THE FOREIGN INVESTMENT PROMOTION ACT

Investment Policy Division T:500-5092

CHAPTER I. GENERAL PROVISIONS

Article 1 (Purpose)

The purpose of this Act shall be to contribute to the sound development of the national economy through effective inducement of foreign direct investment (FDI) by providing support and facilitation of foreign investment.

Article 2 (Definitions)

(1) The terms used in this Act shall have the following meanings:

1. "Foreign National" shall mean an individual possessing foreign nationality, a legal entity established under the laws of a foreign nation (hereinafter referred to as "Foreign Legal Entity") or an international economic cooperation organization stipulated by Presidential Decree.

2. "The National of the Republic of Korea" shall mean an individual possessing the nationality of the Republic of Korea.

3. "Legal Entity of the Republic of Korea" shall mean a legal entity established under the laws of the Republic of Korea.

4. "Foreign Direct Investment" shall mean one of the following items:

a. Activities of foreign nationals pursuant to this Act conducted to establish lasting economic relations with legal entities of the Republic of Korea (including legal entities parts of organizations) or with enterprises run by nationals of the Republic of Korea, which relationships include participation in economic activities of said legal entities or enterprises, by means of ownership of stocks or shares of said legal entities or enterprises.

b. Loans with maturities of five years or more, which are extended in accordance with Presidential Decree, to foreign invested enterprises as defined by said foreign invested enterprises' overseas parent companies or enterprises which have capital affiliations with said parent companies, for purposes of exercising material influence over the management of said foreign invested enterprises.

5. "Foreign Investors" shall mean foreign nationals who acquire stocks or own shares pursuant to this Act.

6. "Foreign Invested Enterprises" shall mean enterprises in which foreign investors have invested capital.

7. "Objects of Investment" shall mean investments by foreign investors which are made for the purpose of acquiring stocks or owning shares, and which fall under one of the following items:

a. International Means of Payment pursuant to Foreign Exchange Management Law, or Domestic Means of Payment stipulated as such by the Working Rules

b. Capital goods

c. Income arising from stocks or shares acquired pursuant to this Act

d. Intellectual property rights, technologies corresponding to such rights, and rights pertaining to the uses of such technologies

e. Properties distributed to foreign nationals subsequent to liquidation of their branches or offices located in the Republic of Korea, which distributions follow the closing of said branches or offices, and subsequent reorganization of said branches or offices as legal entities of the Republic of Korea

f. Loans specified in Item 4. b hereof, or repayments of loans borrowed from foreign nations

g. Other domestic Means of Payment as determined by Presidential Decree

8. "Capital Goods" shall mean equipment, fixtures, tools, components, parts of machinery for the industry facilities (including ships, vehicles and airplanes), and livestock, breeds or seeds, trees, fish needed for development of agriculture, forestry and fisheries, and other raw materials and reserve stocks, which the Ministers of competent Ministries (Heads of State Administrative Organizations in charge of projects concerned) agree to need at the time of first trial operation of facilities concerned (including pilot projects), as well as freight and insurance fees incurred in taking in raw materials or reserve stocks, and establishing or consulting know-how or services.

9. "Technology Inducement Contracts" shall mean the inducement of technologies by nationals of the Republic of Korea or by legal entities of the Republic of Korea from foreign nationals, as in buying or purchasing rights to the usage of technological intellectual property rights and the like, pursuant to contracts.

(2) If individuals possessing Republic of Korea nationality are permanent residents of foreign countries, those provisions of this Act which are applicable to foreign nationals shall be applied.

Article 3 (Protection of Foreign Direct Investments)

(1) The right to remit dividend incomes arising from stocks or shares acquired by foreign investors, the proceeds from the sales of said stocks or shares, the principal amounts, interest and fees received pursuant to loan contracts or public loan agreements, and the prices paid pursuant to technology inducement contracts shall be guaranteed to foreign investors in accordance with the content of authorizations, accepted notices, or agreements as of such times such remittances are to be made.

(2) Unless the law specifies otherwise, foreign investors and foreign invested enterprises shall be treated as nationals, or legal entities, of the Republic of Korea with respect to their businesses.

(3) Unless any law specifies otherwise, provisions of the laws concerning tax reductions or exemptions which are applicable to nationals or legal entities of the Republic of Korea shall equally be applicable to foreign investors, foreign invested enterprises, lenders of such loans as specified in Article 2, Paragraph 1, Item 4. b, and to persons who supply technologies pursuant to the provisions of Article 25.

Article 4 (Liberalization of Foreign Investments)

(1) Unless this Act or any other concerned regulations specify otherwise, foreign nationals shall be free from all restrictions in performing foreign investment activities within the Republic of Korea.

(2) No restrictions shall apply to foreign nationals in the course of their foreign investment activities within the Republic of Korea, except for the following items provided for in this Act.

1. In cases where the sustenance of national security and civil order is threatened.

2. In cases where national sanitation and environmental preservation damages, or social morals and customs are threatened.

3. In cases where the laws of the Republic of Korea are violated.

(3) In accordance with Paragraph 2, Item 1, industries closed to foreign direct investment shall be stipulated by Presidential Decree.

(4) In cases where the heads of any affiliated administrative institutions restrict foreign direct investments beyond this Act, in accordance with presidential decisions, the content of said restrictions shall be reported to the Minister of Finance and Economy. The Minister of Finance and Economy, pursuant to Presidential Decree, shall compile and publicly announce such restriction content every year.

CHAPTER II. FOREIGN DIRECT INVESTMENT PROCEDURES

Article 5 (Foreign Investments through Acquisition of Newly Issued Stock, etc.)

(1) If foreign investors wish to acquire newly issued stock of enterprises owned by nationals of the Republic of Korea, or of legal entities of the Republic of Korea, in the form of foreign direct investments, by Decree of the Ministry of Finance and Economy, said foreign investors shall submit prior notice to the Minister of Finance and Economy. The content of said notice shall include the amounts of said foreign direct investments and their ratios (meaning the percentages of the concerned foreign invested enterprise stocks acquired by said foreign investors). Notices shall also be required if changes in matters stipulated by Presidential Decree are sought.

(2) Where notices are given pursuant to Paragraph 1, the Minister of Finance and Economy shall determine whether to accept said notices, and shall reply to the persons submitting such notices within the time periods stipulated by Presidential Decree.

Article 6 (Foreign Direct Investment Procedures for the Acquisition of Outstanding Stock, etc.)

(1) Foreign nationals (in this article, including Especially Interested Persons as stipulated by Presidential Decree) seeking to acquire outstanding stocks or shares (hereinafter referred to as Out-standing Stock, etc.) of enterprises run by nationals of or legal entities of the Republic of Korea, by the Ministry of Finance and Economy Decree, shall submit prior notices to the Minister of Finance and Economy. The content of said notices shall include the amounts of foreign direct investments concerned, and their ratios. Notices shall also be required if changes in matters stipulated by Presidential Decree are sought.

(2) Where notices are given pursuant to Paragraph 1, the Minister of Finance and Economy shall determine whether to accept said notices, and shall reply to the persons submitting said notices within the time periods stipulated by Presidential Decree.

(3) Foreign nationals seeking to acquire outstanding stocks, etc., of enterprises of the defense industry stipulated by Presidential Decree shall, despite the provisions of Paragraph 1, must obtain prior approval from the Minister of Finance and Economy, as provided for by Decree of the Ministry of Finance and Economy. Authorizations shall also be required if changes in the amounts of foreign investments and their ratios and other matters stipulated by Presidential Decree are sought.

(4) Where notices are given pursuant to Paragraph 3, the Minister of Finance and Economy shall determine whether to accept said notices, and notify the outcomes within the time periods stipulated by Presidential Decree

(5) In deciding whether to grant authorizations in authorization cases, pursuant to the regulations in Paragraph 4, the Minister of Finance and Economy shall consult with Competent Ministers prior to making his decisions.

(6) In deciding to grant authorizations in authorization cases, pursuant to the regulations in Paragraph 4, the Minister of Finance and Economy may attach such conditions when acknowledged necessary.

(7) Persons who acquire outstanding stocks, etc., in violation of the regulations in Paragraph 3 and Paragraph 8, may not exercise voting rights with respect to said outstanding stocks, etc. The Minister of Finance and Economy may issue orders to the persons who acquire outstanding stocks, etc., in violation of the regulations in Paragraph 3 and Paragraph 8, to sell said outstanding stocks, etc., in a manner stipulated by Presidential Decree.

(8) Necessary matters in acquisition of outstanding stocks, etc. by foreign investors, other than regulations in Paragraph 1 through Paragraph 7, shall be stipulated by Presidential Decree.

Article 7 (Acquisition of Stock through Mergers)

(1) Foreign investors shall submit notices to the Minister of Finance and Economy upon acquisition of stocks or shares if said acquisition fall under one of the following items:

1. Where foreign investors acquire stocks of foreign invested enterprises concerned, which stock is issued following transfer of reserved surpluses or revaluation reserves into the capitalization of said foreign invested enterprises.

2. Where foreign investors acquire stock or shares of legal entities that survive, or are newly organized following mergers between foreign invested enterprises and other enterprises, based on rights arising from ownership of the stock or shares of said foreign invested enterprises.

3. Where foreign nationals acquire the stocks or shares of foreign invested enterprises, which is registered pursuant to the regulations outlined in Paragraph 21, from nationals or legal entities of the Republic of Korea by means of purchase, inheritance, testation, or gift.

