Yoon unveils ODZs with major tax benefits

[Photo by Lee Seung-hwan]

South Korean President Yoon Suk Yeol announced specific areas across the country will be designated as the first so-called Opportunity Development Zones (ODZs). They are part of a national designation program that aims to attract corporate investment in certain areas via tax advantages, regulatory exemptions, and financial support.

Yoon approved a designation proposal from the Ministry of Trade, Industry, and Energy (MOTIE) on Thursday at the 9th provincial council meeting in Pohang, North Gyeongsang Province.

The approval will result in the creation of specialized industrial complexes in 20 areas. Among the regions, Pohang will house an opportunity zone of 2 million square meters that focuses on secondary batteries and relevant industries. North Gyeongsang Province’s Gumi will have a 1.8 million square meters zone specializing in semiconductors, secondary batteries, and defense equipment, while an industrial zone for liquefied natural gas (LNG) terminals, hydrogen production, and power generation spanning over 1.12 million square meters will be built in Yeosu, South Jeolla Province.

New businesses that are founded or will be founded in the special zones can take advantage of tax benefits. They become eligible for full exemption of income and corporate taxes for five years and a 50 percent reduction for the following two years. If a company moves to one of the special zones by selling its properties, it will not have to pay taxes on the capital gains from the sale immediately, which will be deferred until the company sells the new real estate it buys in the special zone.

The designated zones are anticipated to attract 26 trillion won ($18.6 billion) in new investments from more than 200 companies. “A total of 40.5 trillion won is expected to be invested in the special zones, including 14.5 trillion won in projects that have already started construction,” according to a senior official from MOTIE’s Office of Industries & Enterprises.