Gov’t to lower barriers for reshoring companies

Ministry of Trade, Industry and Resources MI

The South Korean government is moving to ease regulations to encourage overseas Korean companies to return home, including extending employment obligation deadlines and relaxing expansion requirements.

According to government and industry sources on Tuesday, the Ministry of Trade, Industry and Resources announced a partial revision to the public notice regarding support for overseas companies returning to Korea.

The revision focuses on removing three major obstacles faced by reshoring companies in employment, investment, and administrative procedures, reflecting feedback from businesses in the field.

A new provision has been introduced to grant an extension of the mandatory employment period by up to two years upon a company’s request.

While the selection process for reshoring support considers factors such as the number of full-time employees at domestic investment sites, the mandatory period can now be extended by up to two years.

“We took into account the reality that it is difficult for companies to meet hiring targets during an economic downturn,” said a ministry official.

The government also adjusted facility expansion requirements to better reflect business realities.

Previously, only completely vacant physical space qualified as idle area, limiting investment options. Going forward, the definition will expand to include spaces not actually being used for production activities.

Under revised rule, companies that establish new production lines using existing facilities or invest in spare space within the same building will also be recognized as reshoring companies and become eligible for subsidies.

Administrative inefficiencies have also been addressed.

The base taxable year used to verify production reductions at overseas business sites will be aligned with the Enforcement Decree of the Act on Restriction on Special Cases Concerning Taxation, thereby resolving both the burden of preparing duplicate documentation and tax-related risks for companies.

In addition, the standards for submitting financial statements during feasibility evaluations have been unified. The eased regulations will also be applied retroactively to existing reshoring companies already in the process of building factories in order to maximize policy effectiveness.

The current reshoring support program offers sweeping incentives, such as corporate and customs tax cuts, to companies that have operated overseas facilities for more than two years, provided they liquidate or transfer their overseas operations, or reduce overseas production volume by at least 25 percent before returning to Korea.

However, companies have faced practical difficulties due to stringent requirements and administrative procedures.

On April 27, Industry Minister Kim Jung-kwan held a meeting with domestic reshoring companies and announced plans to draw up a comprehensive package of countermeasures.

Meanwhile, the government plans to go further and announce a more comprehensive plan for reshoring companies later this month.

The plan is expected to include unprecedented support measures that would cover companies returning to Korea after shifting to different business lines from their offshore facilities, as well as companies seeking to invest in domestic research and development (R&D) facilities instead of production facilities.