Announcement No. 2020-219, Mar. 31, 2020>
These Guidelines shall enter into force on the date of their public announcement.
ADDENDUM <Public Announcement No. 2020-541, Sep. 10, 2020>
Article 1 (Enforcement date)
These Guidelines shall enter into force on the date of their public announcement.
ADDENDUM <Public Announcement No. 2021-771, Nov. 8, 2021>
Article 1 (Enforcement date)
These Guidelines shall enter into force on the date of their public announcement.
ADDENDUM <Public Announcement No. 2023-391, Apr. 26, 2023>
Article 1 (Enforcement date)
These Guidelines shall enter into force on the date of their public announcement.
ADDENDUM <Public Announcement of No. 2023-857, Dec. 4, 2023>
Article 1 (Enforcement date)
These Guidelines shall enter into force on the date of their public announcement.