4. Where returns of profits acquired from stocks or shares acquired pursuant to this Act are used to acquire additional stocks or shares.

5. Where foreign investors convert convertible bonds, or bonds with warrants, into stocks or shares.

(2) In cases where notices, pursuant to the regulations contained in Paragraph 1 exist, the Minister of Finance and Economy shall promptly reply confirming receipt of said notices to the persons who submitted said notices.

Article 8 (Foreign Direct Investments in the form of Long-Term Loans)

(1) If foreign investors wish to make foreign direct investments pursuant to the regulations in Article 2, Paragraph 4, by Decree of the Ministry of Finance and Economy, said foreign investors shall submit prior notices to the Minister of Finance and Economy. The content of said notices shall include the amounts of foreign direct investments concerned, and their ratios (meaning the percentages of the concerned foreign invested enterprise stock acquired by said foreign investors). Notices shall also be required if changes in matters stipulated by Presidential Decree are sought.

(2) In cases where notices are submitted pursuant to Paragraph 1 hereof, the Minister of Finance and Economy shall promptly reply confirming receipt of said notices to applicants.

CHAPTER III. SUPPORT FOR FOREIGN DIRECT INVESTMENT

Article 9 (Reduction or Exemption of Corporate Taxes, etc.)

(1) Any of the following foreign direct investments relating to the operation of industries falling under criteria stipulated by Presidential Decree, pursuant to the regulations contained in Paragraph 2 through Paragraph 5, shall receive tax reductions in, or exemptions from, corporate, income, acquisition, registration, property and aggregate land taxes.

1. Industries supporting service businesses, or businesses bringing in advanced technologies that raise the international competitiveness of domestic industries.

2. Foreign invested enterprises, pursuant to the regulations contained in Article 18 directed towards the operation of industries, located in Foreign Investment Zones.

3. Businesses stipulated by Presidential Decree, which are deemed to require tax reductions or exemptions in order to attract foreign direct investments.

(2) With respect to corporate or income taxes levied on foreign invested enterprises, tax reductions or exemptions shall be applied only to those portions of incomes which are derived from those business activities subject to the tax reduction or exemption provisions provided for in Paragraph 1. The amounts of such tax reductions or exemptions for those taxable years ending during the first seven year periods starting from the taxable years during which the foreign invested enterprises have generated incomes for the first time from said business activities (or from those taxable years during which the fifth anniversary of the business commencement dates fall, if said enterprises cannot generate any incomes until such taxable years) shall equal the full amounts calculated by multiplying the total corporate tax or income tax equivalents (the amounts calculated by multiplying the total calculated tax amounts by the ratios which the incomes generated from the business activities enumerated in Paragraph 1 bear to total taxable incomes) for the year by the foreign direct investment ratios (hereinafter, in this Paragraph, referred to as "the Tax Amounts Subject to Reductions or Exemptions"). For the taxable years ending during the period of three years thereafter, tax amounts equivalent to fifty percent of the Tax Amounts Subject to Reductions or Exemptions shall be reduced or exempted.

(3) With respect to corporate and income taxes on dividend incomes derived from ownership of stocks or shares of foreign invested enterprises, the owners of such stocks or shares shall, in proportion to the percentages of incomes derived from businesses stipulated in the regulations specified in Paragraph 1 out of total incomes of each taxable year, enjoy tax reductions or exemptions. The full amounts of corporate or income taxes shall be reduced or exempted for the periods during which the full amounts of the Tax Amounts Subject to Reductions or Exemptions are reduced or exempted under the provisions of Paragraph 2. Fifty percent of corporate or income taxes shall be reduced or exempted for the periods during which fifty percent of the Tax Amounts Subject to Reductions or Exemptions is reduced or exempted under the provisions of Paragraph 2.

(4) With respect to acquisition, registration, property and aggregate land taxes on properties acquired and maintained by foreign invested enterprises for the purposes of running businesses, the taxable amounts subject to reductions or exemptions shall be reduced, or certain amounts shall be exempted from their tax bases, as in the following cases. However, when local governments prolong the period of tax reductions or exemptions by up to fifteen years, or increase the ratios of tax reductions or exemptions during prolonged periods, pursuant to municipal ordinances according to the regulations specified in Article 9 of the Local Tax Law, tax reductions or exemptions shall be determined by said periods and ratios, notwithstanding the regulations contained in Items 1 and 2.

1. With respect to acquisition, registration or property taxes, the amounts of tax reductions or exemptions shall equal the amounts derived by multiplying the values of the properties concerned and the foreign direct investment ratios (hereinafter, "Taxable Amounts Subject to Reductions or Exemptions") for the first five years from the initial dates of operation and, thereafter, 50 percent of the taxable amounts subject to reductions or exemptions for up to the next three years.

2. With respect to aggregate land taxes, tax deductions shall equal the amounts (hereinafter the "Deductible Amounts") derived by multiplying the tax bases applicable to the properties concerned and the foreign direct investment ratios for five years following the initial dates of operation. Thereafter, 50 percent of the deductible amounts shall be deducted from the tax bases for the next three years.

(5) In the event when foreign invested enterprises acquire and possess properties before their business commencement dates for purposes of carrying out the business activities enumerated in Paragraph 1, notwithstanding the provisions of Paragraph 4, said enterprises shall enjoy the following reductions of, or exemptions from, taxes imposed on their properties, such as acquisition, registration, property and aggregate land taxes, or shall have the following deductions of certain amounts from their taxable bases. However, in the event that local governments, pursuant to municipal ordinances promulgated under the provisions of Article 9 of the Local Tax Law, extend the periods of tax reductions or exemptions or tax deductions by up to fifteen years, or increase the reduction or exemption ratios, or the deduction ratios during extended periods, notwithstanding the provisions of Paragraphs 2 and 3, such periods and ratios shall apply.

1. In the case of acquisition and registration taxes on properties acquired after the dates when decisions to reduce or exempt taxes are made, pursuant to the regulations contained in Paragraph 8, the entire amounts subject to tax reductions or exemptions shall be exempted.

2. In the case of aggregate land taxes, the entire deductible amounts are for five years from the dates of acquisition of the properties concerned and 50 percent of the deductible amounts are for the three years thereafter.

3. In the case of aggregate land taxes, the entire deductible amounts are for five years from the dates of acquisition of the properties concerned and 50 percent of the deductible amounts are for the three years thereafter.

(6) Where foreign investors or a foreign invested enterprises seek to obtain tax reductions or exemptions pursuant to the regulations outlined in Paragraph 2 through Paragraph 5, said foreign investors or foreign invested enterprises shall apply to the Minister of Finance and Economy for tax reductions or exemptions by the last day of the fiscal years in which the initial operations fall (in cases of capital increases, within two years from the acceptance notices of foreign direct investments).

(7) Before foreign investors or foreign invested enterprises submit notices pursuant to the regulations outlined in Article 5, Paragraph 1, replies may be sought from the Minister of Finance and Economy to confirm whether such tax reductions or exemptions shall be granted.

(8) Where the Minister of Finance and Economy has received applications for tax reductions or exemptions, pursuant to the regulations outlined in Paragraph 6, the Minister of Finance and Economy shall consult with competent Ministers and determine on whether such tax reductions or exemptions should be granted, and a reply concerning the outcomes of such determinations to the persons who submitted said notices. However, with respect to tax reductions or exemptions in the cases of acquisition, registration, property, or aggregate land taxes, stipulated in the regulations outlined in Paragraph 4 through Paragraph 5, the Minister of Finance and Economy shall consult with the Heads of the Local Governments concerned.

(9) With respect to foreign direct investments implemented pursuant to the regulations outlined in Article 6, Paragraph 2 through Paragraph 5 shall not apply.

Article 10 (Exemptions from Customs Duties, etc.)

(1) If capital goods stipulated in the following items and purported to be used in business operations mentioned under Article 9, Paragraph 1 are brought in conformity with the content of notices accepted pursuant to Presidential Decree contained in the regulations of Article 5, Paragraph 1, then customs duties, special excise taxes, and value added taxes shall be reduced or exempted.

1. Capital goods brought in by foreign invested enterprises with International Means of Payment or Domestic Means of Payment, which foreign investors have invested in.

2. Capital goods brought as objects of investment by foreign investors.

(2) Where foreign investors or foreign invested enterprises seek to receive tax exemptions from customs duties, special excise taxes, and value added taxes pursuant to the regulations outlined in Paragraph 1, said foreign investors or the foreign invested enterprises shall submit applications for tax exemptions pursuant to Decree of the Ministry of Finance and Economy.

(3) The regulations contained in Paragraph 1 shall not apply in cases of foreign direct investments implemented pursuant to the regulations contained in Article 6.

Article 11 (Tax Reductions or Exemptions in cases of Capital Increases)

(1) Where foreign invested enterprises increase their capitalization, the regulations outlined in Article 9 and Article 10 shall apply to the increased amount of capitalization in determining the amounts of tax reductions or exemptions. However, where applications for tax reductions or exemptions covered by Presidential Decree are made, consultations with competent Ministers and Heads of Local Governments pursuant to the regulations specified are not required.

