Article 121-2 (Tax Reduction for Foreign Investment)

, ④, ⑤, and ⑫. 1. Businesses belonging to new growth engine industries essential for advancing the domestic industrial structure and strengthening international competitiveness, and which involve technologies prescribed by the Presidential Decree 2. Businesses operated by foreign invested companies (hereinafter referred to as "foreign invested companies" in this Chapter) under Article 2 (1) (6) of the 「Foreign Investment Promotion Act」 that are located in a foreign investment zone under Article 18 (1) (2) of the same Act, and businesses operated by foreign invested companies under subparagraphs 2-2, 2-8, Article 121-8 (1), or Article 121-9 (1) (1) that undergo deliberation and resolution by the following committees: a. In the case of businesses under subparagraph 2-2, the Economic Free Zone Committee under Article 25 of the 「Act on the Designation and Management of Economic Free Zones」 b. In the case of businesses under subparagraph 2-8, the Saemangeum Committee under Article 33 of the 「Act on the Promotion and Support of the Saemangeum Project」 c. In the case of businesses under Article 121-8 (1), the Jeju Special Self-Governing Province Support Committee under Article 17 of the 「Act on the Establishment of Jeju Special Self-Governing Province and the Development of International Free City」 d. In the case of businesses under Article 121-9 (1) (1), the Jeju International Free City Comprehensive Plan Deliberation Council under Article 144 of the 「Act on the Establishment of Jeju Special Self-Governing Province and the Development of International Free City」 2-2. Businesses operated by foreign invested companies located in economic free zones under Article 2 (1) of the 「Act on the Designation and Management of Economic Free Zones」 2-3. Businesses operated by foreign invested companies that are development project implementers under Article 8-3 (1) and (2) of the 「Act on the Designation and Management of Economic Free Zones」 2-4. Businesses operated by foreign invested companies that are development project implementers of Jeju Investment Promotion Districts designated under Article 162 of the 「Act on the Establishment of Jeju Special Self-Governing Province and the Development of International Free City」 2-5. Businesses operated by foreign invested companies located in foreign investment zones under Article 18 (1) (1) of the 「Foreign Investment Promotion Act」 2-6. Businesses operated by foreign invested companies located in corporate city development zones (hereinafter referred to as "corporate city development zones") under Article 2 (2) of the 「Act on the Development of Corporate Cities」 2-7. Businesses operated by foreign invested companies designated as implementers of corporate city development projects (hereinafter referred to as "corporate city development project implementers") under Article 10 (1) of the 「Act on the Development of Corporate Cities」, which are corporate city development projects under Article 2 (3) of the same Act 2-8. Businesses operated by foreign invested companies located in Saemangeum project areas (hereinafter referred to as "Saemangeum project areas" in this Chapter) designated under Article 2 of the 「Act on the Promotion and Support of the Saemangeum Project」 2-9. Businesses operated by foreign invested companies that are project implementers under Article 8 (1) of the 「Act on the Promotion and Support of the Saemangeum Project」 3. Businesses for which tax reduction is inevitable for attracting foreign investment, as prescribed by the Presidential Decree. ② For foreign invested companies that have applied for tax reduction under paragraph ⑥ by December 31, 2018, tax reductions shall be granted on income arising from conducting the businesses eligible for reduction under paragraph ① (in the case of businesses eligible for reduction under paragraph ① (1), income prescribed by the Presidential Decree) according to the following categories. In this case, when calculating the tax amount eligible for reduction, if a foreign invested company merges with a domestic corporation (excluding foreign invested companies under reduction periods) during the reduction period, and the foreign investment ratio of the merged corporation (referring to the foreign investment ratio calculated according to the Presidential Decree, considering the types of shares issued by the foreign invested company, etc., hereinafter the same in this Chapter) decreases, the foreign investment ratio of the foreign invested company before the merger shall be applied. 1. Income arising from conducting businesses eligible for reduction under paragraph ① (1) and (2): Tax amounts according to the following classifications a. For the tax years ending within five years from the commencement of the first tax year in which income is generated from the business after its commencement (if no income is generated within five years from the commencement date, the tax year in which the fifth anniversary falls shall be considered the commencement date): The full amount of the tax reduction amount (referring to the amount obtained by multiplying the total calculated tax amount by the ratio of income arising from conducting businesses under paragraph ① to the total taxable income) multiplied by the foreign investment ratio (hereinafter referred to as "tax reduction amount" in this paragraph, paragraph ⑫ (1) and (2), and Article 121-4 (4)). b. For the tax years ending within two years after the period under subparagraph a: 50 percent of the tax reduction amount. 2. Income arising from conducting businesses eligible for reduction under paragraph ① (2-2) through (2-9) and (3): Tax amounts according to the following classifications a. For the tax years ending within three years from the commencement of the first tax year in which income is generated from the business after its commencement (if no income is generated within five years from the commencement date, the tax year in which the fifth anniversary falls shall be considered the commencement date): The full amount of the tax reduction amount. b. For the tax years ending within two years after the period under subparagraph a: 50 percent of the tax reduction amount.

