Korea FDI Cash Grants: The 2025 Boost and 2026 Rules

Quick answer

Korea’s foreign investment cash grant is a direct payment negotiated project by project under the Foreign Investment Promotion Act. In the “2025 Economic Policy Direction” (January 2, 2025), the government said it would permanently raise the maximum grant from 30–50% to 40–50% of the foreign investment amount, and, for 2025 investments only, raise it to 75% for regional headquarters and R&D centers in national advanced strategic industries and 60% for other R&D centers and national advanced technology projects (KPMG Korea). The 75% rate was a 2025-only measure; for 2026 the government has instead announced at least 10 percentage points higher grant rates for investment outside the capital region (Newsis, Jan. 28, 2026).

Table of Contents

Introduction: Korea’s Cash Grant Enhancement

South Korea raised its cash support for foreign investors as part of the 2025 Economic Policy Direction, announced at a ministers’ meeting on January 2, 2025. The headline measure was a temporary increase to up to 75% of the investment amount for certain project types invested in 2025 — not for all strategic investments, and not for factories in general (KPMG Korea; Hankyung).

This guide explains what changed, who could actually reach the top rates, what applies in 2026, and how the application process works.

What Are Cash Grants in Korea?

Cash grants (현금지원) are direct financial subsidies paid by the national and local governments to foreign-invested companies that make qualifying investments. Unlike tax credits that reduce tax payable, cash grants are actual monetary payments to offset investment costs.

Key Characteristics

• Direct payment: Not a loan or tax benefit
• No repayment if conditions are met: Grants can be clawed back if investment or employment conditions are breached
• Project-based: Tied to specific investment projects, not company-wide operations
• Negotiated: The amount is set through negotiation within the statutory maximum, not granted automatically (Invest KOREA)
• Funded jointly: Grants are generally shared between the national government and the local government where the project is located

What Changed in 2025

Permanent Cap Increase

According to the 2025 Economic Policy Direction, the maximum cash grant — previously set at 30–50% of the foreign investment amount depending on the category — was to be raised permanently to 40–50% (KPMG Korea).

Temporary Rates for 2025 Investments

For investments made in 2025, the government announced higher one-year rates for specific categories:

Source: KPMG Korea Tax Brief, January 2025, summarizing the 2025 Economic Policy Direction. The government also said it would front-load execution of the cash grant budget in the first half of 2025.

Important: the 75% ceiling applied to regional headquarters and strategic-industry R&D centers, not to manufacturing plants or fabs, and it was a maximum, not an entitlement.

What Applies in 2026

• The temporary 2025 rates were a one-year measure tied to investments in 2025. We have not found an official announcement extending the 75%/60% rates into 2026, so do not plan on them without confirmation from Invest KOREA or the Ministry of Trade, Industry and Resources.
• In January 2026, the Minister for Trade said the government would raise cash grant rates by at least 10 percentage points for investments outside the capital region, with larger increases for areas farther from Seoul, and would expand local governments’ in-kind support such as land and buildings (Newsis, Jan. 28, 2026).
• A bill introduced in June 2026 would tighten post-grant oversight, requiring larger companies that received cash support to notify the ministry before closing a business (National Assembly bill 2219399). As of this update it is pending in committee.

Eligible Investment Types

Invest KOREA lists the main categories eligible for cash grant negotiation (Invest KOREA):

1. Greenfield investment in new growth / high-tech industries
2. Greenfield investment in parts and materials manufacturing
3. New or expanded facilities creating large-scale new employment (thresholds vary by sector)
4. R&D facilities (or contributions to non-profit research institutes)
5. Investments with a large domestic economic effect, including regional headquarters and strategic industries

Typical Priority Sectors

• Semiconductors, displays, batteries and other national advanced strategic technologies
• Materials, parts and equipment (MPE) for critical supply chains
• AI, data and other digital technologies
• Bio-health and advanced manufacturing

Eligibility Requirements

Investment and Employment Thresholds

Minimum investment amounts and job-creation requirements differ by category and are set in the Foreign Investment Promotion Act, its Enforcement Decree and Ministry regulations. They change from time to time, so confirm the current thresholds with Invest KOREA before you build a business case around a grant.

Foreign Ownership

Invest KOREA states that the foreign investment ratio must be at least 30% for cash grant support (Invest KOREA).