(2) In cases of stocks acquired by foreign investors as a result of bringing reserve or revaluation surpluses into capitalization, pursuant to Article 7, Paragraph 1, Item 1, taxes shall be reduced or exempted in accordance with the remaining periods of tax reductions or exemptions and the reduction/exemption ratios of the remaining periods based on tax reductions or exemptions for the stock triggering this provision.

(3) The initial dates of business operations, for the purposes of Paragraph 1, shall be those dates on which registrations noting the changes occurred are filed regarding the capitalization increases in question.

Article 12 (Collection of Reduced or Exempted Taxes)

(1) For cases falling under one of the following items, Directors of District Tax Offices shall, in accordance with Presidential Decree, collect granted corporate or income tax reductions or exemptions pursuant to the regulations specified in Article 9, Paragraph 2.

1. In the event registrations are canceled pursuant to the regulations contained in Article 21, Paragraph 2.

2. In the event tax reduction or exemption criteria, pursuant to the regulations contained in Article 9, Paragraph 1, do not apply.

3. In the event content or conditions of accepted notices are not satisfied, pursuant to the regulations contained in Article 28, Paragraph 4.

4. In the event foreign investors transfer stocks or shares held, pursuant to this Act to nationals, or legal entities, of the Republic of Korea.

5. In the event foreign invested enterprise closes down their businesses.

(2) For cases falling under one of the following items, Directors of District Customs Offices or directors of District Tax Offices shall, pursuant to Presidential Decree, collect granted customs duty, special excise tax, and value added tax reductions and exemptions pursuant to Article 10.

1. In the event registrations are canceled, pursuant to the regulations contained in Article 21, Paragraph 2.

2. In the event foreign capital has been used or disposed of for purposes other than the purposes stipulated in accepted notices.

3. In the event foreign investors transfer stocks or shares held, pursuant to this Act to nationals, or legal entities, of the Republic of Korea.

4. In the event foreign invested enterprises close down their businesses.

(3) If cases falling under one of the following items, Heads of Local Governments shall, pursuant to Article 9, Paragraph 4 and Paragraph 5, and in accordance with Presidential Decree, collect acquisition, registration, property, and aggregate land taxes which were reduced or exempted. In such cases, tax amounts equivalent to the differences in the ratios shall be collected.

1. In the event the ratios of the numbers of stocks or shares held by foreign investors to the total numbers of stock or shares are less than the ratios prior to tax reductions or exemptions, pursuant to the regulations contained in Article 9, Paragraph 5.

2. In the event foreign investors transfer stocks or shares held pursuant to this Act to nationals, or legal entities, of the Republic of Korea pursuant to tax reductions or exemptions granted in accordance with the regulations contained in Article 9, Paragraph 4.

3. In the event registrations are canceled pursuant to the regulations contained in Article 21, Paragraph 2.

4. In the event foreign invested enterprises close down their businesses.

(4) The amount of taxes to be collected, pursuant to Paragraph 1 through Paragraph 3 shall be stipulated by Presidential Decree.

(5) If any of the following items are satisfied, pursuant to Presidential Decree, reduced or exempted taxes need not be collected, notwithstanding the regulations specified in Paragraph 1 through Paragraph 3.

1. In cases where the registrations of foreign invested enterprise are canceled following dissolution of said foreign invested enterprises after mergers.

2. In cases where capital goods brought in and used subsequent to tax reductions or exemptions, such as related to customs duties, granted pursuant to the regulations contained in Article 10, are used or disposed of for purposes different from those originally specified, with the approval of the Minister of Finance and Economy, when said capital goods cannot be used as originally planned due to natural calamities, or some other inevitable events, or to changes in economic conditions, as well as to technological advancements.

3. In the event the stocks or shares of foreign invested enterprises are transferred to nationals, or legal entities, of the Republic of Korea for purposes of going public with said foreign invested enterprises, pursuant to the Securities Exchange Act.

4. Cases stipulated by Presidential Decree, where tax reduction or exemption objectives other than those embodied in Item 1 through Item 3 are deemed to have been achieved.

Article 13 (Leasing and Selling of National and Public Assets)

(1) The Minister of Finance and Economy, Head of the Office of National Property Administration, or Heads of Local Governments, shall, with respect to national and local properties, lands and factories, and public assets (hereinafter referred to as "Lands, etc."), permit foreign invested enterprises to use, earn profits from, or lease (hereinafter referred to as "Lease") said Lands, etc. via free contracts, notwithstanding the National Property Act and the Local Property Act.

(2) In the case of leasing of Land, etc. owned by Local Governments, pursuant to the regulations contained in Paragraph 1, Lease periods can be up to fifty years, notwithstanding the regulations contained in Article 27, Paragraph 1 and Article 36, Paragraph 1, National Property Act, and Article 82, Paragraph 2 and Article 83, Paragraph 2, Local Property Act.

(3) Where lands owned by the Korean government or Local Governments are leased pursuant to Paragraph 1, notwithstanding the regulations contained in Article 24, Paragraph 3, National Property Act and Article 82, Paragraph 2, and Article 83, Paragraph 2, Local Property Act, fixtures such as factories may be built on said lands. In such case, Lease agreements shall require donation of the said fixtures upon return of the leased lands, etc., to the state, in their original condition, with due consideration given the types of fixtures concerned.

(4) Notwithstanding the regulations contained in Article 25, Paragraph 1 and Article 38, National Property Act, and Article 82, Paragraph 2 and Article 83, Paragraph 2, Local Property Act, the use fees or rents charged on the Lands, etc., leased pursuant to Paragraph 1 shall be determined by Presidential Decree and, where necessary, shall be paid in foreign currencies.

(5) Notwithstanding the regulations contained in Article 40, Paragraph 1, National Property Act and Article 83, Paragraph 2, Local Property Act, in the sale of Lands, etc., to foreign invested enterprises, it is determined by Presidential Decree that, if payment of one time purchase prices for the buyers is difficult, the payment of said one time purchase prices may be delayed, or be paid in installments.

(6) Notwithstanding the regulations contained in Article 36, Act on Industry Placement and Factory Establishment, and Article 38, Act on Industrial Location and Development, where government Lands, etc., which fall under one of the following items, are Leased to foreign invested enterprises operating businesses stipulated by Presidential Decree, the Minister of Finance and Economy, or the Office of National Property Administration shall, in consultation with the Minister of Commerce, Industry, and Energy, reduce or exempt usage fees or rents for such Lands, etc., in amounts as stipulated by Presidential Decree.

1. Lands, etc., in Foreign Investment Zones classified as such by the regulations contained in Article 18.

2. Lands, etc., owned by the government in industrial parks for foreign invested enterprises classified as such by Article 35-3, Paragraph 1, Act on Industry Placement and Factory Establishment.

3. Lands, etc., in national industrial parks classified as such by the regulations contained in Article 6, Act on Industrial Location and Development.

(7) Notwithstanding the regulations contained in Article 82, Paragraph 2, and Article 83, Paragraph 2, Local Property Act, Heads of Local Governments in cases of leasing Local Government Lands, etc., to foreign invested enterprises, determined by Presidential Decree, may reduce or exempt the usage fees or rents chargeable for said Lands, etc.

(8) Notwithstanding the regulations specified in Article 38, Act on Industrial Location and Development, in cases of reducing or exempting usage fees or rents chargeable for Lands, etc., pursuant to the provisions of Article 2, Item 5, Industrial Location and Development Act, in industrial parks to foreign invested enterprises, pursuant to the regulations contained in Paragraph 6 and Paragraph 7, lease period can be up to fifty years.

(9) The leasing periods specified in Paragraphs 2 and 8 may be renewed. In cases of renewal, the lease period for each renewal shall not exceed the period stipulated in Paragraphs 2 and 8.

Article 14 (Support for Local Government towards Attracting Foreign Direct Investments)

(1) The state shall exert its best efforts to assist when local governments request funds to establish foreign investment zones, loans to lend to foreign invested enterprises to purchase lands, reductions of rent for usage of lands, etc., to discount land sale prices (including cases where local governments support public agencies stipulated by Presidential Decree) by providing subsidies for the differences when the latter lease the lands they own at reduced rents or sell them below cost prices to foreign invested enterprises, to grant subsidies such as for education and training and other purposes, and request funds to attract other foreign investment projects.

(2) The criteria and procedures governing granting of support state funds to local governments under Paragraph 1 shall be determined by the Foreign Direct Investment Committee under Article 27, stipulated by Presidential Decree. In such cases, the subsidy criteria shall take into account local government efforts to induce foreign investments, records of such inducements, and other relevant factors.

(3) The state shall estimate the amounts of subsidy funds listed under Paragraph 1 in advance, and include them in its budgets.

(4) Local governments, if necessary to promote inducement of foreign investments, may pay as provided for by their regulation employment subsidies under Presidential Decree to foreign invested enterprises.

Article 15 (Establishment of Foreign Direct Investment Service Center)

(1) In order to provide administrative support, including handling of civil affairs and petitions, guidance, counseling, and grievances, in a comprehensive fashion, an administrative support center (hereinafter the "Korea Investment Service Center") will be established in the Korea Trade-Investment Promotion Agency.

(2) The Head of the Korea Trade-Investment Promotion Agency may, in order to increase performance efficiency respecting tasks related to foreign direct investments and of foreign invested enterprises, request legal entities and groups (hereinafter, "Related Institutions") to station public officials and Related Institution officials for duty at the Korea Investment Service Center. When requesting the stationing of civil servants, competent Ministers shall be consulted.

