Following the promulgation of the "Act on Special Measures for Strengthening the Competitiveness of National High-Tech Strategic Industries" (the "Special Act") on February 3, 2022 (which is to take effect on August 4, 2022), the Ministry of Trade, Industry and Energy (MOTIE) recently announced a proposed Enforcement Decree and Enforcement Rules for the Special Act (the "Subordinate Regulations"), bringing greater clarity as to how the Special Act will be applied.

Scope of strategic technologies subject to the Special Act still unknown

One issue of great interest/importance to many technology companies has been exactly which high-technologies specifically will be subject to the Special Act, and therefore be subject to new regulations and various support at the national level. However, the proposed Subordinate Regulations remain still silent as to which high technologies will be selected, instead merely explaining the manner in which high-tech strategic technologies will be designated.

Companies can apply to have their technologies designated as strategic technologies

As reported in our last newsletter (see our 2022 Issue 1 newsletter here), the prevailing expectation has been that the technologies subject to the Special Act may be a combination of (i) "national strategic technologies" under the amended Restriction of Special Taxation Act (to take effect on January 1, 2023) and (ii) national core technologies under the "Industrial Technology Protection Act". However, according to the proposed Subordinate Regulations, MOTIE will now consider high technologies which companies themselves apply to be regulated. Companies seeking designation of their technologies may qualify for certain support or benefits under the Special Act, as explained in the next section. As the Special Act will be effective from August 2022, high-tech strategic technologies are expected to be designated around October 2022.

Support to be provided under the Special Act

The proposed Subordinate Regulations provide that an area designated as a specialized complex for national high-tech strategic industries will be provided with support for the installation of more than 12 items of infrastructure (e.g., roads, power supply facilities and more), and that tenant companies in such a complex will receive extensive support in the form of site development, rent reduction/exemptions, housing support, etc.

Thus, companies should review the details of what support/benefits are available under the Special Act in deciding whether to apply for designation of their technologies as high-tech strategic technologies (including foreign investment companies). In addition, MOTIE plans to continuously supplement the subordinate regulations to the Special Act in line with the legislative intent, and to this end received public comments until May 2, 2022.

Given the potential advantages and disadvantages of requesting designation of technologies as high tech strategic technologies (government support and potential positive PR versus the burden of additional restrictions), once the Special Act and its subordinate regulations take effect, we will continue to provide updates regarding how high-tech strategic technologies are designated, so companies can consider how best to take advantage of the new regulations.

We have attached a summary of the key details of the proposed subordinate regulations for your reference (here).