Korea to introduce special economic zones with tax benefits

South Korea plans to introduce new development zones in regional areas, offering various tax benefits, in a move to achieve balanced development across the country.

The presidential committee focusing on regional development announced Thursday the introduction of Opportunity & Development Zones (ODZs) as part of the vision and strategy for regional development

Under the plan, businesses operating inside ODZs will enjoy a waiver of income and corporate taxes for five years, with an additional 50 percent reduction in taxes for the following two years.

Also, if existing companies sell real estate elsewhere and buy property inside the ODZs for relocation, income tax and corporate tax on the capital gains from the relevant real estate transactions will be deferred until the property sale.

Although there have been special economic zones in various regions across the country, actual impact has been considered minimal.

As the primary reason behind this is believed to be that the incentives offered by these zones did not meet expectations, the government emphasized that the new zones will offer a generous package of tax benefits to encourage corporate relocations and investments.

The presidential committee also announced the introduction of other special zones, including those focusing on regional education innovation and fostering regional talent, creating IT hubs, and promoting regional content and brands.

President Yoon Suk Yeol during the committee meeting in Busan highlighted the need for balanced growth that encompasses the southeast and southwest regions, with Seoul and Busan serving as two pillars.