(3) The Korea Investment Service Center will be primarily maintained by employees from the Korea Trade-investment Promotion Agency with a great deal of experience in foreign direct investments. In accordance with the regulations contained in Paragraph 2, public officials and Related Institution officials stationed to the Korea Investment Service Center (hereinafter, "stationed officials") will support the activities of the Korea Investment Service Center.

(4) In accordance with the regulations outlined in Paragraph 2, Heads of related administrative institutions and Related Institutions, in the absence of special countervailing reasons, shall select and station appropriate individuals. When terminating the stationing of officials during their stationing periods, the Head of the Korea Trade-Investment Promotion Agency shall be consulted.

(5) In accordance with the regulations outlined in Paragraph 2, Heads of stationing-related administrative institutions and Related Institutions, vis-a-vis the stationing of public officials and other officials shall not discriminate in relation to promotions, transfers, rewards and welfare benefits.

(6) The Head of the Korea Trade-Investment Promotion Agency, in accordance with the regulations outlined in Paragraph 1, may, in order to increase performance efficiency respecting tasks relating to foreign direct investments and foreign invested enterprises, request support from related administrative institutions and Related Institutions when needed. The Heads of institutions receiving requests for support shall comply with such requests, in the absence of special countervailing reasons.

(7) The Head of the Korea Trade-Investment Promotion Agency, in order to address foreign investor's grievances and difficulties, shall, in accordance with Presidential Decree, establish an Ombudsman institution at the Korea Investment Service Center.

(8) Matters necessary for the establishment and operation of the Korea Investment Service Center shall be stipulated by Presidential Decree.

Article 16 (City and Provincial Foreign Direct Investment Service Centers)

(1) City and provincial foreign direct investment service centers will be established to expedite civil affairs in relation to foreign direct investments, create a Related Institutions cooperation system, and provide effective foreign direct investment support with respect to permissions, approvals, licenses, sanctions, designations, notices, recommendations, and agreements (hereinafter "Permission, etc.") relating to foreign direct investments.

(2) Foreign Direct Investment Service Centers shall provide full support when support for civil affairs related to foreign direct investments is requested by Related Institutions and the Korea Investment Service Center.

(3) Matters necessary for the establishment and operation of Investment Promotion Centers, other than those stipulated in Paragraph 1 and Paragraph 2, shall be stipulated by Presidential Decree.

Article 17 (Special Cases Concerning Processing of the Civil Affairs of Foreign Invested Enterprises)

(1) Foreign investors or foreign invested enterprises, if granted permissions outlined in the left-hand column of Attachment Table 1, shall be deemed to have obtained, permission, etc., outlined in the right-hand column of said Attachment Table.

(2) When civil affairs related to foreign direct investments needed by foreign investors or foreign invested enterprises fall under the category of civil affairs specified by Presidential Decree (hereinafter "Immediate Settlement Civil Affairs"), stationed officials may dispose of said affairs themselves. In such cases, the heads of the related institutions to which the stationed officials are affiliated shall delegate such authority to their stationed officials.

(3) Foreign investors or foreign invested enterprises may entrust the Korea Investment Service Center with the preparation and submission of their civil application documents, and the Head of the Korea Investment Service Center shall transfer civil affairs in relation to permissions, etc., stated in Attachment Table 1 (hereinafter "Comprehensive Civil Affairs"), and individual civil affairs in relation to foreign direct investments stated in Attachment Table 2 (hereinafter, "Regular Civil Affairs") to the heads of administrative institutions in charge of civil affairs (in cases of Package Civil Affairs, the heads of institutions in charge of civil affairs related to Permissions, etc., stated in the left-hand column of Attachment Table 1), and shall notify receipts and transfers of civil application documents to the officials responsible for foreign direct investment promotion in concerned jurisdiction.

(4) The Heads of institutions in charge of civil affairs, upon receiving civil application documents in accordance with the regulations outlined in Paragraph 3, or from foreign investor or foreign invested enterprises, shall discuss said documents with the heads of concerned institutions without delay; and the Heads of said related institutions shall submit their opinions within the periods set for completing civil affairs as stipulated in Paragraph 5. In such cases, the Heads of the related institutions shall, if not accepting civil affairs applications, specify the reasons for their disagreements, and the Heads of the related institutions shall be regarded as having no objections if they do not provide their opinion within the periods set for completing civil affairs as stipulated in Paragraph 5.

(5) The Heads of institutions in charge of civil affairs, or stationed officials, shall complete Package Civil Affairs (in cases of separately receipts of civil affairs related to permissions, etc., stated in the right-hand column of Attachment Table 1, these civil affairs), Individual Civil Affairs and Self Completion Civil Affairs within the periods set by Presidential Decree. If notices of approval or decline are not issued within the set periods, the civil affairs applications concerned shall be regarded as being approved on the day following expiration day of the periods for completing said civil affairs. In such cases, notices of approval or decline, with accompanying reasons, if issued within set periods, shall be made in written form and sent to the officials in charge of foreign investment promotion and the concerned foreign investors or foreign invested enterprises, as stipulated by Presidential Decree.

(6) In cases where permission or any other decisions have been made, or are regarded as having been made, in accordance with the provisions of Paragraph 5, concerned heads of the institutions in charge of civil affairs and stationed officials shall, upon receiving applications from foreign investors or foreign invested enterprises, immediately issue and send documents verifying said approvals, etc., to said foreign investors or foreign invested enterprises.

(7) The heads of institutions in charge of civil affairs and stationed officials shall approve, etc., as requested in the first place within the periods set by Presidential Decree, in cases where foreign investors who, or foreign invested enterprises which, have received refusal notices, pursuant to the latter part of Paragraph 5, submits documents evidencing that they have resolved the problems leading to receiving refusal notices and have satisfied the approval criteria, etc., stipulated by the related laws. In such cases, refusals shall not be made on grounds, which were not raised in turning down the original applications.

(8) Regulations of Paragraph 7 apply discussions specified in Paragraph 4, mutatis mutandis.

(9) In cases where foreign investors or foreign invested enterprises want to receive permissions for package civil affairs, individual completion civil affairs and self completion civil affairs, pursuant to the provisions of Paragraphs 2 through 8, said investors or enterprises shall submit applications stipulated by Decree of the Minister of Finance and Economy, notwithstanding countervailing provisions set forth in other laws and ordinances.

(10) The heads of administrative institutions in charge of civil affairs may grant permissions or hand down other decisions even in cases where some requirements, such as accompanying documents, are not completely satisfied in relation to package civil affairs permissions or other decisions on the condition that such requirements shall be satisfied later.

(11) In cases of civil affairs relating to Permissions, etc., which are required by other laws and regulations vis-a-vis foreign invested enterprises, in order to fulfill purposes pursuant to relevant laws and ordinances governing the period between foreign investment reports of and initiation of operations but are not listed in each of the following items, such laws and regulations shall not apply to foreign invested business activities carried out by foreign investors or foreign invested enterprises.

1. Comprehensive civil affairs

2. Regular civil affairs

3. Immediate settlement civil affairs

4. Civil affairs related to permissions or other decisions pursuant to the regulations of this Act, other than those listed in Items 1 through 3 above

(12) In cases where foreign invested enterprises divert or change the characteristics of agricultural lands or preserved forest belts for purposes of establishing factories, said foreign invested enterprises may enjoy levy exemptions or reductions for diverting land usage under the provisions of Article 45, Paragraph 2, Special Case Laws for Agriculture and Fisheries Development or Article 20, Paragraph 3, Forest Law. The scope of the foreign invested enterprises qualified for such exemptions or reductions, and the ratios thereof, shall be determined by Presidential Decree.

(13) All necessary matters for completing civil affairs related to foreign direct investments, other than those specified in Paragraph 1 through Paragraph 10, shall be stipulated by Presidential Decree.

CHAPTER IV. FOREIGN INVESTMENT ZONES

Article 18 (Designation and Development of Foreign Investment Zones)

(1) In case it is necessary for inducing foreign investments meeting the criteria determined by Presidential Decree, city mayors or provincial governors (hereinafter referred to as a "mayors" or "provincial governors") can select areas desired by foreign investors for investments as foreign investments zones (hereinafter referred to as "foreign investment zones") through examination by the Commission on Foreign Direct Investment Policy under Article 27. In order to develop foreign investment zones into regional industrial parks, under Article 7, Industrial Location and Development Act, (hereinafter referred to as "regional industrial parks"), development plan shall be drawn up.

(2) Mayors or provincial governors shall issue public notices for the following items, when selecting foreign investment zones in accordance with the provisions contained in Article 1:

1. Foreign investment zone titles, locations and areas

2. Development or management methodology

3. Matters of public notices under Article 7, Paragraph 2, Industrial Location and Development Act (only if corresponding foreign investment zones are to be developed as regional industrial parks)

4. Other matters are determined by Presidential Decree

(3) Foreign investment zones shall be developed and managed by mayors or provincial governors who have jurisdiction over said zones, in accordance with Presidential Decree. However, if national industrial parks are partially or totally selected as foreign investment zones, the existing administrative agencies that had been performing the management tasks will be placed in charge of the management of the latter.

(4) If areas selected as foreign investment zones need to add new sites in order to establish factories and the like, said foreign investment zones may be developed into regional industrial parks.

