Guide to Partial Amendments to the Foreign Investment Promotion Act
[Effective Date: August 5, 2020] [Act Number: 16944, Partial Amendments on February 4, 2020]- When a domestic- or foreign-invested company reinvests its internal reserves in the business, it is recognized as foreign investment.
- Domestic investment is expected to be revitalized by simplifying the investment process and granting incentives
Main Content of the Partial Amendments
Reinvestment of Foreign-Invested Companies, etc.
- ① When a foreign-invested company reinvests its unappropriated retained earnings in the business, it is recognized as foreign investment. (Article 2)
- - Until now, reinvestment of retained earnings of foreign-invested companies has been disregarded as foreign investments. As a result of that, foreign-invested companies have been reluctant to reinvest their retained earnings in the business in Korea. To promote reinvestment of foreign-invested company’s retained earnings in the business in Korea, reinvestment of unappropriated retained earnings in the business is recognized as foreign investment.
- ② Clarification on the Definition of Foreign Investment (Article 2)
- - Resolving controversy on the definition of foreign investment by clarifying that establishing a corporation or private company through sole foreign investment is foreign investment.
Increasing Cash Grants, etc.
- ① Expanding the eligibility for the cash grants to high technology/products business (Article 5 of the Industrial Development Act))Important details of the rights/duties to the cash grants system to be upgraded and enacted. (Article 14-2)
- - Expanding cash grants by adding high technology/product-related businesses to the cash grants project to increase investment incentives for creating new technologies and quality jobs
- - Upgrading important details of the rights/duties, including eligibility requirements for cash grants (30% of foreign investment ratio) and reasons for cancellation/refund of cash grants from the outline (announcement) to enactment and implementation of laws
Security Related Matters
- ① In order to strengthen the security-related preliminary review function, security related ministries such as the Ministry of National Defense, the National Intelligence Service, and the Defense Acquisition Program Administration are added to the ex-officio committee members of the Foreign Investment Committee (Article 27)
- ② Acquisition of new shares of defense companies is permitted and included in the foreign investment (Article 6)
- - Until now, only the acquisition of existing shares issued by defense companies was allowed for reinforcement of national security management, but the acquisition of new shares is also included in prior permission.
Source and Inquiries: Foreign Investment Policy Division, Ministry of Trade, Industry and Energy
TEL. 044-203-4073