A year of… stronger AI incentives, open investment and persistent power constraints
South Korea is a burgeoning hub for data centre investment. With its robust economy and reputation as a regional ‘safe haven’, it attracts strong interest from international investors, developers and operators.
It presents a compelling landscape for data centre investment, particularly due to the absence of foreign investment restrictions and presence of attractive incentives.
However, potential investors must navigate challenges, including the significant electricity supply constraints and regulatory complexities. The promise of an open and thriving economy is enticing, understanding the regulatory nuances and addressing infrastructure limitations are crucial for successful investment in South Korea.
Data centre statistics provided by DC Byte.
Spotlight on key drivers
While the market is still somewhat inward looking, South Korea has a liberal approach to foreign investment and ownership, offering an advantage for international investors.
There are few restrictions on land acquisition (other than in designated military zones) and no specific limitations on data centre ownership, aside from a cap on foreign shareholdings in facility-based telecommunications services.
South Korea’s power supply constraints pose a significant challenge for data centre investment and development.
Korea Electric Power Corporation (KEPCO) is the sole electricity provider, and it faces limitations in transformers and transmission infrastructure, particularly in high-demand areas. This bottleneck means a power procurement timeline of several years, and can lead to further delays in securing adequate power supply, complicating project timelines and operational planning.
Regulatory requirements for power grid impact assessments and energy use plans also add layers of complexity.
Special Opportunity Development Zones and Leading Investment Districts provide reductions or exemptions from corporate income tax and acquisition tax for data centres developed in those areas.
These zones, established by the Korean government, are designed to attract foreign investment and foster innovation, creating an environment conducive to growth. Acquisition, corporate income and property taxes may also be reduced or waived if certain investment vehicles are used to invest in data centre operations.
In addition, following tax reforms in 2025, the Korean government has expanded the scope of tax incentives for AI infrastructure by designating AI-service data centres as ‘National Strategic Technology Commercialization Facilities’.
As a result, capital expenditures for the construction and equipment of qualifying AI-service data centres may be eligible for the national strategic technology tax credit, with the extent of relief depending on the taxpayer’s size.
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