(5) If foreign investment zones are developed into regional industrial parks in accordance with the provisions of Paragraph 4, the foreign investment zones specified under Paragraph 1 shall be considered as being selected as regional industrial parks. In such cases, the development plan, pursuant to the latter part of Paragraph 1, shall be considered as those in accordance with the provisions of Article 7, Paragraph 2, Industrial Location and Development Act, and public notices pursuant to Paragraph 2 shall be considered as those in accordance with the provisions of Article 7, Paragraph 2, Industrial Location and Development Act.

(6) If selections and public notices, pursuant to the provisions of Paragraphs 1 and 2, are given in developing foreign investment zones into regional industrial parks in accordance with the provisions of Paragraph 4, "zones selected and notified as industrial parks," Article 12, Paragraph 1, Industrial Location and Development Act, shall be considered as "zones selected and notified as foreign investment zones;" and "national industrial parks or regional industrial parks selected and notified" in accordance with Article 22 Paragraph 2 of the same Act, shall be considered as "foreign investment zones selected and notified."

(7) If parts or all of national industrial parks or regional industrial parks of which developments are already completed, are selected as foreign investment zones, and the provisions of Article 19, Paragraph 1, shall not apply.

(8) Process and method matters required in selecting foreign investment zones shall be determined by Presidential Decree.

Article 19 (Support for Foreign Investment Zones)

(1) For allocation of responsibility for expenses required in development of foreign investment zones and support for the wide variety of facilities, including harbors, roads, water facilities, railroads, communication and electrical installations, etc., required for smooth promotion of said foreign investment zones, the provisions of Articles 28 and 29, Industrial Location and Development Act, shall apply.

(2) For construction of facilities etc., in foreign investment zones, transportation charge increase levies, pursuant to the provisions of Article 21, Urban Traffic Readjustment Promotion Law, shall be exempted.

(3) Matters concerning support for medical facilities, educational facilities and housing, etc., installed in foreign investment zones shall be determined by Foreign Direct Investment Committees, under Article 27.

Article 20 (Special Cases Concerning Other Laws)

(1) In cases where lands are divided within foreign investment zones, the following laws shall not apply:

1. Article 21, Paragraph 16, National Land Utility Control Law

2. Article 4, Paragraph 2, Item 3, Urban Planning Law

3. Article 15, Paragraph 1, Item 3, Balanced Land Development and Promotion of Small and Medium Local Enterprises Act

4. Article 20, Paragraph 2, Forestry Law

5. Article 5, Paragraph 1, Item 4, Special Management Law for Construction of Provisional Administrative Capital

(2) Foreign invested enterprises located in foreign investment zones shall be deemed as having issued trade or trade agency notices pursuant to the provisions of Article 10, Act on Foreign Trade Business and, for foreign invested enterprises, restrictions on exports or imports may be relieved as determined by the Minister of Commerce, Industry and Energy notwithstanding the provisions of Article 14, Foreign Trade Act.

(3) The following laws do not apply to foreign invested enterprises located in foreign investment zones:

1. Article 4 and Article 12, Paragraphs 2 and 3, Protection of Business Areas of Small and Medium Enterprises and Promotion of Cooperation between Enterprises Act

2. Article 31, Paragraph 2, Honorable Treatment of Men of National Merit Act

CHAPTER V. MANAGEMENT OF FOREIGN DIRECT INVESTMENTS

Article 21 (Ex-Post Facto Management of Foreign Direct Investments)

(1) Foreign investors shall register as foreign invested enterprises in accordance with Presidential Decree regulations when any of the following items applies (including cases when any of the following items applies due to increases in capitalization):

1. In cases where payment of investment objects has been completed.

2. In cases of acquisition of outstanding stocks, etc. (refers to settlements of purchase

payments for outstanding stock acquisitions) pursuant to the provisions of Article 6.

(2) The Minister of Finance and Economy may cancel authorizations or registrations of foreign investors or foreign invested enterprises when any of the following items applies:

1. In cases where registered foreign invested companies, under Article 1, close down their businesses or discontinue business activities for more than two years.

2. In cases where registered foreign invested companies under Article 1, or authorized foreign investors under Article 28, Paragraph 4, do not perform correction orders or other measures requested under the provisions of Article 28, Paragraph 4.

3. In cases where registered foreign invested companies under Article 1 are dissolved.

4. In cases where foreign investors apply for deregistration in accordance with Presidential Decree regulations.

Article 22 (Disposal Limitations, etc., on Capital Goods)

(1) Where foreign investors or foreign invested enterprises attract capital goods pursuant to the regulations contained in Article 10, Paragraph 1, and seek to transfer, lease, or use said goods for purposes which differ from those enumerated in accepted notices, the foreign investors or foreign invested enterprises concerned shall give notice to the Minister of Finance and Economy, except in those cases stipulated by Presidential Decree.

(2) Where notices are given pursuant to Paragraph 1, the Minister of Finance and Economy shall determine whether to accept said notices, and shall notify the outcomes of such decisions to those persons who submitted said notices.

(3) Registered foreign invested enterprises shall not engage in the following activities, except in those cases stipulated by Presidential Decree.

1. In cases of foreign investor activities in restricted industries, pursuant to the regulations contained in Article 4, Paragraph 3, going beyond authorized activity levels.

2. In cases of acquisitions of stocks of enterprises, pursuant to the regulations contained in Article 4, Paragraph 3, in which said acquisitions result in purchases exceeding the authorized levels.

(4) Foreign investors or foreign invested enterprises may not use investment capital for purposes other than those mentioned in accepted notices or permissions.

Article 23 (Transfer of Stock or Shares, etc.)

(1) Where foreign investors transfer stocks or shares acquired, pursuant to the regulations contained in Article 5 through Article 7, or where foreign investors decrease ownership of stocks or shares through reductions of such stocks or shares, said foreign investors shall report such changes to the Minister of Finance and Economy, in accordance with Presidential Decree.

(2) Where permissions for, or registrations of, foreign direct investments have been canceled or de-registered pursuant to the regulations contained in Article 21, Paragraph 2, foreign investors implementing such foreign direct investments shall transfer stocks or shares they own to nationals, or legal entities, of the Republic of Korea within 6 months of such cancellations of permission, or de-registrations. However, if compelling reasons are advanced, said foreign investors may extend the periods for completion of such transfers within a limit of 6 months, with permission from the Minister of Finance and Economy.

(3) If foreign investors have not registered, pursuant to the regulations contained in Article 21, Paragraph 1, or where foreign investors fail to comply with correction orders issued, pursuant to the regulations contained in Article 28, Paragraph 4, then such foreign investors shall transfer stocks or shares they own to nationals, or legal entities, of the Republic of Korea within 6 months from the dates when said foreign investors fail to comply with correction orders. However, if compelling reasons are advanced, these transfers may be delayed for periods of up to 6 months, with permission from the Minister of Finance and Economy.

Article 24 (Collection and Preparation of Statistical Data in Relation to Foreign Direct Investments)

(1) The Minister of Finance and Economy may request city mayors, provincial governors, the Head of the Korea Trade-Investment Promotion Agency, or foreign invested enterprises to provide materials and statistical data, etc., needed to conduct analyses of the effects of foreign direct investments on the national economy, such as economic development, balances of international payments, and employment.

(2) City mayors, provincial governors, the Head of the Korea Trade-Investment Promotion Agency, or foreign invested enterprises shall comply with said requests, pursuant to the regulations contained in Paragraph 1, for materials or statistical data, etc., concerning foreign direct investments, in the absence of special countervailing reasons.

(3) Public officials collecting or creating materials or statistical data concerning foreign direct investments pursuant to the regulations contained in Paragraph 1 and Paragraph 2, shall protect the confidentiality of information related to the operations of the foreign invested enterprises concerned.

CHAPTER VI. TECHNOLOGY INDUCEMENT

Article 25 (Notices of Technology Inducement Contracts)

(1) Nationals, or legal entities, of the Republic of Korea, entering into technology inducement contracts determined by Presidential Decree with foreign nationals shall submit notices to the Minister of Finance and Economy. This requirement also applies where changes are made to the terms and conditions of said contracts.

(2) Where notices are submitted, pursuant to Paragraph 1, the Minister of Finance and Economy shall determine whether to accept said notices, and shall reply to the persons submitting said notices within the time periods stipulated by Presidential Decree.

(3) Technology inducement contracts, notices of which have been accepted pursuant to Paragraph 1, shall be executed within 6 months from the dates of notice acceptances. However, this period may be extended with approval from the Minister of Finance and Economy.

(4) Notices of technology inducement contracts, which have not been executed within the time periods stipulated in the regulations contained in Article 4, Paragraph 2, shall be deemed to have lost their effectiveness.

Article 26 (Tax Reductions or Exemptions on Prices Paid for Technology Inducements)

(1) With respect to contracts which are designed to attract advanced technologies crucially needed to enhance the international competitiveness of domestic industries, should said contracts satisfy the standards stipulated by Presidential Decree, corporate or income taxes on the prices paid for said technology inducements, provided such inducements conform to said contracts, shall be exempted for five years from the first date when disbursements are made, pursuant to said contracts.

(2) Technology suppliers who seek to obtain tax exemptions, pursuant to Paragraph 1 shall submit notices to the Minister of Finance and Economy, along with notices of the technology inducement contracts concerned.

CHAPTER VII. SUPPLEMENTARY RULES

Article 27 (Commission on Foreign Direct Investment Policy)

(1) In order to examine the following matters, a Commission on Foreign Direct Investment Policy (hereinafter "the Commission") shall be established within the Ministry of Finance and Economy.

