Government eases corporate relocation burdens with subsidy system overhaul

South Korea is set to revamp its subsidy program to incentivize businesses to move to or expand their operations in regions outside the capital. The Ministry of Trade, Industry and Energy announced on July 19 that revised guidelines for national financial support for local investment will take effect on July 20, aiming to lower the threshold for companies seeking government assistance.

A key change involves broadening the eligibility for subsidies. Previously, only companies with at least one year of operation could apply. Under the new rules, subsidiaries and joint ventures established for the purpose of local investment, even if less than a year old, will be eligible if they meet certain criteria. This move is expected to encourage the formation of new entities focused on regional development.

Further adjustments aim to provide greater flexibility for businesses. Restrictions on leasing facilities that received subsidies will be eased, allowing companies to apply for support on the remaining area of the facility not intended for lease. Additionally, the obligation to maintain existing facilities nationwide will be reduced; companies will only need to maintain existing facilities in the same industry as their new investment.

New incentives are also being introduced to promote the use of domestic equipment. Companies that source over 70% of their machinery and equipment costs from domestic suppliers will receive a 2% point boost in their subsidy rate. The cost of purchasing used equipment will also be recognized as part of the investment cost, further encouraging local procurement and investment. These revised standards apply to subsidy applications submitted after July 20.