In order to promote balanced regional development, the Korean government has established Opportunity Development Special Zones (the “Special Zones”), which include a comprehensive incentive package, including tax benefits and financial support, regulatory exemptions and improvement to living standards. Accordingly, as of the first half of 2024, eight cities/provinces – Gyeongsangbuk-do, Jeollanam-do, Jeollabuk-do, Daegu, Daejeon, Gyeongsangnam-do, Busan and Jeju^[1] – have been designated as the 1^st Opportunity Development Special Zones (the “1^st Designated Special Zones”). The following are the key details of the designation and the benefits available for businesses that invest in the Special Zones:
 

• For a company relocating to a Special Zone following the disposal of its commercial real estate in the Seoul metropolitan area, taxation on capital gains and corporate income tax will be deferred until the time that the real estate acquired within the Special Zone is disposed of.

• 100% exemption of income/corporate tax for start-up companies and newly-established businesses in a Special Zone for the first five years, and a 50% reduction for the following two years.

• 100% exemption of acquisition tax and property tax for companies relocating from the Seoul metropolitan area to a Special Zone located in a non-metropolitan area for the first five years, and a 50% reduction of property tax for the following five years.

• For the construction of new facilities or expansions of existing facilities in a Special Zone located in a non-metropolitan area, a 75% reduction of acquisition tax and a 75% reduction of property tax for a period of five years.

• Relaxation of the conditions applicable to companies that have taken advantage of family business succession benefits if they relocate to a Special Zone, such as the abolishment of “restrictions on changes to business type” and “obligation of successor to serve as representative director,” and a 100% exemption from the obligation to contribute development charges,^[2] etc.
   

• A 5% increase in the rate of the local investment promotion subsidy, and raising the limit of government funding available per company from KRW 10 billion to KRW 20 billion.

• For private capital investment in a special zone fund for a certain period (ten years or longer), granting tax benefits on interest and dividend income.

• Other support measures are being planned, such as the expansion of infrastructure in the Special Zones and making low-interest loans for companies in the Special Zones.
   

• A three-piece regulatory sandbox (rapid verification, special demonstration cases and temporary permits) will apply to the Special Zones, and a scheme is expected to be introduced whereby each city/ province will design and apply for special regulatory exemptions, and the decision to grant the relevant special regulatory exemption will be made following deliberation and resolution by the Presidential Committee for Balanced National Development.
   

• Plans to apply special exemptions of transfer tax for rural residences, prioritized supply of private housing for workers employed by companies in Special Zones, support for the establishment of elementary, middle and high schools, and support for the establishment of common workplace day care centers for small and medium-sized enterprises.
   

As mentioned above, construction is currently underway in relation to the 1^st Designated Special Zones, as are initiatives to attract investment from businesses operating in the sectors, which are aligned with the purpose of the relevant Special Zone designation. For those who have plans to build new or expand existing facilities in regional areas or to relocate from the Seoul metropolitan area to a non-metropolitan area, it would be advisable to examine whether there is a Special Zone related to their business and discuss with the relevant local government to obtain the various benefits and incentives which may be available.
 

^[1]   Listed in order of the size of the designated area.
^[2]   Basically, certain public imposts in the form of charges imposed by the government on development gains made by developers.

[Korean Version]