1. Basic policies and affairs relating to the major points of the foreign direct investment system

2. Affairs relating to improving the major points of the foreign direct investment environment

3. Affairs relating to tax reduction or exemption criteria governing foreign invested enterprises

4. Affairs relating to cooperation and reconciliation of opinions and conflicts among central administrative institutions and other municipalities in relation to foreign direct investments

5. Affairs relating to the support of local governments, pursuant to the regulations contained in Article 14

6. Affairs relating to the designation and support of foreign investment zones, pursuant to the regulations contained in Article 18 and Article 19

7. Other major affairs relating to the inducement of foreign direct investments

(2) The Head of the Commission shall be the Minister of Finance and Economy, and the following individuals will be Commission members.

1. The Minister of Foreign Affairs and Trade, the Minister of Science and Technology, the Minister of Culture and Tourism, the Minister of Agriculture and Forestry, the Minister of Commerce, Industry and Energy, the Minister of Information and Communication, the Minister of the Environment, the Minister of Labor, the Minister of Construction Transportation, and the Minister of Maritime and Fisheries Affairs

2. Related city and provincial Heads

3. Heads of Related Institutions stipulated by Presidential Decree.

(3) In order to investigate or coordinate the subjects to be examined by the Commission, and to handle those matters delegated by the Commission, an Executive Commission for Foreign Direct Investment (hereinafter referred to as "Executive Commission") shall be organized.

(4) Matters necessary for the establishment and operation of the Commission, other than those stipulated in Paragraphs 1 through 3, shall be stipulated by Presidential Decree.

Article 28 (Reports, Investigations, and Corrections, etc.)

(1) When foreign investment and technology inducements are deemed necessary in relation to this Act, the Minister of Finance and Economy and the Ministers of competent Ministries may request reports from foreign investors, foreign invested enterprises, persons who have concluded technology inducement contracts, The Head of the Korea Trade-Investment Promotion Agency, Heads of related financial institutions, and others.

(2) When deemed necessary for implementation of this Act, the Minister of Finance and Economy may request public officials or the heads of institutions to investigate the following items:

1. Foreign invested capital (including the objects of investment) and status regarding inducement, use or disposition of foreign capital

2. Affairs in relation to technology inducements

3. Records of compliance with the requirements of this Act, such as authorizations, permissions, notice acceptances, etc.

(3) Persons conducting investigations, pursuant to the regulations contained in Paragraph 2, shall wear identification tags indicating their authority, and display said identification tags to those concerned.

(4) The Minister of Finance and Economy may order persons having carried out acts of inducement, usage or disposition of said foreign capital, or to related persons, to take corrective measures or other necessary measures when one of the following items apply:

1. In cases of violations or improprieties with respect to compliance with the requirements of this Act, such as authorizations, permissions, and notice acceptances.

2. In cases of discovery of violations of this Act, pursuant to Article 4, Paragraph 2, Item 1.

(5) Where persons who induce foreign capital goods fail to clear customs and take over said foreign capital goods within the time periods stipulated by the Customs Law, the Commissioner of Customs Administration may sell such foreign capital goods as stipulated by Presidential Decree.

Article 29 (Review and Confirmation of Resource Inducement System)

(1) With respect to capital goods or raw materials brought in, pursuant to this Act, if the standards stipulated by Presidential Decree are satisfied regarding such matters as tax reductions or exemptions, then the Ministers of competent Ministries shall review and confirm the status of the induced foreign capital goods, and may forbid inducement of said capital goods or raw materials.

(2) With respect to capital goods reviewed and confirmed by the Ministers of competent Ministries, such review and confirmation, pursuant to the regulations specified in Paragraph 1, shall be regarded as an import license, pursuant to the Foreign Trade Act.

Article 30 (Relationships with other Laws and International Agreements)

(1) With respect to matters addressed by this Act concerning foreign currencies and overseas transactions, unless otherwise specifically dealt with by the provisions of this Act, the Foreign Exchange Management Law shall have overriding authority.

(2) Foreign invested enterprises may pay dividends by and with newly issued stock up to amounts equivalent to the total amounts of the dividends by special resolution pursuant to the provisions of Article 434, Commercial Code, notwithstanding the provisions of the proviso of Paragraph 1, Article 462-2, Commercial Code.

(3) When foreign investors invest in kind, written confirmation of completions of investments in kind issued by the Head of the Office of Customs Administration as to the performance of said investments in kind, the types, quantities and prices of the objects concerned shall be considered as investigation reports by inspectors under the provisions of Article 203, Non-Contentions Case Litigation Procedure Act, notwithstanding the provisions of Article 299, Commercial Code.

(4) In cases where technical assessment organizations stipulated by Presidential Decree evaluate the costs of intellectual property rights, etc., under Article 2, Paragraph 1, Item 7-D, the assessment content shall be considered as the one appraised by certified appraisers, in accordance with the provisions of Article 299-2, Commercial Code.

(5) Nationals or legal entities of the Republic of Korea who want to run concerned businesses together with foreign investors who submit reports in accordance with the provisions of Article 5, Paragraph 1, may reevaluate their investment objective in accordance with the Revaluation of Asset Act on the first day of each month, being the revaluation day, notwithstanding the provisions of Article 4, Revaluation of Assets Act.

Article 31 (Delegation of Authority, etc.)

The Minister of Finance and Economy, or the Ministers of competent Ministries may delegate or entrust parts of their authority stipulated by Presidential Decree to the Administrator of the National Tax Administration, the Administrator of the Korea Customs Service, the Head of the Korea Trade-Investment Promotion Agency, and Heads of the foreign direct investment related institutions.

CHAPTER VIII. PENAL PROVISIONS

Article 32 (Penal Provision)

With respect to overseas remittances of funds, or to inducement of foreign investments, persons (including representatives of corporate entities) responsible for flight of foreign capital shall be subject to prison sentences exceeding one year or fines of amounts more than 2 times and less than 10 times the transmitted amounts. In such cases, foreign capital that has fled abroad shall be forfeited; if such forfeiting is not possible, than penalties of amounts equal to the foreign capital that has fled abroad shall be levied.

Article 33 (Penal Provisions)

Persons in violation of Article 22 of this Act shall be subject to imprisonment terms of up to five years, or fines of up to 50 million won.

Article 34 (Penal Provisions)

Person who make misrepresentations on documents relating to approvals, permissions, or notices pursuant to this Act shall be subject to imprisonment terms of up to three years, or fines of up to 30 million won.

Article 35 (Penal Provisions)

Person, including enterprise representatives, falling under any one of the following provisions shall be subject to imprisonment terms of up to one year, or fines of up to 10 million won.

1. Persons who, in violation of Article 6, Paragraph 1, acquire outstanding stocks etc., without receiving the necessary authorizations.

2. Persons who, in violation of Article 6, Paragraph 3, acquire outstanding stocks of defense-related businesses without receiving the necessary authorizations

3. Person who do not comply with, refuse, disturb or avoid investigations under the provisions of Article 28, Paragraph 2.

4. Person who fails to take necessary measures pursuant to, or to comply with orders, etc., under Article 28, Paragraph 4.

Article 36 (Penal Provisions)

If offenses, pursuant to the regulations contained in Article 32 through Article 35, are committed by legal entities or their representatives or by workers under hire by individuals, including agents and employees in connection with the businesses of said legal entities or individual, punishment will be meted out to the persons committing or omitting those acts constituting said violations, and monetary fines pursuant to the pertinent Article shall be imposed on said legal entities or individuals.

SUPPLEMENTARY PROVISIONS

Article 1 (Effective Date)

This Act shall take effect 2 months after the date of its promulgation.

Article 2 (Application Deadline)

The Regulations outlined in Article 20, Paragraph 3, Item 2, will apply until December 31, 2003.

Article 3 (Abolishment of Other Laws)

The Foreign Direct Investment and Foreign Capital Inducement Act is hereby abolished.

Article 4 (Application of Regulations in Relation to Tax Reductions or Exemptions)

Tax reductions or exemptions under this Act shall apply to tax reductions or tax exemptions first requested upon enforcement of this Act.

In this case, if tax reductions or tax exemptions have been applied for in accordance with the previous Act on Foreign Direct Investment and Foreign Capital Inducement before enforcement of this Act, but the related tax reductions or tax exemptions have not been approved before this Act takes effect, this Act applies, it being deemed that said tax reductions or tax exemptions were applied for on the first day of enforcement of this Act.

Article 5 (Interim Measures in Relation to Acceptance of Notices, etc.)

(1) Those granted whose notices, have been accepted approved, permitted, reported, confirmed or registered, etc. (hereinafter referred to as "approvals, etc.") in accordance with the previous Act on Foreign Direct Investment and Foreign Capital Inducement before this Act takes effect shall be deemed as having notice accepted, or approval granted, etc.

(2) For notice applications, approvals, permissions, confirmations, or registration applications in accordance with the previous Act on Foreign Direct Investment and Foreign Capital Inducement which are being processed when this Act takes effect, the regulations of the previous Act on Foreign Direct Investment and Foreign Capital Inducement shall apply.

(3) For tax reductions or tax exemptions already granted in accordance with the previous Act on Foreign Direct Investment and Foreign Capital Inducement before this Act takes effect, the regulations of the previous Act on Foreign Direct Investment and Foreign Capital Inducement shall apply, notwithstanding the provisions of Article 3, Supplementary Provisions.

