The Ministry of Strategy and Finance of Korea announced on 6 August 2015 its proposed tax law amendments for 2015. The proposed tax law amendments of 2015 limit the eligibility for tax reductions for foreign investments.
The proposed law excludes the following persons (made investment to foreign invested companies) from the scope of tax reductions:
-person owning directly or indirectly more than 5% of the shares of a foreign corporation or performs substantial influence over such foreign corporation where the foreign corporation makes an investment in Korea with the investment amount corresponding to the shares owned by the Korean person.
-person owning directly or indirectly more than 5% of the shares of a foreign invested company or performs substantial influence over such foreign invested company where the amount lent to the foreign investor by the Korean person.
According to the current Special Tax Treatment Control Law (STTCL), if an preliminary investment is not made within 3 years from the date on which the Korean tax authorities issue a decision granting the tax reduction, that grant will be invalidated.
Also if a business has not started within 5 years from the date on which the decision to grant a tax reduction was issued, the business shall be considered to have started on the last day of the 5-year period and this condition will apply to applications for tax reduction made after 1 January 2016.
