The Ministry of Trade, Industry and Energy (the “MOTIE”) announced a series of measures to strengthen incentives for foreign investment and enhance the corporate investment environment, aiming to further attract foreign investments in high-tech industrial sectors amid various uncertainties including global inflation.

On December 4, 2023, the MOTIE amended its detailed cash grant standards to allow cash grants to subsidize certain qualified foreign investments to replace existing facilities for the purpose of shifting to high-tech industries, even when such investments are not intended to construct or expand plants. To qualify as an “investment to shift to a new industry,” which was added to the types of investments eligible for cash grants under the amended standards, the investment must satisfy the following requirements.
 

• Any foreign investment intended to replace a plant facility in operation with a new facility which constitutes (i) a facility for commercialization of a national strategic technology, (ii) a facility to engage in a business that accompanies a new growth engine/source technology, or (iii) a facility to engage in a business relating to a high-tech technology or a high-tech product, and deemed to significantly contribute to the development of domestic industries and technologies, satisfying all of the following standards:

Additionally, a cash grant applicant must go through the MOTIE’s separate review process to obtain a confirmation that its technology qualifies as a technology under categories (i) to (iii) mentioned above. Companies applying for cash grants should consider which categories they fall under based on a detailed analysis of the technologies they plan to introduce.

Furthermore, in order to expand foreign investments in high-tech strategic industries, the MOTIE increased the upper limit of cash grants payable for a foreign investment in high-tech strategic technology sectors (from up to 40% of the investment to up to 50% of the investment) and the maximum percentage of the Central Government’s funding for a cash grant (up to 50% for investments in metropolitan areas and up to 80% for non-metropolitan area investments). In 2024, the MOTIE further increased the Central Government’s funding portion for “Opportunity Development Zones” located in non-metropolitan areas (and in case of metropolitan areas, in areas with declining population) and drastically increased the amount of the Central Government’s cash grant funding from KRW 50 billion to KRW 200 billion.

Additionally, in order to actively encourage companies to invest outside of major metropolitan areas, the MOTIE relaxed the eligibility requirements for local investment promotion subsidies and increased the subsidy amount (effective as of January 1, 2024). As an example, the MOTIE raised the subsidy limit per company from KRW 10 billion to KRW 20 billion to support large-scale investments. Also, the MOTIE provided for a flexible subsidy policy which allows subsidizing companies shifting to the “future car business” or “future automotive parts business” in response to changes in the industry environment to be eligible even when the companies are not physically expanded or new workers hired as long as they obtain approvals for their corporate restructuring plans and maintain their pre-existing full-time workers. Moreover, the MOTIE increased the facility subsidy rates for companies making investments for new construction/expansion in certain regions (from 3% - 44% to 4% - 45%) and the location subsidy rates for mid-sized metropolitan companies relocating to non-metropolitan areas (from 0% - 25% to 5% - 30%). Not only domestic but also foreign-invested entities are eligible to receive local investment promotion subsidies if they are investing in non-metropolitan areas to expand their pre-existing businesses or enter into businesses which are closely related to their pre-existing businesses (provided that such businesses have been in operation in Korea continuously for at least one year).

The Government expects that these measures will expand and promote foreign-invested entities’ investments in national strategic technologies and key supply chain areas.

[Korean Version]