Yoon Government Greatly Reduces Corporate Taxes for Regional Relocation... Establishment of Opportunity Development Zones

Kim Byung-joon, Special Committee Chair for Regional Balanced Development of the 20th Presidential Transition Committee, is speaking at the 5th plenary meeting held on the afternoon of the 18th at the Transition Committee's main conference room in Samcheong-dong, Jongno-gu, Seoul. Photo by Transition Committee Press Corps

After the new government takes office, companies in the Seoul metropolitan area relocating to provincial regions will be offered unprecedented tax benefits such as corporate tax reductions. Additionally, further relocation of public institutions like the Korea Development Bank will be promoted to achieve regional balanced development.

The Presidential Transition Committee’s Special Committee on Regional Balanced Development announced these regional development measures on the 27th.

Kim Byung-joon, Chair of the Special Committee on Regional Balanced Development, stated at a press conference in Tongui-dong, Seoul, "To promote the relocation and investment of companies to non-metropolitan areas, we will provide significant reductions in capital gains tax and corporate tax," adding, "We will implement unprecedented measures in tax benefits and deregulation."

The plan devised by the Special Committee to encourage corporate relocation to provinces is called the ‘Opportunity Development Zone (ODZ).’ This aims to attract companies to relocate to regions through exceptional tax support and regulatory exemptions for companies and individuals.

During the relocation phase to the special zone, benefits such as deferral and reduction of capital gains tax, gift tax reductions for founders, and reductions in acquisition tax and property tax will be provided. Companies operating within the zone will receive reductions in corporate tax and income tax, as well as income tax reductions on financial income from the zone’s development fund. Small and medium-sized enterprises and mid-sized companies will be offered eased requirements for business succession. When disposing of assets within the zone, reductions in capital gains tax, corporate tax, and inheritance tax will be granted.

Additionally, local governments will select specialized models and regulatory exemptions. The plan is to apply a menu-style regulatory exemption to the Opportunity Development Zone, suspending or exempting regulations from 201 existing central government laws, and to implement a set of three regulatory innovations: ‘rapid regulatory confirmation,’ ‘experimental exemption,’ and ‘temporary permits.’

For example, if a multi-homeowner in Seoul sells a house and incurs a capital gains tax of 500 million KRW, they can deposit this amount into a regional fund and invest in the ODZ; after more than 10 years, a significant portion of that capital gains tax will be exempted. The same benefits will apply if the seller directly invests in a company. Chair Kim acknowledged that "there may be discomfort regarding tax and regulatory relaxations targeted at specific regions," but emphasized, "The Yoon Seok-yeol administration clearly recognizes that this issue cannot be neglected and will change the paradigm of regional balanced development strategies."

The corporate tax rate is expected to be announced after the new government takes office, likely around 15%. Chair Kim explained, "Regarding corporate tax, since U.S. President Joe Biden has set it at 15%, we will not go below that global minimum."

The Special Committee on Regional Balanced Development also unveiled 15 national agenda items, including three major commitments: ‘genuine region-led balanced development,’ ‘job creation through strengthening the foundation for innovative growth,’ and ‘maximizing unique regional characteristics.’ Chair Kim explained, "We will create an era of local autonomy characterized by fairness, autonomy, and hope, where everyone enjoys equal opportunities regardless of where they live."

In particular, the Special Committee selected ‘additional relocation of public institutions’ as one of the 15 national agenda items, aiming to lead regional development through win-win growth with surrounding areas. Previously, President-elect Yoon Seok-yeol pledged to relocate the Korea Development Bank to Busan. There is also speculation about the possible relocation of the Export-Import Bank and Korea Investment Corporation. Chair Kim stated regarding this, "We will strive to fulfill all presidential pledges," but added, "At this stage, we will not specify which institutions will move where."

Furthermore, the Special Committee proposed 15 national agenda items including strengthening local decentralization, enhancing local fiscal capacity, reforming local education and human resource development systems, and improving the planning and management capabilities of local governments.

There is also speculation that the Special Committee on Regional Balanced Development will be formally organized through a government reorganization under the new administration. Chair Kim said, "There was a proposal to elevate it to a deputy prime minister level, and I discussed this with President-elect Yoon," but added, "However, due to legal amendment issues, we decided not to pursue this for now."

This content was produced with the assistance of AI translation services.