Investment System

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Legal System of GIC


Gaeseong Industrial Compext Act
  • Article 3
    • Citizens of the South, overseas Koreans, foreign corporations, foreign individuals and foreign economic organizations may invest in GIC.
  • Article 7
    • The legal rights and interests of investors shall be protected and the right of inheritance of investment assets shall be guaranteed in GIC. The investor’s assets shall not be nationalized. In the event that the expropriation of investors’ assets becomes necessary in connection with the public good due to unavoidable circumstances, investors shall be consulted prior to the expropriation and shall be conpensated for the assets’ value.
Agreement on Investment Protection between the South and the North
* The South and the North hereby confirm ……in order to protect the investment assets of the investors from each party and to provide favorable conditions for investment, agree as follows
  • Article 2-2
    • The South and the North shall protect the investment assets of investors of each other in each of their own area in accordance with each of their own laws and regulations.
  • Article 2-3
    • Upon the approval of an investment according to the relevant laws and regulations, the South and the North shall guarantee the free exercise of management activities of investors of each other that occur based on an approved contract and articles of association
  • Article 4-1
    • The South and the North shall not nationalize, expropriate, or restrict the property rights of, or implement any measure having the same effect, the investment assets of investors ……In the event property is expropriated, prompt, sufficient and effective compensation shall be provided.
Agreement on Entry into, Exit from, and Stay in Gaeseong Industrial Complex and Geumgangsan Tourist Zone
  • Article 2-1
    • The South and the North shall actively cooperate with each other to guarantee personnel’s and passing vehicles, etc.’s entry into, exit from, and stay in the Zone in an expeditious and safe manner
  • Article 2-2
    • The North shall guarantee personnel’s personal safety, entry and exit, and the conveniences necessary for carrying out the purpose of their stay
  • Article 10-1
    • The North shall guarantee the inviolability of person, residence, and personal property of each person

    • * Full text of agreements and acts related to GIC is available go

Functions and Organization of South-North Joint Committee

  • Implement and manage GIC-related agreements
  • Improve GIC operation system
  • Discuss and resolve pending issues between South and North
* South and North Korea agreed to establish South-North Joint Committee for GIC and sub-committees in the Agreement on the Normalization of GIC(Aug. 14, 2013)

Taxation System

There are company income taxes, personal income taxes, property taxes, inheritance taxes, transaction taxes, sales taxes and local taxes in GIC.

  • Company Income Taxes
Company Income Taxes
Type of Tax Taxpayer Tax Base Tax Rate Exemptions
Company income taxes All companies with earings from GIC Net profits 14%(general business)
10%(light industry, infrastructure, high-tech and other promoted businesses)

• Investment in the promoted or manufacturing areas

Companies with more than 15 years of operation are exempted from taxes for the first five years following the year they start making profits. A 50% reduction is applied for the next three years.


• Investment in the service area


Companies with more than 10 years of operation are exempted from taxes for the first two years following the year they start making profits. A 50% reduction is applied for the next one year.


• Re-investment of profits

Companies with more than 3 years of operation are exempted 70% of corporate income taxes on re-investment in the following year.



Category Item Content
Taxation object • Incomes from business activities • Income from product sales, transfer of buildings and structures, and from fares and fees
• Other incomes • Interest income, dividend income, rental/lease income, income from property sales, income from offering intellectual property rights and technical know-how, endowed income, etc.
Accounting period
  1. From January 1 to December 31
  2. Start-up businesses: From opening day to December 31
  3. Closed businesses : From January 1 to closing day
Tax rate • 10 percent out of annual revenues for businesses involved in infrastructure, light industry and advanced scientific technology
• 14 percent out of annual revenues for other businesses
Calculation method Principles • Applying the rate of enterprise income tax to annual revue
Exception • Simplified taxation: 2 percent out of annual sales and tip revenue for unlisted companies or 1.5 percent for listed companies
• Companies that find it difficult to exactly calculate their annual revenues, and companies that earn less than USD 3 million in annual revenue and tip revenue
Options for Calculation method • No company can change the method of calculating annual revenues for three years.
• Companies that want to change the calculation method are required to submit a change-of-method form to a tax office one month before the fiscal year
Examples • If a company chose the simplified taxation method in 2011, it cannot change the method until 2014. • In this case, the company should submit to the tax office a "change of method form" by the end of November 2014, if it wants to change the method.
  Due date for payment • Companies should pay taxes within three months before the end of the fiscal year. (However, according to the 2014 fiscal year, payment should be made by the end of March 2015.) They also should submit a balance sheet and a tax return.
• Closed, merged and spin-off companies should pay company income taxes within two months from the day when they were closed, merged, or separated.


