Tax Reduction for Relocation: Incentives for Moving Factories and Headquarters outside the Seoul Area
Tax Reduction for Relocation: Incentives for Moving Factories & HQs outside the Seoul Area
Korea offers powerful, long-term tax holidays to ease overconcentration in Seoul. Here’s how factory/HQ relocation incentives work—and how to keep them.
1) Why Relocation Incentives Exist
Seoul and nearby cities dominate Korea’s economy. To spread growth and jobs nationwide, the government grants long-term corporate tax reductions/exemptions to companies that move out of the most crowded districts and operate in less-developed regions.
2) Target Area — Overconcentration Control Zones
Benefits apply when relocating from designated overconcentration control zones (parts of Seoul, Incheon, Gyeonggi-do) to permitted areas outside those zones. The incentive applies to the income generated by the relocated facility/HQ.
3) Relocating a Factory (Article 63) — Eligibility
- Operation history: Factory operated in the control zone ≥ 3 years (SMEs: ≥ 2 years).
- Relocation & closure: Move all factory facilities out, commence at new site, and sell/demolish the old factory within 2 years of starting the new business.
- Same business: New site must run the same KSIC business as before.
- SME extra: If an SME relocates its factory, its HQ must also move out of the control zone.
4) Relocating the Headquarters (Article 63-2) — Eligibility
- HQ history: HQ located in the control zone for ≥ 3 consecutive years.
- Sale/repurpose old HQ: Sell or change the use of the former HQ building within 2 years of starting business at the new site (3 years if constructing a new HQ).
- Investment & jobs: Meet required thresholds for new investment and headcount at the new HQ.
5) The Tax Holiday — Periods & Rates
Relief starts from the first year income occurs at the relocated site. Periods vary by relocation area (longest for areas needing activity most):
| Area of relocation | Reduction/Exemption period & rate |
|---|---|
| Middle-sized cities or non-overconcentration Seoul areas (SMEs only) | 100% exemption for 5 years + 50% reduction for 2 years |
| Growth-promotion / population decrease / industrial or employment crisis areas | Up to 100% exemption for 10 years + 50% reduction for 2 years |
6) Clawback — When You Must Repay
Reduced/exempted taxes (retroactively up to 5 years, or 3 years on dissolution) may be recovered if:
- The business closes or the company dissolves within 3 years of relocation.
- The company fails to commence business after the move.
- The company later sets up a factory/HQ producing the same product back inside the control zone.
Clawbacks protect the policy purpose: sustained regional development.
7) Quick FAQs & Tips
Q1. Does partial relocation qualify?
Factory relief generally requires moving all factory facilities. For HQ relief, confirm whether functions/staff thresholds meet the standard at the new site.
Q2. When does the clock start?
Relief applies from the taxable year when the relocated site first generates income. Keep evidence of commencement dates and revenues.
Q3. Can we combine with other reductions?
Overlapping reductions for the same year/site are often not stackable. Ordering and exclusivity rules apply—model scenarios before filing.
8) In Summary
- Relocate from overconcentration zones to qualifying regions to access multi-year tax holidays.
- Meet strict eligibility (history, full relocation, same business, HQ/SME conditions).
- Know your periods & rates and avoid clawback by maintaining operations and not re-entering restricted zones.
9) Disclaimer
This post is for general information only and not legal or tax advice. Designations, rates, and rules change; outcomes depend on your facts. Consult a qualified professional.
댓글
댓글 쓰기
💬 질문은 환영! 욕설, 홍보성 댓글은 삭제됩니다.