For foreign invested companies that have applied for tax reduction under paragraph ⑥ by December 31, 2019, acquisition tax and property tax on property acquired or held for conducting the business reported by the foreign invested company shall be reduced or a certain amount shall be deducted from the tax base, as follows. However, if a local government extends the reduction or deduction period up to 15 years or increases the reduction or deduction ratio within the extended period, in accordance with an ordinance prescribed by Article 4 of the 「Act on Special Cases Concerning Local Taxes」, the period and ratio shall apply notwithstanding subparagraphs 1 and 2. 1. Acquisition tax and property tax shall be reduced by the full amount of the calculated tax multiplied by the foreign investment ratio (hereinafter referred to as "tax reduction amount" in this paragraph, paragraph

by December 31, 2019, notwithstanding paragraph ④, acquisition tax and property tax on property acquired or held for the purpose of using it for businesses under paragraph ①, before the commencement of business, shall be reduced or a certain amount shall be deducted from the tax base, as follows. However, if a local government extends the reduction or deduction period up to 15 years or increases the reduction or deduction ratio within the extended period, in accordance with an ordinance prescribed by Article 4 of the 「Act on Special Cases Concerning Local Taxes」, the period and ratio shall apply notwithstanding subparagraphs 2 and 3. 1. Full amount of the tax reduction amount for acquisition tax on property acquired on or after the date of receiving a tax reduction decision under paragraph ⑧. 2. For property tax, the full amount of the tax reduction amount shall be reduced for five years from the date of acquiring the property, and 50 percent of the tax reduction amount for the subsequent two years. However, for property tax on property acquired or held for conducting businesses eligible for reduction under paragraph ① (2-2) through (2-9) and (3), the full amount of the tax reduction amount shall be reduced for three years from the date of acquiring the property, and 50 percent of the tax reduction amount shall be reduced for the subsequent two years. 3. For property tax on land, the full amount of the deductible amount shall be deducted from the tax base for five years from the date of acquiring the property, and 50 percent of the deductible amount for the subsequent two years. However, for property tax on land acquired or held for conducting businesses eligible for reduction under paragraph ① (2-2) through (2-9) and (3), the full amount of the deductible amount shall be deducted from the tax base for three years from the date of acquiring the property, and 50 percent of the deductible amount shall be deducted from the tax base for the subsequent two years. ⑥ To receive reductions or exemptions under paragraphs ②, ④, ⑤, ⑫, and Article 78-3 of the 「Act on Special Cases Concerning Local Taxes」, a foreign invested company must apply for the reduction or exemption to the Minister of Economy and Finance by the end of the tax year in which the commencement date of business falls. However, if the business content for which a tax reduction decision was made under paragraph ⑧ is changed, an application for modification of the tax reduction content must be submitted to the Minister of Economy and Finance within two years from the date such modification occurs to receive a reduction for the modified business. If a decision to modify the tax reduction content is made, the content of the modified decision shall only apply for the remaining period of the original reduction period.

Upon receiving an application for tax reduction, modification of tax reduction content under paragraph ⑥, or prior confirmation under paragraph ⑦, the Minister of Economy and Finance shall consult with the heads of relevant central administrative agencies (in the case of reductions or exemptions of acquisition tax and property tax under paragraphs ④, ⑤, and paragraph ⑫ (3) and (4), the head of the local government that has jurisdiction over the business site; and in the case of reductions or exemptions of acquisition tax and property tax under Article 78-3 of the 「Act on Special Cases Concerning Local Taxes」, the Minister of Security and Public Administration and the head of the local government that has jurisdiction over the business site) to determine whether to grant the reduction, modify the tax reduction content, or be eligible for reduction, and shall inform the applicant thereof. However, for reductions under paragraph ① (1), the determination of reduction, modification of tax reduction content, or eligibility for reduction may be made according to the Presidential Decree.

If a foreign invested company applies for reduction after the deadline for application under paragraph ⑥ and receives a reduction decision under paragraph ⑧, paragraphs ① through ⑤ and ⑫ shall apply only to the tax year in which the application date falls and the remaining reduction period thereafter. In this case, if there has been any tax paid before receiving the reduction decision under paragraph ⑧, such tax shall not be refunded.

