Companies relocating their headquarters to provincial areas will enjoy wider tax benefits under the government’s commitment to bolster policies for a balanced growth nationwide.

Economy-related ministries including the Strategy and Finance Ministry on Wednesday unveiled their policy on vitalizing provincial economies, which include providing businesses with tax deductions should they leave Seoul and satellite cities for regional districts.

“While the tax benefits for relocating businesses were implemented earlier, policymakers have decided to ease the requirements,” said the Finance Ministry in a statement.

The benefits have so far been only available to companies relocating 50 percent of its workforce before its headquarters moves. Under the revised plan, the benefits will be offered as long as a company carries out its 50 percent staff relocation within three years of its office move.
 

The coming revised law is projected to take effect next year. “The government plans to propose the revised motion on corporate taxation to the National Assembly in the coming months,” said the ministry.

Further, the government plans to raise the tax deduction rate in exchange for job creation in provincial areas by 1 percentage point to 4 percent.

The vitalization package involves offering investment funds raised by the state-run Korea Development Bank and Industrial Bank of Korea. The collective funds will be worth 1 trillion won ($933 million).

In addition, firms whose workforce increases more than 20 percent for three years will enjoy other state funds amounting to 1.2 trillion won by 2017.

Meanwhile, President Park Geun-hye reiterated the significance of the regional economic vitalization during a senior government officials’ meeting for investment promotion and provincial development.

Park said that when designing regional strategies, developers must keep in mind that each region has its own characteristics and conditions.

“If regional development strategies are drawn up, led by the central government, they can’t help but have limits in reflecting the actual situations of the regions in them,” she said. “We have to change the paradigm so that municipalities, residents and regional businesspeople can take the lead in drawing up development strategies.”

During the meeting, the government decided to relax existing development restrictions on the areas that were previously under “greenbelt” development bans. It also designated dozens of provincial development zones exemplifying the characteristics of each region and promised state support for the projects.

Meanwhile, Deputy Prime Minister and Finance Minister Hyun Oh-seok dismissed the speculation that the government unveiled the regional development policy in a bid to support the ruling Saenuri Party ahead of the June 4 local elections.

“The policy will not affect any candidate either negatively or positively,” Hyun told a news briefing. He claimed the policy was mapped out in reflection of respective conditions of each region throughout the country.

By Kim Yon-se and news reports
(kys@heraldcorp.com)