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05 JUL 2019

Korea Company Compliance Checklist 2019

Your Korean Business Compliance Checklist

Rising overseas trade has been the driving force behind Korea’s out of the ordinary economic boom. No wonder, since it signed its first Free Trade Agreement (FTA) with Chile in the April of 2004, Korea has seen consistent growth in its network of FTA’s, all over the world. This is why Korea has become a major FTA nation that has a huge FTA network across the world.

Korea is one of its kind country in the world that has FTAs with all of the key economic alliances around the globe, as well as the United States, the European Union, the ASEAN (Association of South-East Asian Nations) and China. Therefore as an entrepreneur, you get to benefit from an FTA privileged duty rate when bringing in goods and services into Korea from almost every principal export nation.

Taking into account this remarkable growth, the Korea department of customs and similar laws have changed a lot and compliance requirements actually mean business do to business in Korea.

 


Legal and Compliance Checklist for Korean Companies

1.      Prior to the conclusion of formalities for incorporating a company in Korea, it is mandatory to get the lease agreement for office premises reviewed and approved by the Korean Government. A corporate services provider offering an entire range of services at a single window is the best solution you can have.

2.      An experienced corporate services provider can provide all the needed assistance and guidance by the company for all corporate and South Korea banking issues.

3.      Every fund amount that is deposited into a Korean bank account needs to be approved by the bank.

4.      The FIPA (Foreign Investment Promotion Act) is configured in a way to govern investment in South Korea. According to this Act, foreign investors are required to file a report with the government if they intend to invest in Korea by way of a merger or by procuring a company.

5.      To start a new business in Korea, you must get it registered by the Government, though this is applicable in select sectors.

6.      Every South Korean firm is required to file a VAT report every quarter and a tax return every year to comply with the regulation of the Republic of Korea’s Company Law.

7.      Every establishment is required to file an interim tax return with the Korean Government. This is inclusive of, (i) balance sheet (ii) income statement and (iii) a trial balance.



Compliance Obligations


Company Information Disclosure and Withholding Provisions

In the case of domestic employment income earners, employers must withhold payroll taxes once in every month, decide upon the employee’s due taxes and release a payroll tax settlement certificate on the closure of the tax period.

Companies do not have to withhold taxes at the time of paying the foreign employment income.


Safeguarding Compliance and Mitigation

In South Korea, corporations are liable to be legally penalized only in cases where laws clearly have provisions for vicarious liability. The Criminal Code has no say in the matters of vicarious liability. Therefore, an enterprise cannot be brought to book according to the Criminal Code.

At the same time, Article 4 of the FBPA and other specific bylaws that govern certain sectors (for instance, the Medical Devices Act, the Pharmaceutical Affairs Act, the Framework Act on the Construction Industry and the Housing Act) take care of the vicarious liability for corrupt practices.

Despite the fact that vicarious liability is specifically taken care of by the appropriate regulations, corporations cannot be considered accountable for the activities of their workers. This is true only if the enterprise can prove that it did what it was supposed to do to sufficiently monitor those employees.

Hence, on a practical level, a compliance program that works best may be effective to a certain extent in putting up a defense corresponding to liability claims against corporations for the doings of their workforce.

The Criminal Code has no clear provisions for any safety against extortion, pressure or fear of corruption wrongdoings. Hypothetically, in case an economic advantage is offered as a result of a squeeze and not with respect to the recipient’s responsibilities, then there is no proof of bribery.

Practically speaking, it is improbable that the courts will recognize such a plea as a defense to a local bribery misdoing, in line with the Criminal Code.

The FBPA excludes compensations to foreign state authorities that are legal as per the appropriate regulations of the other country and foreign bribery wrongdoing within the FBPA

A Korean Compliance Checklist is meant to offer just a fundamental outline of what is required to comply with the law and keep yourself safe from shareholders’ charges.  It is strongly advised that a compliance audit be carried out– if you have not completed a compliance audit of your Korean business in the past or recently.

 

Korea Business Compliance, Korea Company Registration, Korea Business Checklist


Conclusion

Accountability is a prerequisite for going global; notification and registration, in terms of compliance requisites, are going to stay here for the times to come and are likely to mushroom as the days go by.

