./.RESTRICTEDWORLD TRADE
ORGANIZATIONG/SCM/Q2/KOR/15
25 January 1999
(99-0249)
Committee on Subsidies
and Countervailing MeasuresOriginal:  English
SUBSIDIES
Questions from the EUROPEAN COMMUNITY Regarding
the New and Full Notification of KOREA1
The following communication, dated 15 January 1999, has been received from the Permanent
Delegation of the European Commission.
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Korea submitted on 17 November 1998 its new and full notification of subsidy programmes
to the WTO pursuant to Article XVI:1 GATT 1994 and Article 25 of the WTO Subsidies Agreement.
In this respect, the European Communities would like to obtain clarification on a number of issues onthe notified schemes as described below.  The Community also requests further clarification on a
number of programmes which appear to be specific and were not included in the notification.
I. NOTIFIED SUBSIDY PROGRAMMES
V.A. Support for foreign invested enterprises
- Could Korea give a definition of a "foreign invested enterprise"?
- According to information available to the Co mmunity, the corporate income tax exemption
for foreign invested enterprises has been exte nded to 10 years (at 100 per cent exemption for
the first seven profitable years, and 50 per cent reduction for the next 3 years).  Can Koreaconfirm that this programme has been amended?
- It seems that under this programme additional benefits are available for foreign invested
enterprises:
- assistance in job training
- exemption from land-use fees
- exemption from local taxes
- loans at preferential interest rates to import raw materials under Article 4 of the
Enforcement Decree of the Foreign Investment and Foreign Capital Inducement Act
The Community requests that these additional benefits are included in Korea's notification.
                                                     
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II. NON-NOTIFIED PROGRAMMES
The Community finds that the schemes described below provide a financial contribution
which confers benefits to the local industry.  In addition the schemes are clearly specific (as pertaining
to a specific sector or contingent upon exports).  In addition to the specific questions asked, theCommunity would like clarification why these programmes were not notified to WTO and requeststhat, if appropriate, Korea supplies a notification under Article 25, using the standard format.
1. Tax incentives for investments in the Cholla region.2. Tax incentives for companies located in Export Processing Zones pursuant to the Free Export
Zone Establishment Law.
3. Policy Loans
Loans given by public financial institutions at preferential rates.  They are either contingent
upon export performance, contingent upon the use of domestic goods or otherwise specific to certain
enterprises.
4. Duty Drawback Scheme under the Special Act for Tariff Drawback5. Tax provisions
- Article 8 of the Tax Exemption and Reduction Control Law (TERCL):  Reserve for
Technology Development
- Article 10 of TERCL:  Tax Credit a nd Special Depreciation for Investment in
Facilities for Development of Technology and Manpower
- Article 16 of TERCL:  Reserve for Export Loss- Article 17 of TERCL:  Reserve for Overseas Market Development- Article 19 of TERCL:  Reserve for Overseas Business Loss
- Article 20 of TERCL:  De duction Overseas Business
- Article 23 of TERCL:  Reserve for Overseas Investment Loss- Article 25 of TERCL:  Tax Credit for Investment in Facilities for Increasing
Productivity
6. Subsidies through the financial market stabilization package
The Korea Asset Management Corporation, a government organization, was established to
purchase bad loans from the banks.  These loans are being written off by the Government of Korea.
7. Export subsidies pursuant to Article 72 of the Pharmaceutical Affairs Law.8. Equity infusion of W 438.6 billion in the Kia Group.
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