Incentives for foreign investors in Korea: what is on offer in 2026

Foreign investors often arrive in Korea expecting the tax holiday that once defined Korean FDI policy. It is gone: after an OECD and EU review of preferential regimes, Korea ended corporate and income tax reductions reserved for foreign investors for applications from 2019 and put foreign-invested companies on the same tax footing as Korean ones. What replaced it is more targeted — cash grants, capital-goods exemptions, location support and regional schemes — and more competitive, because the government chooses whom to support.

This guide covers support under the Foreign Investment Promotion Act, the Restriction of Special Taxation Act, the local tax laws and regional programmes, plus the startup schemes aimed at foreign founders. It reflects the 2025 expansion announced in January 2025 and carried into 2026; budgets and rates change each year, so confirm current figures with Invest Korea before relying on them.

Cash grants

Under Article 14-2 of the Foreign Investment Promotion Act, the Ministry of Trade, Industry and Energy (MOTIE) and local governments can pay a cash grant (현금지원, hyeongeum jiwon) to a foreign investor’s project. The grant is a share of the foreign investment amount, negotiated case by case within category ceilings. The standard ceilings have been around 40% for general projects, 45% for new-growth and materials-parts-equipment projects and 50% for R&D and national strategic technology; from 2025 they were raised permanently by 5–20 points for key categories and, as a temporary measure carried into 2026, up to 75% for R&D centres in national advanced strategic industries and for regional headquarters of global companies, and 60% for other strategic-technology R&D centres. Projects in designated opportunity development zones (기회발전특구, gihoe baljeon teukgu) outside the capital region get a further 5 points. The 2025 budget was KRW 200 billion.

Eligibility starts with structure: the investment must be new shares, not a purchase of existing shares or a loan, and foreign ownership must be at least 30%. Evaluators weigh jobs most heavily — numbers and quality — together with technology and technology transfer, regional impact and whether the project would otherwise go to another country. The process runs from Invest Korea’s eligibility review to an application to MOTIE, an evaluation committee, negotiation of the amount, deliberation by the Foreign Investment Committee and a contract; grants above KRW 1 billion go through the full process. Expect several months, and apply before the investment is made. The contract sets obligations — the investment, the jobs, the period — and the grant can be recovered if they are not met.

Tax incentives

Foreign-invested companies now use the same tax incentives as Korean companies. The most valuable are the integrated investment tax credit (통합투자세액공제, tonghap tuja seaek gongje) under Article 24 of the Restriction of Special Taxation Act for investment in business assets, with higher rates for new-growth and national strategic technologies — the 2025 policy raised general rates from 10% to 12% and new-growth rates from 12% to 14% for the relevant categories — and the R&D tax credit, generous for strategic technologies. Employment-increase credits reward net new hiring. Credits only help a company that pays tax, so a loss-making start-up carries them forward; plan the timing.

Some incentives remain specific to foreign investment. Imported capital goods (자본재, jabonjae) for qualifying high-tech foreign investment can be exempt from customs duty, individual consumption tax and VAT; the exemption ran for five years from the import declaration and was extended to up to seven years under the 2025 policy. Assets must stay in the qualifying use; selling or lending them early brings back the tax. Local governments can reduce acquisition and property taxes (취득세 · 재산세, chwideukse · jaesanse) for qualifying foreign investment by ordinance. In opportunity development zones outside the capital region, start-ups and new investment can obtain reduced income or corporate tax for five years and large reductions in acquisition tax.

Zones and land

Simplified; thresholds from Invest Korea guidance as summarised by Taxguide.

Zones matter most for manufacturing and logistics: land at reduced rent on public sites can be worth more than a grant. For offices and services in Seoul, they rarely apply. Discuss sites with Invest Korea and the relevant provincial investment agency together; regions compete for projects and will put their own subsidies on the table.

Finance and guarantees

The 2025 policy committed state lenders and guarantee funds to treat foreign-invested companies on the same terms as domestic ones, with low-interest loans, higher loan limits and access to the Korea Credit Guarantee Fund and similar bodies, and planned a foreign investment promotion fund. In practice this helps established foreign-invested manufacturers expanding in Korea more than start-ups. Companies that return production to Korea — reshoring — have their own package of subsidies and loans.

Strategic technologies and the tax credit rates

The incentives that move most money in Korea today are not labelled ‘foreign’ at all. They attach to national strategic technologies — semiconductors, secondary batteries, displays, hydrogen, future mobility, biopharmaceuticals and a few others listed in the Enforcement Decree of the Restriction of Special Taxation Act — and a foreign-invested company qualifies on exactly the same terms as Samsung or LG. For facility investment in national strategic technology, the integrated investment tax credit is markedly higher than the general rate, with a further increment for investment above the company’s three-year average; small and medium-sized companies get the top rates. R&D in the same technologies attracts the highest R&D credit rates in the system.

Two practical points follow. First, the classification is technical: what counts is the specific technology listed in the decree, not the industry the group describes itself as being in. A battery-materials company whose Korean line makes a listed component qualifies; its sales office does not. Second, the credit requires separate accounting for qualifying R&D and assets, and the National Tax Service audits the claims. Plan the cost centres before the first invoice arrives, and keep the technical documentation that shows why the activity falls within the list. See Korean corporate tax rates for how credits interact with the minimum tax.

Simplified overview; each incentive has its own detailed criteria.

Employment, training and the research institute

Two smaller tools are worth more to most foreign companies than a grant they will never receive. The first is the corporate research institute (기업부설연구소, gieop buseol yeonguso) — a registered R&D unit recognised under the Basic Research Promotion and Technology Development Support Act. Registration with the Korea Industrial Technology Association is not a subsidy in itself, but it makes R&D credits easier to defend, can exempt researchers’ allowances from income tax up to a monthly cap, and is a precondition for many government R&D projects. Smaller teams can register a research department with lower staffing requirements.