Foreign companies with a good presence in Korea are strongly recommended to maintain a good compliance checklist. With a checklist in hand (that acts like a compliance monitoring system) foreign enterprises are as safe as home in Korea and their businesses will benefit when a universal audit and government inquiries take place.

A successful compliance checklist directly results in reducing noticeable and indefinable losses by avoiding occurrences and insufficiencies by way of early rectification and maximizes the company’s mid-term as well as long-term profits.

Alternatively, in a roundabout way, it enriches the reputation of the organization by lowering the desire in employees to engage in any kind of fraud. At the same time, it helps carry out proactive preventive measures.

Also, it’s extremely important that stakeholders understand this fact of business, formalize this new reality and ensure adherence to all such requisites. The inability to do so can bring global commerce to a dead halt for any company that fails to demonstrate compliance. Contact us for more information on Korea company compliance criteria.

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All About Korea Foreign Direct Investment 2021

In the aftermath of the Asian financial crisis in 1997, South Korea committed to liberalizing its economy and promoted foreign direct investment (FDI) to open its market to foreign investors. FDI allows foreign investors to acquire and own stocks or shares of Korean companies. According to UNCTAD's 2020 World Investment Report, South Korea’s FDI stocks increased from US$ 135 billion in 2010 to US$ 238.5 billion in 2019. Other forms of FDI include a contribution to Non-Profit Organizations (NPO) and offering long-term loans to domestic companies. Acquisition of stocks or shares of a domestic company guarantees your participation in technology transfer and the management of the company you invested in. As a foreign investor, your investment in South Korea will be facilitated and legally supported by the Foreign Investment Promotion Act. You can also rely on the Rules on Foreign Investment to guide your business operations or Consolidated Public Notice to protect your investment. The South Korean government has cultivated a conducive environment for doing business, with robust measures and policies to help you make the most out of your investment and business capabilities. These measures have enticed investors from across the world and increased inbound investment steadily in the past 15 years. Now is the perfect time to invest in South Korea.   Why Invest in South Korea? South Korea is appealing for foreign direct investment for many reasons. The Korean Government has been reducing tax incentives and increasing cash grants. In January 2019, the government increased cash incentives for foreign companies to around $46 million (50 billion KRW) to entice investors. Cash grants now drive the government’s comprehensive incentive program for foreign investors, which include industrial site support, financial support for staff training, and many more. Companies that invest in the IT sector and related industries qualify for generous cash grants provided by the central and local governments of Korea on a matching fund basis. From January 2020, the number of eligible technologies was expanded to 2,990 in 33 fields, which now includes high-tech products like IoT emotional diagnosis and biometric authentication payment. But South Korea has more to offer foreign investors than FDI cash incentives. Investors are also attracted by the country’s rapid economic development, specialization in ICT, and strong industrial base, high-potential emerging sectors, and expanding market.   Factors to Consider Before You Invest in South Korea In 2009, financial, insurance, and other services made up 64% of inbound investments, compared with 35% invested in manufacturing. Investment opportunities have diversified over the years to include trade, hospitality, real estate, ICT, transportation, and many more. Industries like semi-conductors, auto manufacture, logistics, displays, and environmental products and services are attracting more investors. Under the Foreign Investment Promotion Act, foreign investors can set up a company, foreign branch, or liaison office. Even you'll need to invest in opening a branch in South Korea; it will not fall under FDI since it is not locally incorporated. A liaison office conducts functions like market research and R&D but cannot undertake profit-generating business in South Korea. To set up a local corporation, you’ll need to invest a minimum of around US$ 100,000 (100 million KRW) and does not have a maximum limit. On the other hand, establishing a domestic branch of a foreign company in Korea does not have any limits. Before setting up a business in South Korea, you have to consider how the implications of identification. The act recognizes foreign investors and foreign-invested companies as separate entities and requires independent accounting and settlement. The Foreign Exchange Transactions Act identifies a branch and headquarters as a single entity, which requires consolidated accounting and settlement. The foreign-invested company pays taxes based on domestic and overseas income, while taxes for the branch and liaison office considers income from domestic sources only.   How to Establish a Company in South Korea Since the early 2000s, the government has focused on simplifying the FDI process and established a one-stop services platform to help foreign investors and multinationals invest in South Korea. The FDI procedure starts with foreign investment notification, which is conducted by your foreign exchange bank or accredited agencies like Pearson & Partners. Then, you remit your investment via customs or exchange bank before proceeding to the registration of incorporation at the court registry office. You will be notified once your business registration and incorporation process is completed. Then, you transfer your paid-in capital to a corporate account and wait for a notification confirming the establishment of your foreign-invested company.   How to Set Up a Stock Company in South Korea The Commercial Act of South Korea recognizes five forms of companies, and three types of business forms are available to foreign companies, including the stock company. Each of these business forms has distinct registration requirements, minimum investment limit, and differ in terms of scope. The procedure for establishing a company may differ slightly depending on the degree of commitment or how much you invest in South Korea. There are two ways of setting up a stock company in South Korea. You can use either promotion or subscriptive incorporation, but both procedures involve registration of incorporation that takes about two weeks to complete. Registration tax is charged for both promotion and subscriptive incorporation, which costs around 0.4% of the capital you’ll be investing. You will also have to pay 20% of the registration tax for local education tax. If you invest in stock companies established in overconcentration control areas, the total costs accrued from both taxes can increase by up three times more. Other charges include registration application fee to get revenue stamp of the Supreme Court and notarization fee. The most important step in this procedure is filing your business registration, which should be completed within 20 days from the day your stock company opens its doors for business. To avoid issues down the line, hire an expert in South Korea’s FDI like Pearson & Partners to help you establish a company.   South Korea is ranked 5th globally in the Doing Business 2020 ranking by the World Bank. It has laid a solid foundation across all sectors that will guarantee its position as a global business hub for many years to come. You can rely on Pearson & Partners to help you become part of South Korea’s inspiring journey and join the long list of the success stories of the FDI. Contact us today to start your journey.

