Increasing Corporate Overseas Investment... Doubling the Post-Report Threshold Amount

Post-Report Threshold Raised from $50 Million to $100 Million
No Foreign Currency Earnings Required for Overseas Base Establishment

Relaxation of Sales Criteria for Hydrogen Specialized Companies
Amendment to the Hydrogen Economy Promotion and Safety Management Act

The government will simplify the reporting procedures for direct investment amounts to increase corporate overseas investment and relax the requirements for domestic corporations to establish overseas bases. Going forward, if the overseas direct investment amount is $100,000 or less, only a post-report within one year will be required. The government will also lower barriers by making the sales criteria for selecting hydrogen-specialized companies more realistic.

On the 5th, the government held an Economic Relations Ministers' Meeting chaired by Choi Sang-mok, Deputy Prime Minister and Minister of Economy and Finance, at the Government Complex Seoul, announcing the "Economic Regulation Innovation Plan to Enhance Corporate Dynamism and Promote New Industries." To boost the dynamism of Korean companies, the plan was prepared through a cross-ministerial joint effort led by the Ministry of Economy and Finance and the Office for Government Policy Coordination, reflecting suggestions from economic organizations and companies.

The government decided to improve the mandatory reporting procedures to activate corporate overseas investment. Previously, the timing of reporting and required documents varied depending on the investment amount and industry, resulting in complicated procedures. Last year, violations of the Foreign Exchange Transactions Act included 54.2% (426 cases) related to overseas direct investment reporting procedure violations, indicating unintended illegal acts.

From now on, the threshold for overseas direct investment amounts eligible for post-reporting within one year will be doubled from $50,000 to $100,000. For cumulative investments of $500,000 or less, post-reporting within three months will be required, and for amounts exceeding that, prior reporting will be unified. Business performance reporting will be exempted regardless of industry if the cumulative amount is $3 million or less.

An official from the Ministry of Economy and Finance explained, "The government raised the threshold for undocumented remittances to $100,000 last year, but it was inconsistent to require reporting for overseas direct investments over $50,000, so the threshold was raised. Banks already monitor amounts up to $3 million, and since it is not unregulated, requiring business performance reports would be cumbersome, so the reporting obligation was exempted."

The government will also relax the requirements for domestic corporations to establish overseas branches or offices. Previously, foreign currency earnings and approval from other relevant ministers were required, making it difficult for new startups and non-profit corporations to establish overseas bases. These requirements will be abolished going forward. However, to prevent misuse for illegal transactions and money laundering, remittance details of overseas bases will be monitored.

The restriction period for reapplying for local investment promotion subsidies will be reduced to two years. Previously, if a company failed to achieve 70% of the investment amount after receiving the subsidy, reapplication was restricted for three years, but this will be shortened by one year. This government plan aims to remove investment obstacles for companies without intent, considering cases where companies failed to meet investment targets due to business changes during the COVID-19 pandemic.

The sales criteria for recognizing hydrogen-specialized companies will also be improved. Under the current system, to be recognized as a hydrogen-specialized company, a certain percentage (10-20%) of total sales must come from hydrogen business sales.

The sales ratio is applied differentially: companies with total sales under 100 billion KRW must have 20% hydrogen sales, while companies with total sales over 100 billion KRW must have 10%. This has caused a regressive phenomenon where a company with total sales of 70 billion KRW must have hydrogen sales of 14 billion KRW (20%) to qualify, whereas a company with total sales of 110 billion KRW only needs 11 billion KRW (10%).

The government plans to add an absolute sales amount criterion in addition to the hydrogen business sales ratio and set standards considering quantitative indicators such as innovation capacity and export performance. To this end, revisions to the Hydrogen Economy Promotion and Hydrogen Safety Management Act and its enforcement decree will be pursued next year.

To revitalize small and medium enterprise (SME) cooperatives, the establishment requirements such as the number of promoters will also be relaxed. The current SME Cooperative Act requires 50 promoters for national cooperatives and 30 for local cooperatives, which is considered excessive and has made establishing cooperatives difficult. The government plans to ease the minimum promoter number requirements for SME cooperatives in the first half of next year.

To alleviate manpower shortages in local small and medium manufacturing industries, the requirements for deploying industrial technical personnel will also be relaxed. The industry pointed out that local SMEs must be selected as military service designated companies to receive industrial technical personnel, but small companies find it difficult to meet the evaluator's criteria. The government plans to expand the scoring system for this scheme, which is easier for small businesses to adopt, to strengthen preferential treatment for local companies.

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