  • Other Taxes
Other Taxes
Type of Tax Taxpayer Tax Base Tax Rate Exemptions
Personal income taxes Individuals staying in GIC more than 184 days a year and making profits   Individual worker’s monthly earnings beyond USD 500 after paying a 30% tax   4~20%   • The taxes may be exempted according to an agreement made between the two Koreas.
• Earnings made from insurance payment or interest on savings in North Korean financial institutions are exempted from the taxes.
• Non-residents’ interest earnings from savings in GIC are exempted from the taxes.
Property taxes Anyone who owns a building in GIC on January 1 Market price of the building at the time of purchase 0.1~1% New building owners are exempted from taxes for five years since the date of registration.
Inheritance taxes Anyone who inherits a property in GIC The total value of inheritance after deducting expenses prescribed in tax regulations 6~25% -
Transaction taxes Companies in manufacturing sector Sales earnings from each type of product 1~2% (15% for alcohol, cigarettes and other personal consumption items) Companies exporting goods to South Korea or other countries are exempted.
Sales taxes Companies in service area Earnings from service or sales in the construction or financial industry Construction traffic transport 1% Companies in infrastructure industry are exempted.
- Electricity, gas, heating and other energy, water supply, sewage, road construction, etc.
Finance 1%
Commerce 2%
Local taxes City management taxes Individuals and businesses Total monthly wages or earnings 0.50% -
Vehicle taxes Companies or individuals who own a vehicle in GIC on January 1 Type of car USD3~60 - If a vehicle has not been in use for 60 or more days in a row, taxes are exempted for that period of time.


  • Double Taxation Avoidance Agreement on earnings signed by South and North Korea came into effect on Aug. 20, 2003.
  • All goods in inter-Korean trade, including those that are brought in or out of GIC, are tariff free.
  • For more detailed information, please refer to GIC Act go
  • Please refer to 'Tax accounting in GIC' for more information go

Labor Management System

Hiring Workers

  • Process of finding jobs and hiring workers
    * Fees for finding workers : USD 17 per person. Fees are exempted when a tenant company hires new workers to replace existing ones due to dismissal and resignation of workers or expiration of contract.
  • Minimum Wage Increase : Workers are given a raise once a year, up to 5% of the minimum wages paid in the previous year.
  • Basic wage is determined by each company.
    * Basic wage during internship (for 3 months) : 70% of the basic wage
  • Additional Pay
    • Overtime and night shifts : 1.5 times regular hourly rate
    • Holiday shifts: twice regular hourly rate
  • Incentives and Bonus are determined by each company.

Social Insurance Payment and Benefits

  • Social security payment : 15% of total monthly wage
  • Paid vacation : 3 months’ wages ÷ actual working days × vacation days (In addition, workers are entitled to up to 60 days of paid maternity leave.)
  • Supplementary living allowance : 60% of daily or hourly wage (when works were disrupted by the company or due to training)
  • Unemployment support : Average monthly wage for last 3 months × duration of employment (when those who have been employed for more than a year have to leave the work due to the company’s fault) ※ Workers have to sign wage slips to confirm their work hours including overtime, night, and holiday shifts and enable themselves to check their wages.

Insurance System

  • The official insurance company for GIC is the Korea National Insurance Company (KNIC).
    * North Korea’s General Bureau of Guidance for Special Zone Development designated KNIC as the insurance company for GIC on January 26, 2005.
    • Insurance Rules: All individuals must be insured by KNIC (Insurance Regulations Article 5).
  • Eligibility : All new companies, branch offices, agencies, offices, South Koreans and compatriots staying or residing in GIC, and foreigners
  • Mandatory Insurances (Insurance Regulations Article 6)
    • Fire insurance, gas liability insurance, automobile liability insurance and employee compensation insurance
      * Details about insurance policies are still under discussion between the two Koreas.
  • Dispute Resolution
    • Disputes should be resolved through consultations between the parties to the insurance.
    • If the dispute cannot be resolved through a mutual agreement, the parties may resolve it by arbitration, trial or dispute resolution process agreed by the two Koreas.

