Article 63 (Tax Reduction and Exemption for Businesses Relocating Factories Outside the Seoul Metropolitan Area)

Where a domestic company that meets all the requirements set forth in the subparagraphs of item 1 (hereinafter referred to as a "relocating factory company" in this Article) relocates its factory and commences business by December 31, 2028 (or December 31, 2031, in the case of constructing a new factory, if the factory site is held by December 31, 2028, and the relocation plan is submitted when filing the tax return for the tax year that includes December 31, 2028), its income generated from the relocated factory (excluding income generated from business succeeded through merger, division, contribution in kind, or acquisition of business by the relocating factory company after relocation) shall be subject to reduction or exemption of income tax or corporate tax according to the classification in item 2. <Amended by Act No. 12168, Dec. 31, 2022, Act No. 12700, Jun. 9, 2023, Act No. 13010, Dec. 31, 2024, Act No. 13228, Mar. 14, 2025, Act No. 13429, Dec. 23, 2025> 1. Requirements for Tax Reduction and Exemption a. The company shall have operated a factory for 3 years (2 years for small and medium-sized enterprises) or more continuously in a Seoul Metropolitan Area congestion control zone. However, companies that have received reduction or exemption under this Article for the same factory within 10 years prior to the beginning of the tax year that includes the date of ceasing operations for relocation shall be excluded. b. The entire factory facilities shall be relocated outside the Seoul Metropolitan Area (or to a depopulated area within the Seoul Metropolitan Area for small and medium-sized enterprises) as prescribed by the Presidential Decree. c. In cases falling under any of the following, the requirements prescribed in the following classifications shall be met: 1) Where a small or medium-sized enterprise relocates its factory facilities to a depopulated area in the Seoul Metropolitan Area and its head office or main office (hereinafter referred to as "headquarters" in this Article and Article 63-2) is located in a Seoul Metropolitan Area congestion control zone: The headquarters shall also be relocated along with the factory facilities. 2) Where a company other than a small or medium-sized enterprise relocates to a metropolitan city: The relocation shall be to an industrial complex as defined in Article 2, item 8 of the 「Industrial Site and Development Act」. 2. Period of Reduction and Exemption, and Amount of Reduction and Exemption a. For the tax year ending within the period prescribed in the following classifications, commencing from the tax year in which income is first generated from the factory after the factory relocation date (or the tax year that includes the date 5 years from the factory relocation date, if no income is generated by that date): 100 percent of the income tax or corporate tax. 1) Where relocating to a Seoul Metropolitan Area or other areas prescribed by the Presidential Decree: 5 years. 2) Where relocating to a metropolitan city located outside the Seoul Metropolitan Area: a) Where relocating to a growth promotion area, depopulated area, or crisis area (hereinafter referred to as "growth promotion areas, etc." in this Article and Article 63-2) under the 「Act on Decentralization of Power and Balanced Regional Development」: 7 years. b) Where relocating to an area other than those referred to in a): 5 years. 3) Where relocating to an area outside the Seoul Metropolitan Area prescribed by the Presidential Decree: a) Where relocating to growth promotion areas, etc.: 10 years. b) Where relocating to an area other than those referred to in a): 5 years. 4) Where relocating to an area other than those referred to in 1) through 3): a) Where relocating to growth promotion areas, etc.: 10 years. b) Where relocating to an area other than those referred to in a): 7 years. b. For the tax year ending within 3 years [or 4 years in cases falling under a) 2) a) or a) 4) b), or 5 years in cases falling under a) 3) a) or a) 4) a)] from the tax year referred to in a): 50 percent of the income tax or corporate tax.

Where the income tax or corporate tax reduced or exempted under paragraph ① is to be paid under paragraph ②, interest equivalent to the amount prescribed by the Presidential Decree shall be added to the income tax or corporate tax and paid, and the said tax amount shall be deemed the tax amount to be paid under Article 76 of the 「Income Tax Act」 or Article 64 of the 「Corporate Tax Act」.

For the land appurtenant to the buildings of the factory prior to relocation owned by a relocating factory corporation that has relocated its factory outside the Seoul Metropolitan Area (including cases where ownership has been transferred due to merger, division, or merger of division), which is subject to Article 106 (1), item 3, a) of the 「Local Tax Act」 as of the factory relocation date, it shall be deemed land to which Article 106 (1), item 3, a) of the 「Local Tax Act」 applies for 5 years from the date of full relocation of the factory. However, this shall not apply after the business is closed after commencing business following the factory relocation.

A relocating factory company that intends to receive the application of paragraph ①, ④, or ⑤ shall have the same business operations in the factory prior to relocation, which were continuously operated for 2 years (1 year for small and medium-sized enterprises) or more prior to the date of ceasing operations for factory facility relocation, and in the relocated factory, based on the classification prescribed by the Presidential Decree. <Amended by Act No. 13010, Dec. 31, 2024>

The total sum of income tax or corporate tax reduced or exempted during the reduction and exemption period applicable to paragraph ① shall be limited to the sum of the amounts in items 1 and 2 (hereinafter referred to as the "reduction and exemption limit" in this Article). <Newly inserted by Act No. 13429, Dec. 23, 2025> 1. 70 percent of the cumulative investment prescribed by the Presidential Decree. 2. The number of regular employees at the relocated factory (hereinafter referred to as "relocated factory" in this Article) in the relevant tax year × 15 million won [or 20 million won for regular employees who are youths and for the regular employees of the relocated factory of a relocating factory company operating a service business prescribed by the Presidential Decree (hereinafter referred to as "reduction and exemption target service business" in this Article)].

Where a relocating factory company that has received reduction or exemption of income tax or corporate tax by applying the reduction and exemption limit in item 9 (2) experiences a decrease in the number of regular employees at the relocated factory in any tax year within the period ending on the last day of the tax year that is 2 years after the end of the tax year for which the reduction or exemption was granted, compared to the number of regular employees in the tax year for which the reduction or exemption was granted, the amount equivalent to the reduced or exempted tax shall be paid as income tax or corporate tax, as prescribed by the Presidential Decree. <Newly inserted by Act No. 13429, Dec. 23, 2025>

When applying paragraphs ① through ⑫, the method of calculating periods, application for tax reduction and exemption, the scope of regular employees and youth regular employees, the method of calculating the number of regular employees, and other necessary matters shall be prescribed by the Presidential Decree. <Amended by Act No. 13429, Dec. 23, 2025>