South Korea’s efforts to revise corporate tax to promote domestic investment has shown effect as the trend of bringing in profits earned by large corporations overseas into the domestic market has been intensifying, which is expected to help bring positive effects such as job creation and improvement of the balance of trade.

Hyundai Motor Group announced that it will bring in surplus funds amounting to nearly 8 trillion won ($5.9 billion) generated by overseas subsidiaries and invest them in the electric vehicle business in the domestic market.

To achieve this, the company will increase the annual dividend by 4.6 times compared to the previous year. Hyundai Motor Co. and Kia Corp. recorded their largest surplus funds in history by achieving record performance in overseas markets last year. This is the largest-scale profit repatriation in the history of the Hyundai Motor Group.

Samsung Electronics Co. is also bringing in substantial surplus of funds held by its overseas subsidiaries into the domestic market this year. According to the company’s business report, dividend income for the first quarter was 8.44 trillion won.

Compared with the same period a year ago, dividend income increased more than 60 times this year, reaching 127.5 billion won. It is interpreted that Samsung Electronics brought in overseas profits to secure investment.

Companies are actively engaging in profit repatriation due to the reduction in corporate tax burden resulting from the revision of tax laws.

This is because the revised corporate tax law, which converts dividends sent by overseas subsidiaries to the domestic market into non-taxable income, passed the National Assembly at the end of last year. According to the revised tax law, domestic companies will not be taxed on 95 percent of the dividend income received from subsidiaries in which they hold more than 10 percent ownership from the beginning of this year.

As a result, it is expected that other major companies, such as SK Group and LG Group, will actively consider expanding domestic dividends for overseas surplus funds. An official at the Federation of Korean Industries in Seoul said, “The case of the Hyundai Motor Group shows that companies can invest as soon as the domestic investment environment improves. Continuous improvement of the business environment is necessary to activate both domestic and international investments.”

By Lee Sae-ha, Park So-ra, and Chang Iou-chung

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