By Choi Kyong-ae
Korea will give bigger tax benefits and improve the atmosphere of uncertainty in the nation's business environment in a move to encourage multinational firms to establish their headquarters and research and development (R&D) centers here, the government said Thursday.
The measures were proposed by the Ministry of Trade, Industry and Energy in its quest to bolster foreign investment to stimulate the nation's sluggish economy.
Towards that end, the government will maintain the current income tax rate at 17 percent for foreign executives in Korea, regardless of the size of their income. This rate was originally supposed to end in December, the ministry said in a statement.
As for financial transactions between foreign firms' global headquarters in Korea and their overseas affiliates, the National Tax Service and the Korea Customs Service are expected to collaborate in levying appropriate taxes and simplifying the transfer process.
Foreign engineers at multinational R&D centers in Korea will continue to benefit from tax cuts of 50 percent on their incomes till 2018, which is an extension of four years. The government will also extend the maximum visa duration for foreign employees of any multinational firm headquartered here to five years from the current three years, the statement said.
"We are planning to offer extended tax incentives, improve the predictability of economic policies and seek further deregulation to lure value-added investments such as the global headquarters of multinational firms and their R&D facilities," the ministry said.
On the same day, President Park Geun-hye vowed to lift the nation's business environment to the level of global standards at a meeting with foreign business leaders, including representatives of foreign chambers of commerce, at Cheong Wa Dae.
"The government will listen to what difficulties foreigners have in making investments here and try to make Korea a better place to invest," Park said at the meeting.
The country has had a steady flow of foreign investments helped by major free trade deals signed with the EU and the U.S. But the value of foreign investments fell to $9.48 billion last year from $10.6 billion a year earlier.
Experts and foreign business lobbying groups such as the European Chamber of Commerce in Korea (ECCK) and the American Chamber of Commerce in Korea (AMCHAM) welcomed the latest measures.
"European investors and the Korean economy will mutually benefit from a predictable business environment. We will do our best to support Korea's effort to shape a better investment environment," ECCK President Thilo Halter said Thursday in a statement.
"I think it is wonderful. I think it is a great example of what can be done to help improve the investment environment which will cause the economy to grow," former AMCHAM Chairman Jeffrey D. Jones told The Korea Times by telephone. He currently serves as an attorney at the Kim & Chang law firm in Seoul.
The two major foreign lobbies are calling for greater consultation with the government when rules and regulations are developed or changed to reduce the uncertainty of the business environment.
Compared to other competing Asian countries such as Hong Kong and Singapore, Korea continues to have a very rigid regulatory regime which impedes foreign investment. Investors want to invest where they know rules are predictable and transparent, she said.
Thilo told The Korea Times in August that "When competing at the international level, corporate and personnel tax rates are, among others, key criteria in attracting investment and foreign talent."
According to Thilo, during their meeting with President Park, foreign business leaders "proposed" an amendment to the nation's tax law for foreign workers and the very complex audit process.
The government expects these measures will help attract investments such as the establishment of General Electric's global headquarters for its offshore plant business in Korea last year. It is also optimistic that the measures will also attract firms from emerging economies like China.
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The measures were proposed by the Ministry of Trade, Industry and Energy in its quest to bolster foreign investment to stimulate the nation's sluggish economy.
Towards that end, the government will maintain the current income tax rate at 17 percent for foreign executives in Korea, regardless of the size of their income. This rate was originally supposed to end in December, the ministry said in a statement.
As for financial transactions between foreign firms' global headquarters in Korea and their overseas affiliates, the National Tax Service and the Korea Customs Service are expected to collaborate in levying appropriate taxes and simplifying the transfer process.
Foreign engineers at multinational R&D centers in Korea will continue to benefit from tax cuts of 50 percent on their incomes till 2018, which is an extension of four years. The government will also extend the maximum visa duration for foreign employees of any multinational firm headquartered here to five years from the current three years, the statement said.
"We are planning to offer extended tax incentives, improve the predictability of economic policies and seek further deregulation to lure value-added investments such as the global headquarters of multinational firms and their R&D facilities," the ministry said.
On the same day, President Park Geun-hye vowed to lift the nation's business environment to the level of global standards at a meeting with foreign business leaders, including representatives of foreign chambers of commerce, at Cheong Wa Dae.
"The government will listen to what difficulties foreigners have in making investments here and try to make Korea a better place to invest," Park said at the meeting.
The country has had a steady flow of foreign investments helped by major free trade deals signed with the EU and the U.S. But the value of foreign investments fell to $9.48 billion last year from $10.6 billion a year earlier.
Experts and foreign business lobbying groups such as the European Chamber of Commerce in Korea (ECCK) and the American Chamber of Commerce in Korea (AMCHAM) welcomed the latest measures.
"European investors and the Korean economy will mutually benefit from a predictable business environment. We will do our best to support Korea's effort to shape a better investment environment," ECCK President Thilo Halter said Thursday in a statement.
"I think it is wonderful. I think it is a great example of what can be done to help improve the investment environment which will cause the economy to grow," former AMCHAM Chairman Jeffrey D. Jones told The Korea Times by telephone. He currently serves as an attorney at the Kim & Chang law firm in Seoul.
The two major foreign lobbies are calling for greater consultation with the government when rules and regulations are developed or changed to reduce the uncertainty of the business environment.
Compared to other competing Asian countries such as Hong Kong and Singapore, Korea continues to have a very rigid regulatory regime which impedes foreign investment. Investors want to invest where they know rules are predictable and transparent, she said.
Thilo told The Korea Times in August that "When competing at the international level, corporate and personnel tax rates are, among others, key criteria in attracting investment and foreign talent."
According to Thilo, during their meeting with President Park, foreign business leaders "proposed" an amendment to the nation's tax law for foreign workers and the very complex audit process.
The government expects these measures will help attract investments such as the establishment of General Electric's global headquarters for its offshore plant business in Korea last year. It is also optimistic that the measures will also attract firms from emerging economies like China.