Article 6 (Interim Measures in Relation to Free Export Zones)

When this Act takes effect, Free Export Zones, pursuant to the free Export Zone Establishment Law, will be granted tax reductions or exemptions and lease reductions or exemptions as Foreign Investment Zone.

Article 7(Interim Measures in Relation to Penal Provisions)

For application of the Penal Provisions to activities carried out before this Act takes effect, the regulations of the previous Act on Foreign Direct Investment and Foreign Capital Inducement shall apply.

Article 8 (Revision of Other Laws)

(1) Laws in relation to South-North Exchanges will be revised as follows:

Article 26, Paragraph 3, Item 2 will be revised as follows:

2. The Foreign Investment Promotion Act

(2) Laws in relation to Exclusive Regulations and Public Trade will be revised as follows:

Article 8, Paragraph 2, Item 2 "Act on Foreign Direct Investment and Foreign Capital Inducement" will become "The Foreign Investment Promotion Act."

(3) The Foreign Exchange Control Act will be revised as follows:

Article 21, Paragraph 2, Item 4 will be revised as follows:

(4) The Revaluation of Property Law will be revised as follows:

Article 18, Paragraph 2, "The Foreign Direct Investment and Foreign

Capital Inducement Act" will become "The Foreign Investment Promotion Act."

(5) The Tax Reduction or Exemption Law will be revised as follows:

Article 3, Paragraph 1, Item 17 will be revised as:

17. The Foreign Investment Promotion Act

Article 47, Paragraph 3, " Act on Foreign Direct Investment and Foreign Capital Inducement, Article 14 and Article 16, Paragraph 1" will be revised as "The Foreign Investment Promotion Act, Article 9 and Article 11, Paragraph 1," and "Act on Foreign Direct Investment and Foreign Capital Inducement Act," will be revised as "The Foreign Investment Promotion Act," "businesses bringing in advanced technologies pursuant to the regulations specified in Article 14, Paragraph 1, Item 1" will be revised as, "industry-supporting service businesses or businesses bringing in advanced technologies pursuant to the regulations specified in Article 9, Paragraph 1, Item 1," and Article 47, Paragraph 4, "Act on Foreign Direct Investment and Foreign Capital Inducement, Article 16, Paragraph 1" will be revised as the "The Foreign Investment Promotion Act, Article 11 Paragraph 1."

Article 117, Paragraph 5, "Act on Foreign Direct Investment and Foreign Capital Inducement" will be revised as "The Foreign Investment Promotion Act", and Article 117, Paragraph 7 and Paragraph 8, "Act on Foreign Direct Investment and Foreign Capital Inducement, Article 14" will become "The Foreign Investment Promotion Act, Article 9."

(6) The Small and Medium Size Company Support Law will be revised as follows:

Article 16, Paragraph 3, "Act on Foreign Direct Investment and Foreign Capital Inducement" will become "The Foreign Investment Promotion Act."

(7) The Stock Exchange Law will be revised as follows:

Article 191, Paragraph 7, Item 1, "Act on Foreign Direct Investment and Foreign Capital Inducement" will become "The Foreign Investment Promotion Act."

(8) Special-case laws in relation to Tourism Housing Facilities Support will be revised as follows:

Article 13, Paragraph 3, "Foreign Capital Inducement Act" will become "The Foreign Investment Promotion Act and the Law on Inducement and Management of Public Loans."

(9) The Income Tax Law will be revised as follows:

Article 13, Paragraph 1, Item 2 "Foreign Capital Inducement Act" will become "The Foreign Investment Promotion Act."

(10) The laws relating to support for the 18th Winter Universiade and the 4th Asian Games will be revised as follows:

Article 6, Paragraph 2, "Foreign Capital Inducement Act" will become "The Foreign Investment Promotion Act and the Law on Inducement and Management of Public Loans."

Article 9 (Relationships with Other Laws)

In cases where provisions related to foreign investments in the previous Act on Foreign Direct Investment and Foreign Capital Inducement are quoted by other laws when this Act takes effect, if this Act contains provisions corresponding to the quoted provisions, such quotations shall be considered to be made as relating to the corresponding provisions of this Act.

[Attachment 1]Permits in Respect of Factory Construction (related to Article 17, Paragraph 1)

1. Approvals of factory construction, pursuant to the provisions of Article 13, Paragraph 1, Industrial Layout and Factory Construction Act

Upon approval, receipt the following permits, approvals, etc., are primarily to be deemed as having been granted.

a. Permits for conversion of farmlands, pursuant to the provisions of Article 36, Farmlands Act

b. Reports on conversion of farmlands, pursuant to the provisions of Articles 37 and 45, Farmlands Act

c. Approvals for usage changes, pursuant to the provisions of Article 42, Farmlands Act

d. Approvals for basic agricultural facility usage for non-designated purposes, pursuant to the provisions of Article 20, Rearrangement of Agricultural and Fishing Villages Act

e. Permits for conversion of grasslands, pursuant to the provisions of Article 23, Paragraph 1, Grasslands Act

f. Cancellation of designations as dairy farming areas, pursuant to the provisions of Article 7, Paragraph 1, Dairy Farming Promotion Act

g. Permits for conversion of preservation designated forest lands, pursuant to the provisions of Article 18, Paragraph 1, Forestry Act

h. Permits for, or reports on trees, cutting, etc., pursuant to the provisions of Article 90, Paragraph 1, Forestry Act

i. Permits for activities within erosion control areas, pursuant to the provisions of Article 14, Paragraph 2, Work Against Land Erosion or Collapse Act

j. Cancellation of designations as erosion control areas, pursuant to the provisions of Article 20, Paragraph 1, Work Against Land Erosion or Collapse Act

k. Permits for land transaction contracts, pursuant to the provisions of Article 21, Paragraph 3, Utilization and Management of National Territory Act

l. Reports on land transaction contracts, pursuant to the provisions of Article 21, Paragraph 7, Utilization and Management of National Territory Act

m. Permits for changes of land types, or permits for division of lands, pursuant to the provisions of Article 4, Paragraph 1, Urban Planning Act

n. Permits for construction, pursuant to the provisions of Article 8, Buildings Act

o. Reports on construction, pursuant to the provisions of Article 9, Buildings Act

p. Permits for river construction operations, pursuant to the provision of Article 23, Paragraph 1, Rivers Act

q. Permits for occupancy of roads, pursuant to the provisions of Article 40, Paragraph 1, Roads Act

r. Permits for activities within areas adjacent to roads, pursuant to the provisions of Article 50, Paragraph 5, Roads Act

s. Permits for activities within roadside areas, pursuant to the provisions of Article 51, Paragraph 3, Roads Act

t. Permits for private road building, pursuant to the provisions of Article 4, Private Roads Act

u. Permits for occupancy of rivers, etc., pursuant to the provisions of Article 25, Paragraph 1, Rivers Act

v. Permits for occupancy and usage of public water surfaces, pursuant to the provisions of Article 4, Paragraph 1, Public Water Surface Management Act

w. Licenses for public water surface reclamation, pursuant to the provisions of Article 4, Public Water Surface Reclamation Act

x. Permits for digging of neglected graves, pursuant to the provisions of Article 16, Paragraph 2, Burials and Burial Grounds, etc., Act

y. Permits for beneficial usage of state properties, pursuant to the provisions of Article 24, State Properties Act

z. Cancellation of road, river, gutter or riverbank usage, pursuant to the provisions of Article 30, State Properties Act

2. Approvals for business plans, pursuant to the provisions of Article 21, Support of Small and Medium Enterprise Start-Up Act

a. Permits for conversion of farmlands, pursuant to the provisions of Article 36, Farmlands Act

b. Permits for conversion of grasslands, pursuant to the provisions of Article 23, Paragraph 1, Grasslands Act

c. Cancellation of dairy farming area designations, pursuant to the provisions of Article 7, Paragraph 1, Dairy Farming Promotion Act

d. Permits for conversion of preservation designated forest lands, pursuant to the provisions of Article 18, Paragraph 1, Forestry Act

e. Permits for, or reports on, trees cutting, etc., pursuant to the provisions of Article 90, Paragraph 1, Forestry Act

f. Permits for activities within erosion control areas, pursuant to the provisions of Article 14, Paragraph 2, Work Against Land Erosion or Collapse Act

g. Cancellation of erosion control area designations, pursuant to the provisions of Article 20, Paragraph 1, Work Against Land Erosion or Collapse Act

h. Approvals for factory construction, pursuant to the provisions of Article 13, Paragraph 1, Industrial Layout and Factory Construction Act

i. Determinations of plan changes respecting utilization of national territories, pursuant to the provisions of Article 8, Utilization and Management of National Territory Act

j. Permits for land transaction contracts, pursuant to the provisions of Article 21, Paragraph 3, Utilization and Management of National Territory Act

k. Reports on land transaction contracts, pursuant to the provisions of Article 21, Paragraph 7, Utilization and Management of National Territory Act

l. Permits for land type changes, or permits for land divisions, pursuant to the provisions of Article 4, Paragraph 1, Urban Planning Act

m. Determinations of urban planning changes, pursuant to the provisions of Article 12, Urban Planning Act, with respect to facilities under Article 2, Paragraph 1, Subparagraph 1, Item b, Urban Planning Act

