Article 121-5 (Recapture of Tax Reductions and Exemptions for Foreign Investment, etc.)

A foreign-invested enterprise that has received a reduction or exemption of corporate tax or income tax under Article 121-2 (2) and (12) shall, when any of the following grounds occur, pay income tax or corporate tax, by adding interest equivalent to the amount calculated by the Presidential Decree, to the tax base declaration for the taxable year in which the grounds occurred, in accordance with the Presidential Decree. Such tax amount shall be deemed the tax amount payable under Article 76 of the 「Income Tax Act」 or Article 64 of the 「Corporate Tax Act」. <Amended by Act No. 11610, Jan. 1, 2014; Act No. 14472, Dec. 20, 2016> 1. Where its registration is canceled under the 「Foreign Investment Promotion Act」. 2. Where it no longer meets the tax reduction and exemption criteria under the main sentence of Article 121-2 (1). 3. Where a person who received a corrective order under Article 28 (5) of the 「Foreign Investment Promotion Act」 for failure to fulfill the reported matters fails to fulfill it. 4. Where a foreign investor transfers shares, etc. owned under this Act to a national or a corporation of the Republic of Korea. 5. Where the relevant foreign-invested enterprise ceases business. 6. Where the capital contribution for the investment purpose and the introduction of long-term loans under Article 2 (1) 4 (b) of the 「Foreign Investment Promotion Act」 or the number of employees falls short of the tax reduction and exemption criteria under Article 121-2 (1) within five years (three years for employment-related tax reduction and exemption criteria) after the foreign investment report.

The head of a local government shall recapture the acquisition tax and property tax reduced under Article 121-2 (4), (5), and (12), in accordance with the Presidential Decree, in any of the following cases. In this case, if it falls under subparagraph 1, the tax amount corresponding to the amount equivalent to the short percentage shall be recaptured. <Amended by Act No. 10272, Dec. 27, 2010; Act No. 14472, Dec. 20, 2016> 1. Where the ratio of shares, etc. of a foreign investor falls short of the ratio of shares, etc. at the time of reduction, after taxes have been reduced under Article 121-2 (5) and (12). 2. Where a foreign investor transfers shares, etc. owned under this Act to a national or a corporation of the Republic of Korea after taxes have been reduced under Article 121-2 (4) and (12). 3. Where its registration is canceled under the 「Foreign Investment Promotion Act」. 4. Where the relevant foreign-invested enterprise ceases business. 5. Where the capital contribution for the investment purpose and the introduction of long-term loans under Article 2 (1) 4 (b) of the 「Foreign Investment Promotion Act」 or the number of employees falls short of the tax reduction and exemption criteria under Article 121-2 (1) within five years (three years for employment-related tax reduction and exemption criteria) after the foreign investment report.

In any of the following cases, the reduced tax amount may not be recaptured, in accordance with the Presidential Decree, notwithstanding paragraphs (1) through (3). <Amended by Act No. 12962, Dec. 23, 2014; Act No. 17310, Oct. 1, 2025> 1. Where the registration of a foreign-invested enterprise is canceled due to dissolution by merger. 2. Where capital goods introduced and used after receiving exemption of customs duties, etc. under Article 121-3 can no longer be used for their original purpose due to natural disaster or other force majeure, depreciation, technological advancement, or changes in economic conditions, and they are used or disposed of for a purpose other than the original purpose with the approval of the Minister of Economy and Finance. 3. Where shares, etc. are transferred to a national or a corporation of the Republic of Korea to make the relevant foreign-invested enterprise a public company under the 「Capital Markets and Financial Investment Business Act」. 4. Where the capital contribution for the investment purpose is made within the extended period of fulfillment by the mayor or governor under the 「Foreign Investment Promotion Act」, thereby satisfying the tax reduction and exemption criteria. 5. In other cases recognized as having achieved the purpose of tax reduction and exemption, as prescribed by the Presidential Decree.