Operational Requirements

• Duration commitment: Grant agreements typically require you to maintain the investment and employment for a set period
• Performance conditions: Grants are usually paid in installments as investment and hiring milestones are met
• Clawback: Breaching conditions can lead to repayment

Application Process

Step 1: Pre-Consultation

Contact Invest KOREA (KOTRA) and the relevant local government early for a preliminary assessment of eligibility and likely support.

Step 2: Foreign Investment Notification

File the Foreign Investment Notification with a foreign exchange bank or KOTRA, together with the investment plan.

Step 3: Cash Grant Application

Submit the cash grant application with the project plan, investment schedule, employment plan and supporting documents.

Step 4: Review and Negotiation

The application is reviewed by the competent ministry and local government and, for larger projects, the Foreign Investment Committee. The amount is negotiated within the statutory maximum.

Step 5: Grant Agreement

Finalize the payment schedule, performance targets, reporting obligations and clawback conditions.

Step 6: Disbursement

Grants are generally paid in installments tied to investment and employment milestones. Timelines vary by project, so build a buffer into your financing plan.

Combining Cash Grants with Other Incentives

1. Corporate Tax: No Tax Holiday

Older guides describe a 5–7 year corporate income tax exemption for foreign-invested companies. That was abolished for applications filed on or after January 1, 2019 (EY Tax News). Cash grants largely replaced it.

2. Local Tax and Customs Relief

Acquisition and property tax relief and customs/VAT relief on imported capital goods continue to be available for qualifying foreign investment (EY Tax News). Conditions and durations depend on the project and the local government.

3. Tax Credits

• National strategic technology R&D credits and facility investment credits under the Restriction of Special Taxation Act are available to Korean companies generally, including foreign-invested ones. See our integrated investment tax credit guide and semiconductor incentives guide for the current rates.

4. Site Support

• Lease of land in foreign investment zones, industrial complexes and Free Economic Zones on favorable terms for qualifying projects

Common Pitfalls and How to Avoid Them

Mistake 1: Assuming the Top Rate Applies

Problem: Treating “up to 75%” as the default for any strategic project
Solution: Check which category your project falls into; the 75% rate applied only to specific categories in 2025

Mistake 2: Insufficient Documentation

Problem: Missing technical specifications, financing evidence or permits
Solution: Prepare a complete application package with local counsel

Mistake 3: Underestimating Employment Commitments

Problem: Difficulty meeting job creation targets after construction
Solution: Build realistic hiring plans and negotiate phased targets

Mistake 4: Ignoring Clawback Provisions

Problem: Grants can be recovered if conditions are breached or the business exits early
Solution: Understand the commitment period and negotiate clear terms

Mistake 5: Overlooking Regional Differences

Problem: Focusing only on the capital region
Solution: Compare locations; the government has signaled higher grant rates for investment outside the capital region

Tax and Accounting Considerations

Corporate Tax Treatment

Do not assume cash grants are tax-free. Government grants are generally included in taxable income, although Korean tax law allows deferral in some cases where the grant is used to acquire business assets. Confirm the treatment with a Korean tax adviser before you model after-tax returns.

Accounting Standards

Under K-IFRS, government grants related to assets are presented either as deferred income recognized over the asset’s useful life or as a deduction from the carrying amount of the asset.

Legal Structure

• The grant is paid to the Korean foreign-invested company, usually a subsidiary (corporation or LLC)
• Keep the required foreign ownership ratio throughout the commitment period
• Expect ongoing reporting to the competent ministry and local government

How SMA Lawfirm Can Help

• Initial feasibility assessment of cash grant eligibility
• Foreign investment notification and company incorporation
• Cash grant application drafting and negotiation support
• Post-award compliance and reporting support

📩 Contact us at sma@saemunan.com for a confidential consultation on your Korea investment project.

Conclusion

Korea’s cash grant program became more generous in 2025, with a permanent cap increase to 40–50% and temporary 60–75% rates for regional headquarters, R&D centers and national advanced technology projects invested in 2025. For 2026, the emphasis has shifted to higher rates for investment outside the capital region. Grants remain negotiated, conditional and subject to clawback, so treat any percentage as a ceiling and confirm current terms with Invest KOREA before you commit.

Official Sources

For authoritative reference, consult the following Korean government portals:

• Invest Korea (KOTRA)
• KOTRA — Korea Trade-Investment Promotion Agency
• K-Startup (Ministry of SMEs and Startups)
• Ministry of SMEs and Startups (MSS)