The government has decided to consider providing subsidies or other forms of support to South Korean companies for repatriating earnings from overseas through “capital reshoring,” recognizing it as an investment returning to the domestic market.
On May 7, the Ministry of Trade, Industry, and Energy (MOTIE) held a “Returning Company Support Policy Conference” chaired by Minister Ahn Duk-geun at the Government Complex in Sejong. During the conference, it unveiled the “Returning Support Strategy 2.0,” which introduces the concept of capital reshoring. Additionally, it acknowledges investments made in the domestic market using earnings repatriated from overseas as returning investments. This move aims to address the issue of “reverse discrimination” between foreign investment and domestic turnaround companies.
One of the reasons domestic companies hesitate to invest in the domestic market is due to perceived “reverse discrimination.” While the government has actively implemented support policies for foreign investment, South Korean companies have not received any benefits when investing earnings repatriated from overseas into the domestic market. This has created a widespread perception that South Korean companies are overlooked when investing domestically while foreign companies are incentivized to invest using the same foreign capital.
At the conference on the same day, Minister Ahn announced, “We plan to consider and promote measures to recognize capital reshoring as returning investment, even when domestic companies repatriate earnings from overseas and invest them domestically.” Capital reshoring refers to large corporations such as Samsung Electronics, Hyundai Motor, and Kia Motors repatriating earnings from their overseas subsidiaries to South Korea in the form of dividends.
With the revision of corporate taxes, the tax burden has been reduced. Therefore, there was a significant increase in the size of capital reshoring by domestic companies last year, amounting to US$43.55 billion, more than three times the US$14.41 billion in 2022. The MOTIE expects that this trend will lead to an expansion of domestic investment resources. Currently, the government offers various incentives, including subsidies of up to 30 billion won, for companies recognized as turnaround companies when they divest overseas production facilities and return to South Korea.
The criteria have been relaxed to allow advanced industry firms, which inevitably require foreign investment to enhance their competitiveness, to receive turnaround subsidies even when investing domestically without restructuring their overseas operations. Furthermore, strategic sectors, including national strategic technology, advanced strategic technology, and future automotive components and products, will be added alongside existing criteria such as advanced technology and core technology for materials, components, and equipment.
According to the MOTIE, 22 companies returned to South Korea last year, continuing the trend of more than 20 companies returning annually since 2020. The scale of domestic investment plans by turnaround companies also surpassed 1 trillion won for the first time in 2022 and consistently exceeded 1 trillion won for the second consecutive year.
An official from the MOTIE stated, “With recent changes in the domestic and international environments such as supply chain restructuring, strategic competition between the U.S. and China, and domestic protectionism, the importance of domestic return, especially in advanced industries, is increasing. The government will actively develop support measures to increase domestic investment.”
Minister Ahn said, “Activating investments, including returning investments, is not only crucial for promoting exports and employment but also essential for economic security, such as stabilizing supply chains. We will proceed with support strategies smoothly, including promptly amending relevant laws.”