The second is employment support. The Ministry of Employment and Labor and local governments run subsidies for hiring young workers, older workers and people with disabilities, for converting fixed-term staff to permanent contracts and for training through the employment insurance fund. These schemes change every year and are modest per head, but they are available to any company that pays employment insurance, foreign-owned or not. Combine them with the employment-increase tax credit and the numbers become noticeable for a team of twenty. See hiring in Korea for the payroll side.

After the money: conditions and recapture

Every Korean incentive comes with strings, and the strings are checked. A cash grant contract usually requires the foreign investment to stay for a fixed period, the promised jobs to be created and maintained, and the business to operate as described; the grant is paid in instalments against milestones and can be recovered, in whole or part, if conditions fail. Capital-goods exemptions are recaptured if the equipment is sold, transferred or used for another purpose within the restricted period. Local tax reductions on land and buildings are clawed back if the property is not used for the qualifying business within the set time or is sold early. Tax credits on assets can be reversed if the assets are disposed of within the statutory holding period.

Foreign ownership itself is a condition. If the foreign investor sells down below the threshold, or the investment is reclassified because the shares were transferred to a Korean party, incentives tied to foreign investment status fall away. Plan exits and group restructurings with the incentive calendar open on the table, and keep the foreign investment registration up to date with the bank and KOTRA; see Korea’s foreign exchange rules for the reporting side.

Startups and individual founders

Foreign founders have programmes of their own. The K-Startup Grand Challenge (K-스타트업 그랜드 챌린지) selects about a hundred foreign-led startups a year — 80 in the main track in 2026, plus an international-student track — for a programme in Seoul with participation grants, prize money of up to KRW 100 million for the winner, growth grants for the top eight, office space, help incorporating, and visa recommendations: a startup-preparation D-10-2 visa in phase two and the D-8-4 technology startup visa in phase three. 2026 applications closed in June; the cycle repeats each spring.

Outside the competitions, foreign founders can reach the D-8-4 visa through points earned in the government’s OASIS programme of startup training, IP filings and awards; see D-8, D-8-4 or F-5. Seoul Global Startup Center and the Seoul Global Center offer free office space, mentoring and administrative help. Once a Korean company exists, its founders can apply to the same domestic startup programmes as Korean founders, subject to each programme’s rules.

What a small foreign investor actually gets

Most foreign companies in Korea are small: a sales subsidiary, a trading company, a services firm with a handful of staff. For them the honest answer is that cash grants and zones are out of reach, and the package is: the same tax credits as Korean companies, used properly; capital-goods exemptions if the business is on the qualifying high-tech list; free help from Invest Korea, KOTRA, the Seoul Global Center and the Foreign Investment Ombudsman, who handles grievances under the Foreign Investment Promotion Act; and the residence route that registered foreign investment opens. The KRW 100 million that qualifies a company as a foreign investment is not an incentive in itself, but it is the gateway to the D-8 and to everything above; see do you need KRW 100 million?.

Where a small investor can win is location and timing: a regional city that offers its own subsidy, an opportunity zone with tax breaks, or a project shaped to fit a strategic category. Those decisions are made before the company is formed, not after.

In Korea the incentive is negotiated before the investment. Afterwards it is a tax credit.

Voixa Korea

How to apply

1. Talk to Invest Korea early — before choosing a site or structure. It is free and runs the pre-assessment.
2. Check the lists — high-tech, new-growth, national strategic technology, materials-parts-equipment — against what the Korean company will actually do.
3. Structure for eligibility — new shares, 30% foreign ownership or more for grants, a credible job plan.
4. Apply before investing — cash grants, capital-goods exemptions and many local incentives must be applied for before the money moves or the goods arrive.
5. Negotiate the contract — obligations, timing, recapture, and what happens if the project is delayed.
6. Report and keep the conditions — ownership, assets and jobs are checked afterwards.

A worked example

A German maker of industrial sensors plans a Korean R&D centre and small production line serving Korean battery and semiconductor makers, with USD 15 million of investment and 60 engineers over three years. Invest Korea’s pre-assessment confirms that the R&D work falls within a national strategic technology. The company structures the investment as new shares in a 100%-owned Korean subsidiary and compares a site near Seoul with one in an opportunity development zone in Chungcheong.

The regional site wins: a cash grant negotiated at a higher share of the foreign investment, with the zone bonus; reduced acquisition tax on the building; customs and VAT exemption on imported test equipment; and a provincial subsidy for hiring. The grant contract requires the 60 jobs within three years and the investment to stay for five; the company plans its hiring to match and uses the R&D tax credit from the year it turns profitable.

Mistakes we see

1. Investing first and asking about incentives afterwards.
2. Buying existing shares when only new shares qualify for a grant.
3. Expecting a tax holiday that ended in 2019.
4. Job plans without numbers or timing.
5. Selling exempt capital goods early and repaying the tax.
6. Ignoring regional offers by looking only at Seoul.
7. Treating the KRW 100 million threshold as an incentive rather than an entry ticket.

Korean terms you will meet

Questions readers ask

About the author

Alexander Baranov

Founder of the BCA Group · cross-border corporate and tax adviser since 2008

Alexander advises foreign founders and groups on company formation, tax structuring and corporate law in more than 40 jurisdictions across Europe, the Gulf, Asia and Latin America. He is the author of nine books on international business and tax and writes regularly for professional finance and tax journals. He works in English, German, Spanish and Russian.

This guide is based on the Korean statutes cited in the text and on our own filings. It is reviewed when the law or official rates change.

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