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Top 3 Major Business Districts (CBD) in Seoul, Korea

Seoul, the capital city of South Korea, belongs to the league of Asia Pacific’s highly sustainable workplace markets, along with being a cultural hub of the region. Korean cuisine, cinema and pop music have an immense influence all over Asia, transforming the city into a tourist resort of global appeal, while Seoul’s rank as a business hub, depends on the might of its financial services sector and the power of Korean chaebols (corporations) makes it a well-liked investment terminus. Close to 10 million people have their homes in Seoul, but the bigger built-up area houses 25 million, which is close to 50 per cent of the population of South Korea. The city’s key sectors are finance, manufacturing and retail. The internet speed provided within the country is among the worlds fastest and public WiFis can be easily reached. The city proudly carries three primary office districts: the CBDGwanghwamun, the Yeouido Business District (YBD) and the Gangnam Business District (GBD). These CBDs are the country’s heart and soul and longest-serving business districts and also the major shopping areas of Seoul. They take account for a diverse range of businesses. Though research statistics show a CBD vacancy rate of 16.7%, however, it has exhibited a significant rise in rents since the past few months. Gwanghwamun – Rise through the Ranks as Seoul’s Premium Business District Gwanghwamun, in the heart of Seoul, rules the topmost position in the listing of the country’s business districts, on the parameters of annual sales and sales volume per individual. Business districts can be ranked on the basis of the statistical data of geography, population, sales, type of business and consumer’s trends of consumption, as well as information on a map. According to a report, places around Gwanghwamun Station registered the highest sales of 5.8 trillion won ($4.6 billion) in a single year, around approximately eight times hike as against the 2013 review. The area’s separate sales were reported at 3.9 million won.  After blending with the sale figures of adjoining areas like City Hall Station and Jonggak Station, the overall sales figure in the area would exceed 12.7 trillion won.  The swift upsurge of sales near the Gwanghwamun region can be ascribed to the clustered population who went out in public through the whole-month duration torchlight procession and other end-of-the-year events conducted at Gwanghwamun Square.  On the other hand, Apgujeong Station in the swanky Gangnam district was placed at 19th position, a sensational drop from number three, five years ago. Areas near Gangnam Station that registered its best volume of sales in 2013, were positioned at 13th. Apart from key business districts in Seoul; Nam-gu in Ulsan, Jung-gu in Busan, places adjoining Seohyun Station in Seongnam and Beomgye Station in Anyang, Gyeonggi Province showed up in the top 20 list.    Yeouido This YBD is present on a tiny island of the Han River, has been in the limelight for its financial residents – the Korea Stock Exchange lives there along with media firms. Lately, it has turned into a hub for foreign-owned businesses, majority of them have shifted to Seoul IFC development; having a combination trio of office high-rises, a hotel and a shopping arcade. Built by AIG, presently it belongs to Brookfield. The office market in the YBD is still getting used to Seoul IFC’s working premises and Q1 vacancy was 24.4%. Yeouido sprawls across 8.4 square kilometers of island sculpted by the Han River in western Seoul. The island gets its fame as the big economic district of Seoul, a registered address for several investment enterprises and banks.  Additionally, the island holds the National Assembly where the regulations and political decisions of paramount importance to Korea are conceptualized and framed, the governing agencies of the Korean financial sector just like Financial Supervisory Service, Korea Financial Investment Association and the exemplary buildings like IFC SEOUL and 63.    