Real Estate System

Land-use Rights

  • Acquisition : By lease or transfer
  • Registration : Apply to KIDMAC after acquiring the land use rights
  • Land Use
    • Tenant companies may use the lot from the day it is leased or transferred until expiration of lease. (April 12, 2054)
      * Tenant companies may extend the period of lease by signing a contract with North Korea’s General Bureau of Guidance for Special Zone Development and have the land use certificate reissued six months before the lease expires.
  • Land Use Fee (Similar to domestic real estate tax)
    • he General Bureau of Guidance for Special Zone Development and developer will charge the fee ten years after the contract is signed.
      * The land use fee will be determined through joint consultation between the General Bureau of Guidance for Special Zone Development and KIDMAC.


  • Acquisition : By constructing new ones or through sales or transfer of existing ones
  • Registration : Tenant companies are required to register ownership of building with KIDMAC.

Transfer, lease and collateral of real estate: Part or all of the land use rights or building ownership could be transferred, leased or used as collateral.

  • The companies must register with KIDMAC within 14 days of sale, transfer or collateral trade to make it effective.

Marking of the Country of Origin

Country of Origin Confirmation in GIC

  • The declaration of origin must be submitted for all products from GIC.
    • The certificate for the country of origin is exempted for delivery of items with values less than 500 Euro or commercial items and parcels of values less than 100 Euro.
  • Marking of GIC products: For domestic sales, Made in Korea (Gaeseong) or other similar markings are allowed when South Korea’s ownership shares in the product is more than 60% and raw material gained from South Korea accounts for more than 60 % of the cost.
    • Laws applied : Public notice on transporting goods and vehicles in and out of GIC (Korea Customs Service, effective March 10, 2005)
  • Export to other countries : Subject to the laws of the importing country.

Challenges in Finding Markets

  • Korea and Singapore FTA
    • Goods produced in GIC exported to Singapore via South Korea are subjected to the same special tariffs that are applied to the goods made in South Korea.
  • Korea-EFTA FTA, Korea-ASEAN FTA, Korea-Peru FTA, Korea-India CEPA
    • Goods produced in GIC are subject to the same tariffs that are applied to other South Korean products.
    • When the Committee on Outward Processing Zones on the Korean Peninsula designates GIC as an outward processing zone, its products would be subject to the same special tariffs applied to other South Korean goods. (KORUS FTA, Korea-EU FTA)
    • The Committee will meet a year after the free trade agreement becomes effective.
  • Korea has signed FTA with China, Columbia, Australia, New Zeland and Canada.
  • Korea is also currently negotiating FTA with about 18 countries

Certificate of Origin

  • Self-Issuance: Exporter confirms the country of origin of the goods by submitting declaration document stipulated in agreement.(Korea-EFTA)
  • Authority-Issuance: Customs authority issues Certificates of Origin after confirming the country of origin of the goods pursuant to modality and procedures stipulated in agreement(Korea-Singapore, Korea- ASEAN, Korea-India and Korea-Peru)

Foreign Exchange System

  • Foreign currency is managed by KIDMAC.
    After opening an account at a local bank in South Korea and submitting application documents to KIDMAC, companies may also open a foreign currency account at a bank in GIC.
  • Cope of Foreign Currency
    Exchangeable foreign currencies, bonds in exchangeable foreign currencies, commercial securities such as stocks, payment methods such as certificates of deposit, and jewelry
  • Standard Currency : U.S. dollars (USD)
  • Remittance of Dividend : The companies may bring foreign currency in and out of GIC without reporting it to the customs office. The remittance of interest or wage is exempted from taxes.

Application Procedure

Accounting System


  • The company’s account should be kept in USD.
  • Fiscal Year: January 1 to December 31
  • Balance sheet should include:
    • Balance sheets, income statement, appropriation of retained earnings or disposition of deficit, and cash flow, footnotes and explanation of current financial situations
  • Organization of balance sheet which includes assets, liabilities, and capital
    • Assets and liabilities should include liquid assets, fixed assets, liquid liabilities and fixed liabilities every year.
    • Capital should be categorized into capital fund, surplus capital, surplus profits, and capital adjustments
  • Organization of income statement
    • Income statement should include profits or loss on sales, profits or loss on operation, gross profits or loss, profits and loss before corporation income tax and net profits or loss
    • Profits and expenses should be tallied for each period
  • Submission of balance sheet
    • The companies should have their balance sheets inspected and submit them to GIC accounting office within three months of the end of each fiscal year.


  • Purpose: Independent auditor’s opinions would improve the credibility of the balance sheet, and help people make right decisions on the company.
  • Subject of audit: All companies and their branch offices, agencies or private business owner who meets the eligibility requirements.
  • Auditor: There are three audit offices in GIC.
    • The audit offices should inspect and verify balance sheets within three months of the end of each fiscal year.