A complex-type Foreign Investment Zone(FIZ) is designated for lease or transferred exclusively to foreign-invested companies. The lease term is up to 50 years and must be renewed every 10 years. Companies moving into this type of zone are provided with low-cost rent and benefits such as rent reduction or tax credits depending on the investment.
1. Type of Businesses Eligible for Occupancy
The categories of business eligible to take the occupancy in a complex- type FIZs are as follows, while the categories of business eligible to take occupancy in each zone shall be specified in a master plan for management.
- Business holding technologies for new growth engine industry (Restriction of Special Taxation Act)
– Categories of business in which advanced technologies or advanced products (Industrial Development Act)
- Research institutes affiliated with enterprises and research and
development service business (Special Act on Support of Scientists and Engineers for Strengthening National Science and Technology Competitiveness)
- Combined logistics terminal operation (Distribution Industry Development Act)
- Other categories of business that a management agency determines, taking account of the industrial characteristics of the relevant region.
2. Occupancy Requirements
Only companies registered as a foreign-invested company where the share of the foreign-invested company is at least 30 percent (10 percent in cases of standard-type factories of Daebul Foreign Investment Zone, and 50 percent in case of combined-logistics terminal operation and courier activities). If a new factory facility (workplace) is constructed or a new machine or device is installed in an existing building, the same corporation shall install factory facilities, machinery, and devices that can be separately accounted for in accounting, separate from existing factory facilities. In addition, no existing foreign-invested factory may be relocated. However, where it relocates between FIZs or where a foreign-invested company increases the foreign investment by at least 30 percent of the total number of voting stocks or the total amount of contribution, such factory may be relocated with approval from the person having the authority to manage the relevant FIZ in an industrial complex.
3. limit on Occupancy
The factory construction area should satisfy the standard area ratio of a factory of the relevant category of a manufacturing business (12 percent or higher) and the limit on lease area for each company should be at least equivalent to the land price. In short, the occupancy limit is related to the number of funds to be invested by the size of the area where the foreign-invested company intends to move into.
4. Rents and Rental Security Deposits
Annual rent in a complex-type FIZ shall be determined by multiplying the acquisition value(referring to the publicly announced land price, where a publicly announced individual lan price exceeds the acquisition value) of the relevant complex-type FIZ by at least 1 percent. The rents for “a relocated company that has failed to fulfill the amount of foreign investment and the area for construction of a factory-applied when determining the occupancy limit”, “a relocated company that has failed to meet the qualifications for occupancy” and “a relocated company that falls under any ground for termination of the occupancy contract”, shall be determined by the Minister of Trade, Industry, and Energy, following consultation with the Minister of Strategy and Finance and a mayor/provincial governor, in an amount calculated by multiplying the acquisition value by at least 5 percent.
Rental security deposits: it shall be an amount calculated by multiplying the acquisition value by at least 5 percent and paid in cash. Companies in foreign investment zones may instead request to replace a cash payment with the submission of a guarantee insurance policy or payment certificate of a bank.
5. Reduction and Exemption of Rents
In applying a rate of reduction and exemption, the investment amount that has been paid in full to invest shall be construed as the amount of foreign investment, and the time that falls a month before the issuance of payment notice of the rent shall be construed as the date of calculation of the number of full-time workers. The rents for national and shared properties are 5 percent or more of the acquisition amount but the companies in FIZs may lease the site with 1 percent or more of the acquisition amount.
6. Occupancy System for Suppliers
In case a company with occupancy in a FIZ requests that their suppliers with no foreign-held shares be permitted to occupy a part of the factory for process shortening or cost reduction, it shall be permitted to move into the area under the evaluation by the committee and consent of the Minister of Trade, Industry, and Energy.
The contract shall be made within the remaining period of the contract and should be renewed every five years. The area allowed for a subcontractor to move in shall not exceed 30 percent of the total building area of the factory of the relevant relocated company.