Yeouido has grown up and matured as a financial district from the last 70's when the KRX (Korea Stock Exchange) shifted base to Yeouido from CBD. Because the district identity looks similar to a financial and banking nuclear center of the city that is geographically placed on an island with a park, YBD is usually known as the Wall Street of Korea.   Gangnam Gangnam is stationed in Seoul, south of the Han River, which splits through the city. It is among the several bridges of the city that bridges Gangnam with the adjoining areas to the north of the Han and also city centers. GBD (Gangnam Business District) used to be a farming area running in the reverse gear until 40 years ago. Nevertheless, this area has made its footprint as the educational, commercial and focal point in Korea and is armed to the teeth with administrative buildings on Gangnam-daero and Teheran-ro, centered on the Gangnam Station area. Every kid who loves to dance is familiar with ‘Gangnam Style’, - YouTube has more than 3 billion official views of this video. However, a considerably smaller number of people are aware that Gangnam belongs to Seoul in the capacity of a major office district. Gangnam houses several hi-tech and media agencies and another name for it is the Beverly Hills of Seoul. It is a highly robust office market, owing to limited resources and available positions of only 5.1%. GBD is at number two, on the scales of biggest business districts in Seoul, with reference to the entire leasing area of ​​grade A & B office buildings.   Conclusion Seoul has numerous universal districts. The evolution in the number of foreign nationals is most likely to hit the roof with schemes for foreign investment sectors throughout the town. When global firms make an entry into the Korean market, one of the initial choices to decide where in Seoul to set up their office. Now we have an overview of the three major business districts that are high-density areas, dotted with office buildings. Seoul’s Metropolis area comprises 400 logistics centers of area 10,000 sqm or more, with 25% of overall retail online sales. With these statistics, exceeding expectations for the sector is an understatement. Contact us for clarity and in-depth knowledge of the best place for your new company to operate.

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Applying for D-7 Visa in Korea : Eligibility and Requirements

Who can apply for D-7 visa?D-7 visa is issued to “dispatched foreign professional/supervisor/employee of a firm that is engaged in the business activities in Korea.”Eligibility and requirements Foreign professionals at a Korean branch office sent from the foreign company Foreign professionals at the domestic headquarters of a Korean company that has advanced into the overseas market. - Worked at a foreign company/organization and sent to the foreign company’s affiliate/subsidiary company, branch, or other offices in Korea as an “indispensable professional specialist.“ - The applicant is waived for the one-year work experience, 1) If planning to work in key industries or in national projects or, 2) the employer company has inducted $500,000 or more of business operational fund into its Korean office. - Worked at an overseas branch office of a listed Korean corporation or public organization for at least one year and was dispatched to the main office in Korea. - However, if the Korean headquarter has invested less than $500,000 into its overseas branch/local office, one is not eligible to apply for the D-7 visa.   How long is it valid?When granted a D-7 visa, the maximum length of stay is 2 years, but it can be extended upon application. Dispatch orders should be issued by the company headquarters, even if the employee is dispatched from a branch. The dispatch order should state the dispatch period.Are you applying for your visa in Korea? Contact our Korea visa expert Team in Pearson & Partners.

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