n. Designations of operators, pursuant to the provisions of Article 23, Paragraph 5, Urban Planning Act

o. Approvals for operating plans, pursuant to the provisions of Article 25, Urban Planning Act

p. Permits for occupancy of roads, pursuant to the provisions of Article 40, Paragraph 1, Roads Act

q. Permits for activities within areas adjacent to roads, pursuant to the provisions of Article 50, Paragraph 5, Roads Act

r. Permits for activities within roadside areas, pursuant to the provisions of Article 51, Paragraph 3, Roads Act

s. Permits for private road construction, pursuant to the provisions of Article 4, Private Roads Act

t. Permits for river construction operations, pursuant to the provisions of Article 23, Paragraph 1, Rivers Act

u. Permits for occupancy of rivers, etc., pursuant to the provisions of Article 25, Paragraph 1, Rivers Act

v. Permits for occupancy and usage of public water surfaces, pursuant to the provisions of Article 4, Public Water Surface Management Act

w. Licenses for public water surface reclamation, pursuant to the provisions of Article 4, Public Water Surface Reclamation Act

x. Permits for digging of neglected graves, pursuant to the provisions of Article 16, Paragraph 2, Burials and Burial Grounds, etc., Act

y. Permits for beneficial usage of state properties, pursuant to the provisions of Article 24, State Properties Act

z. Cancellation of road, river, gutter or riverbank usage, pursuant to the provisions of Article 30, State Properties Act

3. Permits for Construction, pursuant to the provisions of Article 8, Buildings Act upon approval receipt, the following permits, approvals, etc., are primarily to be deemed granted.

a. Permits for conversion of farmlands, pursuant to the provisions of Article 36, Farmlands Act

b. Permits for forest type changes, pursuant to the provisions of Article 90, Forestry Act

c. Permits for land type changes, pursuant to the provisions of Article 4, paragraph 1, Urban Planning Act

d. Designations of urban planning activity operators, pursuant to the provisions of Article 23, paragraph 1, Urban Planning Act

e. Approvals for operating plans, pursuant to the provisions of Article 25, Urban Planning Act

f. Reports on construction, pursuant to the provisions of Article 9, Paragraph 1, Buildings Act

g. Reports on building of temporary structures for construction, pursuant to the provisions of Article 15, Buildings Act

h. Reports on building of structures, pursuant to the provisions of 72, Construction Act

i. Permits for occupancy of roads, pursuant to the provisions of Article 40, Paragraph 1, Roads Act

j. Permits for activities within areas adjacent to roads, pursuant to the provisions of Article 50, paragraph 5, Roads Act

k. Permits for activities within roadside areas, pursuant to the provisions of Article 51, Paragraph 3, Roads Act

l. Permits for private road building, pursuant to the provisions of Article 4 of the Private Roads Act

m. Permits for occupancy of rivers, etc., pursuant to the provisions of Article 25, Paragraph 1, Rivers Act

n. Approvals for installations of converted waterworks, pursuant to the provisions of Article 36, or Article 38, Water Supply and Waterworks Installation Act

o. Permits for installations of facilities or structures, pursuant to the provisions of Article 20, Sewage Act

p. Reports on installations of drainage facilities, pursuant to the provisions of Article 24, Sewage Act

q. Permits for, or reports on air pollutants discharge facilities, pursuant to the provisions of Article 10, Atmospheric Environment Preservation Act

r. Permits for, or reports on waste water discharge facilities, pursuant to the provisions of Article 10, Environment. Affecting Water Quality Conservation Act

s. Permits for, or reports, on noise or vibration causing facilities, pursuant to the provisions of Article 9, Noise and Vibration Control Act

t. Approvals for, or report on, installation of waste control facilities, pursuant to the provisions of Article 30, paragraph 2, Wastes Control Act

u. Reports on installation of waste water purification facilities and septic tanks, pursuant to the provisions of Article 9, Paragraph 2 and Article 10, Paragraph 2, Disposal of Sewage, Excreta and Livestock Wastewater Act

v. Approvals for, or reports on, private usage electricity facility construction plans, pursuant to the provisions of Article 32, Electricity Services Act

w. Permits for storage construction for explosives, pursuant to the provisions of Article 25, Control of Firearms, Swords, Explosives, etc., Act

x. Consents to construction permits, etc., pursuant to the provisions of Article 8, Paragraph 1, Fire Services Act

y. Permits for installation of plants, etc., pursuant to the provisions of Article 16, Paragraph 1, Fire Services Act

z. Reports on fire fighting water facility changes, etc., pursuant to the provision of Article 43, Paragraph 2, Fire Services Act

α. Reports on fire fighting facility construction execution, pursuant to the provisions of Article 62, Paragraph 1, Fire Services Act

4. Permits for waste water discharge facilities, pursuant to the provisions of Article 10, Water Quality Conservation Environment Affecting Act, (if there are no waste water discharge facilities permits for air pollutant, discharge facilities, pursuant to the provisions of Article 10, Atmospheric Environment Preservation Act) upon approval receipt, the following permits, approvals, etc., are primarily to be deemed granted.

a. Permits for, or reports on, air pollutant discharge facilities, pursuant to the provisions of Article, 10, Atmospheric Environment Preservation Act

b. Permits for, or reports on waste water discharge facilities, pursuant to the provisions of Article 10, Water Quality Conservation Environment Affecting Act

c. Permits for, or reports on, noise or vibration causing facilities, pursuant to the provisions of Article 9, Noise and Vibration Control Act

d. Approvals for or reports on, construction of waste control facilities, pursuant to the provisions of Article 30, paragraph 2, Waste Control Act

e. Registrations of businesses handling hazardous substances, pursuant to the provisions of Article 15, Control of Hazardous Chemical Substances Act

f. Reports on of hazardous substance manufacture that requires surveillance, pursuant to the provisions of Article 13, Paragraph 1, Control of Hazardous Chemical Substances Act

g. Reports on soil contamination causing facilities, pursuant to the provisions of Article 11, Paragraph 1, Soil Environment Conservation Act

4. Approvals for building usage, pursuant to the provisions of Article 18, Building Act upon approval receipt, the following permits, approvals, etc., are primarily to be deemed granted.

a. Inspections of installation completions of converted waterworks, pursuant to the provisions of Article 15, Paragraph 1, Water Supply and Waterworks Installation Act

b. Reports on water drainage facility installations, pursuant to the provisions of Article 24, Paragraph 2, Sewage Act

c. Reports on discharge facility operation commencements, pursuant to the provisions of Article 14, Preservation of Atmospheric Environment Act

d. Reports on operation discharge facility operation commencements, pursuant to the provision of Article 14, Water Quality Conservation Environment Affecting Act

e. Reports on waste control facility usage commencements, pursuant to the provision of Article 30, paragraph 4, Wastes Control Act

f. Inspections of waste water purification facility and septic tank construction completions, pursuant to the provisions of Article 12, Disposal of Sewage, Excreta and Livestock Wastewater Act

g. Internal communications line pre-usage inspections, pursuant to the provisions of Article 36, Information Communications Works Act

h. Private use Electricity facility pre-usage inspections, pursuant to the provisions of Article 34, Electricity Services Act

i. Explosives' storage construction completion inspections, pursuant to the provisions of Article 43, Control of Firearms, Swords, Explosives, etc. Act

j. Plant, etc. completion inspections, pursuant to the provisions of Article 17, Paragraph 2, Fire Services Act

k. Fire fighting facility completion inspections, pursuant to the provisions of Article 62, Paragraph 2, Fire Services Act

l. Registrations of any changes in official land registers, pursuant to the provisions of Article 3, Land Register Act

[Attachment 2]

Separately Processed Civil Petitions Related to Foreign Investments (Related to Article 17, Paragraph 3)

1. Permits for, or reports on, usage changes, pursuant to the provisions of Article 14, Building Act

2. Confirmations of chemical substances excluded from hazardous substance inspections, pursuant to the provisions of Article 40, Paragraph 1, Industrial Safety and Health Act

3. Permits for, or reports on, acquisitions of Lands by foreigners, pursuant to the provisions of Article 4, Foreigner Acquisitions of Lands Act

4. Hazardous chemical substance examinations, pursuant to the provisions of Article 8, Control of Hazardous Chemical Substances Act

5. Permits for manufacture and use of poisonous substances whose handling is limited, pursuant to the provisions of Article 20, Paragraph 1, Control of Hazardous Chemical Substances Act

6. Reports on specified facility installations, pursuant to the provisions of Article 30-2, Water Quality Affecting Environment Act

7. Reports on noise and vibration-causing facility operation commencements, pursuant to the provisions of Article 13, Noise and Vibration Control Act

8. Consultations on environment impact assessment reports, pursuant to the provisions of Article 16, Environmental Impact Assessment Act

9. Permits for, or reports on, activities within water supply source protection areas, pursuant to the provisions of Article 5, Paragraph 4, Water Supply and Waterworks Installation Act

10. Permits for occupancy or usage of natural parks, pursuant to the provisions of Article 23, Natural Parks Act

11. Permits for occupancy or usage of natural park protection areas, pursuant to the provisions of Article 25, Natural Parks Act

12. Reports on business combinations, pursuant to the provisions of Article 12, Monopoly Regulation and Fair Trade Act

13. Permits for business activities which foreign investors desire to engage in through foreign invested corporations

14. Other permits provided by Presidential Decree