[KMTI ⑬] Procedures to Induce Global Enterprise HQs

Simplifying Procedures to Induce Global Enterprise HQs 

The Korean government announced its 'Foreign Investment Activation Plan' with the intent to enhance the foreign investment scale and level one stage further.

The plan highlights expanded inducement of foreign capital in the high value-added services sector, including regional headquarters and R&D centers of global enterprises.

The plan is drawing keen attention from the perspective that it is 'Economic Innovation Countermeasure No. 1' since President Park Geun-Hye revealed her initiative to promote a '3-Year Economic Innovation Plan' at her New Year press conference on January 6.

On January 9, the Ministry of Trade, Industry and Energy announced the 'Foreign Investment Activation Plan' during a luncheon roundtable meeting with foreign-invested enterprises at Cheong Wa Dae. Chairmen of foreign chambers of commerce & industry in Korea, 25 CEOs of leading foreign-invested enterprises and ministers and vice ministers of related ministries, including Trade, Industry & Energy Minister Yoon Sang-Jick, participated in the meeting.

Under the plan, the government decided to promote inducement of high value-added investments, including headquarters and R&D centers of global enterprises, in advance, with a focus on inducing global headquarters of multinational companies having capabilities to create comparatively higher added value.

To that effect, the government decided to apply a 17% flat tax rate for foreign executives and employees working at the headquarters, regardless of their incomes, and also to extend the 50% income tax exemption for foreign engineers working at foreign-invested R&D centers, which was scheduled to expire at the end of this year, until 2018.

Furthermore, the government plans to introduce a prior adjustment system that discusses proper price ranges with joint participation of the National Tax Service and the Korea Customs Service and significantly simplify the taxation system, which is being pointed out as the biggest area of difficulty in domestic management of headquarters, as well.

The government also plans to extend the period of foreign-investment visas to a maximum of five years and the period of stay granted for executives and employees of headquarters to a maximum of five years from the present 1~3 years.