For foreign investments under paragraph ① (1) that are made through business acquisition, etc. as prescribed by the Presidential Decree, corporate tax, income tax, acquisition tax, and property tax shall be reduced respectively, as provided in the following subparagraphs, notwithstanding the reduction or deduction periods and rates provided in paragraphs ② through ⑤. However, when applying subparagraphs 3 and 4, if a local government extends the reduction or deduction period up to 10 years or increases the reduction or deduction ratio within the extended period, in accordance with an ordinance prescribed by Article 4 of the 「Act on Special Cases Concerning Local Taxes」, the period and ratio shall apply notwithstanding subparagraphs 3 and 4. 1. For corporate tax and income tax for foreign invested companies that have applied for tax reduction under paragraph ⑥ by December 31, 2018, reductions shall be granted only on income arising from conducting businesses eligible for reduction under paragraph ① (1). For tax years ending within three years from the commencement of the first tax year in which income is generated from the business after its commencement (if no income is generated within five years from the commencement date, the tax year in which the fifth anniversary falls shall be considered the commencement date), 50 percent of the tax reduction amount shall be reduced, and for tax years ending within the subsequent two years, 30 percent of the tax reduction amount shall be reduced. 2. Deleted <2014.1.1> 3. For acquisition tax and property tax on property acquired or held for conducting businesses under paragraph ① (1) by foreign invested companies that have applied for tax reduction under paragraph ⑥ by December 31, 2019, tax reductions or deductions from the tax base shall be granted according to the following classifications. a. For acquisition tax and property tax, 50 percent of the tax reduction amount shall be reduced for three years from the commencement of business, and 30 percent of the tax reduction amount for the subsequent two years. b. For property tax on land, 50 percent of the deductible amount shall be deducted from the tax base for three years from the commencement of business, and 30 percent of the deductible amount for the subsequent two years. 4. In the case of property acquired or held for the purpose of using it for businesses under paragraph ① (1) by foreign invested companies that have applied for tax reduction under paragraph ⑥ by December 31, 2019, acquisition tax and property tax shall be reduced or deducted from the tax base according to the following classifications. a. 50 percent of the tax reduction amount for acquisition tax on property acquired on or after the date of receiving a tax reduction decision under paragraph ⑧. b. For property tax, 50 percent of the tax reduction amount shall be reduced for three years from the date of acquiring the property, and 30 percent of the tax reduction amount for the subsequent two years. c. For property tax on land, 50 percent of the deductible amount shall be deducted from the tax base for three years from the date of acquiring the property, and 30 percent of the deductible amount for the subsequent two years.

During the reduction period applicable under paragraphs ② and ⑫ (1), if the total amount of income tax or corporate tax reduced exceeds the sum of the following amounts, the tax shall be reduced up to the sum of these amounts (hereinafter referred to as "reduction limit" in this Article). 1. Limit based on investment amount, according to the following classifications: a. In the case of paragraph ① (1) and (2): 50 percent of the cumulative foreign investment amount prescribed by the Presidential Decree (hereinafter referred to as "cumulative foreign investment amount" in this paragraph). b. In the case of paragraph ① (2-2) through (2-9), (3), and ⑫ (1): 40 percent of the cumulative foreign investment amount. 2. Sum of the following amounts based on employment. However, in the case of paragraph ① (1) and (2), the limit shall be 50 percent of the cumulative foreign investment amount, and in the case of paragraph ① (2-2) through (2-9), (3), and ⑫ (1), the limit shall be 40 percent of the cumulative foreign investment amount. a. Number of graduates from vocational high schools tailored to industry demand, etc. among regular employees of the relevant foreign invested company in the relevant tax year × 20 million won. b. Number of young workers, disabled workers, and workers aged 60 or over, excluding graduates under subparagraph a, among regular employees of the relevant foreign invested company in the relevant tax year × 15 million won. c. (Number of regular employees in the relevant tax year - Number of graduates under subparagraph a - Number of young workers, disabled workers, and workers aged 60 or over under subparagraph b) × 10 million won.

If the number of regular employees in each tax year within the period ending with the tax year that is two years after the termination of the tax year in which income tax or corporate tax was reduced under paragraph ⑭ (2) decreases compared to the number of regular employees in the tax year in which reduction was received, an amount equivalent to the tax reduced shall be paid as income tax or corporate tax, as prescribed by the Presidential Decree.

If a foreign invested company separately accounts for businesses under paragraph ① (1) and businesses other than paragraph ① (1) at the same business site, in accordance with Article 143, reductions under paragraph ② shall apply to each business. However, the reduction period for each business shall be calculated from the commencement of the tax year in which the first income eligible for reduction arises at that business site (if no income arises by the tax year in which the fifth anniversary of the commencement date falls, the tax year in which the fifth anniversary falls shall be considered the commencement year).