South Korea makes effort to draw foreign producers

South Korea offered new tax incentives to attract foreign investments yesterday, reflecting its confidence that last month's World Cup tournament boosted its image.

A draft bill, written by the Ministry of Finance and Economy, highlighted a seven-year exemption of corporate and income taxes for foreign manufacturing firms investing more than US$50 million in South Korea.

Foreign companies will also be eligible for 50 percent corporate and income tax reductions for three additional years.

The bill followed South Korea's remarkable performance in the World Cup football tournament which gave foreign investors a positive view about its investment environment.

The ministry pledged a 100 percent reduction in tariffs, excise and value added tax on capital products foreigners import for a period of three years, as well as a 100 percent cut in acquisition and other taxes for five years.

Such incentives will be given to foreign distribution firms and resort developers who want to invest more than US$30 million in the country. The minimum investment requirement for tax benefits drops to US$20 million for foreign firms investing in hotel and convention industries, the ministry said.

Foreign manufacturing firms investing less than US$50 million in South Korea will receive a 100 percent cut in corporate and income taxes for three years and a 50 percent cut for the following two years, it said.

They will not be required to pay tariffs for capital goods and research and development equipment for two years and are also eligible for a three-year exemption of acquisition, registration, property and real estate taxes.

Foreign investors in information, bioengineering, film, computer game and media industries will get a 100 percent corporate and income tax deduction for seven years, the ministry said.

From Jan. 1 next year, foreigners employees will see 40 percent of their earnings exempt from income tax, it said.

South Korea's average corporate tax rate stands at 27 percent, compared with Taiwan's 25 percent, Singapore's 24.5 percent and Hong Kong's 16 percent.