Tax attorney, is a tax reduction for foreign-invested companies still possible now?

Hello. This is a tax attorney at Daeryun Law LLC.

The tax reduction system related to foreign investment has been operated primarily under the Restriction of Special Taxation Act, and support has been provided for various tax items, such as corporate tax and income tax, acquisition tax and property tax, and customs duties, in order to attract investment and promote technology transfer.

However, whether a tax reduction applies is clearly distinguished according to the timing of the application and the type of business.

First, the reduction of corporate tax or income tax on the income of a foreign-invested company applies only where the application for the tax reduction was made by December 31, 2018, and in principle it is excluded for applications made on or after January 1, 2019.

However, in the case of a company that lawfully completed its tax reduction application in the past, if it falls under a business involving new growth engines or source technologies, or a business operated by locating in a foreign investment zone or free economic zone, it can receive a reduction of corporate tax or income tax.

In this case, the reduction period is up to seven years, and the structure is such that 100% of the calculated tax is fully reduced for the first five years, and thereafter 50% of the calculated tax is reduced in stages over the following two years.

In addition, the reduction of acquisition tax and property tax likewise applies on the premise of a foreign-invested company that applied for the tax reduction by the end of 2019, so for new investments at present, only a limited review is possible.

As such, a tax reduction for foreign investment does not apply merely by virtue of the fact of investment, and a comprehensive review of the type of business, the location, and the timing of the application is essential.

It is advisable to determine the actual possibility of application through a review by a tax attorney.