For the purposes of economic recovery, enhancing domestic competitiveness, and encouraging foreign investors to invest in the Republic of Korea, in January 2025, following the announcement of the “2025 Economic Policy Directions,” the Korean Government, together with relevant competent authorities, decided to increase the maximum cash grant cap and the proportion of State funding allocated from the subsidy fund for foreign investors. It is anticipated that the maximum amount will be raised to up to KRW 200 billion in early 2025. Accordingly, the investment subsidy fund will also be expanded, with a significantly higher projected budget allocation.
In early 2025, the Korean Government is expected to revise its cash grant policy by raising the cash grant cap to levels higher than those applied in 2024, with increases ranging from 5% to 20% depending on the investment sector. In particular, the maximum cash grant rate applicable to certain sectors may reach up to 75%. Specifically:
Summary
- I. Increase in the Cash Grant Cap for Foreign Direct Investment (FDI)
- II. Increase in the Share of State Funding in the Cash Grant Fund for Foreign Direct Investment
- III. Strengthened Support for Physical Facilities and Project Sites in Special Development Zones
- IV. Policy objectives and significance
- V. Conclusion
- VI. About NYLA – Korean Legal Office
I. Increase in the Cash Grant Cap for Foreign Direct Investment (FDI)
In early 2025, the Korean Government is expected to revise its cash grant policy by increasing the applicable cash grant ceilings by approximately 5% to 20% compared to 2024, depending on the investment sector. In particular, the maximum cash grant rate applicable to certain industries may reach up to 75%. Specifically:
Comparison of Cash Grant Caps for Foreign Investment by Sector
| Before Adjustment | After Adjustment
(Temporary Measures for 2025) |
||
| Research and Development (R&D) Centers | 50% | R&D Centers and Regional Headquarters of Global Enterprises (or Global Corporate Groups) | 50%
(75%) |
| Other R&D Centers and National High-End Strategic Technologies | 50%
(60%) |
||
| New Growth Engine (NGE) Industrial Technologies, High-Tech Industries, and Materials/Parts/Equipment (MPE) | 40% | Industrial technologies classified under the New Growth Engine category include high-technology industries as well as the materials, parts, and equipment (MPE) sectors. | 45
(55%) |
| Regional Headquarters of Global Enterprises, Large-Scale Job-Creation Projects, Region-Specific Specialized Industries, etc. | 30% | Large-scale job-creation projects and region-specific specialized industries. | 40
(50%) |
The cash grant fund for foreign direct investment comprises various sources of funding. Within this framework, the Korean Government and the Ministry of Economy and Finance have considered increasing the proportion of State-funded contributions by an additional 10% for investment projects located outside metropolitan areas or within Special Development Zones. Specifically:
Contribution Ratios of Central and Local Governments to Cash Grants for Foreign Investment
| Before Adjustment | After Adjustment | ||
| Urban Areas | 30:70 | Urban Areas | 30 : 70 |
| Non-Metropolitan Areas | 60:40 | Non-Metropolitan Areas | 70 : 30 |
| Special Development Zones | 70:30 | Special Development Zones | 80 : 20 |
III. Strengthened Support for Physical Facilities and Project Sites in Special Development Zones
With a view to attracting investors to projects located in Special Development Zones, the Korean Government has decided to increase the level of subsidies for investments in physical facilities. Compared to 2024, the enhanced subsidy rates for investment in physical facilities, based on enterprise size, are as follows:
| Enterprise Size | Post-Adjustment Increase |
| Large Enterprises | + 5% |
| Medium-Sized Enterprises | + 8% |
| Small and Medium-Sized Enterprises (SMEs) | + 10% |
In addition, the Korean Government has considered revising the subsidies applicable to project sites as follows:
| Enterprise Size | Post-Adjustment Increase |
| Medium-Sized Enterprises | + 8% |
| Small and Medium-Sized Enterprises (SMEs) | + 10% |
IV. Policy objectives and significance
1. Attracting high-quality FDI: The policy aims to attract high-quality foreign direct investment (FDI), with a focus on high-technology sectors and high value-added manufacturing, as increased cash subsidies help reduce initial investment costs and mitigate risks for foreign investors.
2. Enhancing competitiveness compared to other countries in the region: In the context of competition with economies such as China, Japan, Singapore, and Vietnam in attracting FDI, South Korea has adjusted its policies to enhance its attractiveness to foreign investment.
3. Promoting job creation and technology Transfer: The application of higher cash subsidies targeting R&D projects and sectors supporting strategic technologies directly contributes to increasing value added within the South Korean economy.
V. Conclusion
The policy to increase the ceiling for cash subsidies for foreign direct investment (FDI), effective from April 2025, reflects South Korea’s efforts to enhance its attractiveness to international investors through more robust preferential financial mechanisms, particularly targeting high-technology industries, research and development (R&D), and global conglomerates. This measure also constitutes a strategic step to strengthen competitiveness in attracting FDI amid the significant restructuring of global supply chains in the post-pandemic context.
VI. About NYLA – Korean Legal Office
■ NYLA – Your Trusted Legal Partner in Korea
At NYLA, we understand that the success of foreign businesses in Korea requires not only a solid business strategy but also reliable legal support. With a team of experienced Korean attorneys and legal professionals, NYLA provides tailored legal services for companies, investors, and individuals operating or planning to establish a presence in Korea.
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■ Contact NYLA
If you’re a foreign business or individual looking for a reliable legal partner in Korea, NYLA is here to help. We are committed to delivering effective, practical, and personalized legal solutions for every client.
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