The government held the thirtieth free economic zone committee meeting in March 19 to pass seven-year tax relief managerial regulations for the free economic zone, and decided to prolong the period of tax relief in the zone.
The government expects that if this tax relief regulation is enforced in the free economic zone, it could attract predominant foreign companies to invest in Korea and expand foreign capital investment.
The special tax case restriction law was revised. If companies pass the committee's consultation, they can get tax relief - cutting taxes by 100 percent for the first five years, and by 50 percent for the next two years. The relief targets are corporate tax, income tax, and local tax.
The free economic zone committee drew up the standards and processes to select recipients because the committee wanted to enhance its transparency and consistency.
Before the regulations, companies who wanted to get tax relief had to be selected as foreign investors even though they were in the free economic zone. However, based on the new regulations, companies can get tax relief if they pass only the committee's consultation. The government expects to attract more foreign investment in this way which benefits the free economic zone.
Berna Biotech Korea Corp., which is preparing to enter Songdo, Incheon, applied to get seven-year tax relief, so the government plans to test out the new regulations on their application. The company was established by 100 percent investment from Cruel - a Dutch drug firm. It submitted its construction plan to the government in November 2008, showing that it is arranging to build a factory for manufacturing the latest bio-pharmaceuticals on 24,421 square meters of Songdo, in Incheon.
On the other hand, the committee resolved the expansion of the business district in the free economic zone because the demand for the business district is increasing. Thus the committee prepared extended standards to set essential conditions and processes to decide the propriety of the expansion. The standards focused on the local conditions and the possibility of development.
The extended standard appointed six detailed indexes to decide to accept or reject the zone authorities' application. The six indexes are an outcome of each authority's project, the local condition of development, parts plan, efficiency, legal propriety, and the possibility of development.
These indexes were set for restricting indiscreet demand. There were not yet any systematic standards about the expansion of the district before now, so the committee decided to set the rules.
Also, the committee approved the development project and the action plan of Hadong District in Gwangyang Bay Area Free Economic Zone, and reformed the regulations to manage the project.
The approved project allows Daewoo Shipbuilding Marine & Engineering (DSME) Construction Co., Ltd. and shipbuilding machinery and materials companies to move into 5.6 square kilometers of the Galsaman shipbuilding industry district, which is planned to be completed by 2012.
In addition, the committee permitted a rule, issuing cards for foreign investors to use exclusive immigration checkpoints. The rule was already cleared with the Ministry of Justice in January 2009. The cards will be issued from the end of March.
Moreover, the committee revised a subsidy rule for foreign education and research centers, according to the revised special law for the free economic zone, which will be enforced from July 31, 2009. The new subsidy rule additionally made foreign schools eligible for the subsidy.
The free economic zone committee was established under the Ministry of Knowledge Economy (MKE). It consists of a chairman, ten members from the government, and nine appointed members from the private sector. According to the regulations, the Minister of the MKE is appointed the chairman, and the vice chairman is elected by the committee among its appointed members. The appointed members are chosen among experts from labor, environment, foreign investment, physical distribution, and urban policies. The appointed members' tenure is two years, and they can only be reappointed one time.
The committee meeting is open when over half of its members attend the meeting. A majority of the attending members must agree to gain approval on anything. It is in charge of basic policies and rules, appointing and cancelling districts, development plans for the zone, and providing administrative services to foreign investors.