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01 JUL 2019

5 Things to Keep in Mind to do Business in Korea

Setting up a business or a startup in another country can turn out to be a confusing experience or an affair dotted with doubts, for the majority of entrepreneurs. However, this is reduced with the knowledge they gain at their own expense and through years of experience in overseas trade, as well as business with foreign customers.

However, after globalization, accessibility to worldwide markets has become as easy as can be, for entrepreneurs. With connectivity among nations becoming increasingly barrier-free, even small enterprises can draw maximum benefits from the enormous potential of customers abroad.

South Korea is a big market for foreign products and services. Being highly developed and economically sophisticated, the country offers a huge customer base that has a good spending capacity and an exquisite choice of products from around the globe. Also, Koreans can be wonderful partners in any commercial transaction.

However, to make it big in any business venture in Korea you must know the market, the society and primary rules of industrial liaisons there. This business sense comes over a period of time. It is extremely important to do thorough market research before setting up a business.

Going ahead with the flavor of the article, let us learn about the top five pointers to a successful business in Korea. Though not a complete list, the following serve as great baseline information to guide your dreams to succeed in setting up a business in Korea.


Business in Korea, Korea company setup, Korea Business Etiquette


1. Bear in Mind the Culture

Formality and distinct power structure run through the core of Korean society. Therefore, while trading in Korea, it is crucial that you are conscious of the grade and/or designation of the individual you are trading with, so as to refer to them appropriately.

It is not considered polite to formally address someone by their first name. As most of the Koreans have similar surnames (Kim, Lee, Park, etc.), you will often end up referring to them by their full names, if they are more in number.

Initially, this may seem strange, though a lot nicer than annoying them. However, if they insist, you may address them by their first names. Body language also has a part to play here. This means no embraces, no pat on the back or other inappropriate physical interaction apart from formal handshakes and plenty of bowing while meeting and parting.


2. Etiquette Matters a Lot

Being formal and maintaining an image are major factors in the Korean business culture. Proper dress-code, suitable visiting cards and referring to your Korean partners appropriately are all vital for good ethical standards and building strong ties. You can lose business in Korea over improper decorum.


3. Personalize it

Personal ties matter a lot to Koreans. Such liaisons do not happen over the phone or in a few meetings. A lot of time goes into building such relationships well.

In Korea, there is a fine line between personal and professional lives. Koreans spend long hours working in the office or mixing socially with their colleagues at dinner and drinks. Late nights are often used to build interpersonal links. Official dinners are usually highly formal, but also a means to develop liaisons. It is important that your interest is evident not just in the talks.


4. Socialize with Korean Trading Partners

Bright prospects often rise as an outcome of delegation get-togethers that also help in sustaining goodwill. Business tours also help a lot, if intended to direct all efforts into making the travel; productive, engaging, enjoyable and a learning experience. Being a good host plays a major role that is most surely reciprocated Korea.


5. Make time in Korea

Extended business trips always help when geared towards building contacts and hosting productive meetings. Actually speaking, networking is an essential key to successful foreign business and global enterprise development.

The major portion of challenging tasks in global sales is connected with the identification of the best channels and partners. The best way to do this is by putting in a lot of efforts and time to brainstorm and design a strategy that is backed by professionals who specialize in helping entrepreneurs and companies set up businesses in Korea.

Koreans have an open-door policy towards foreign investment and exert themselves to boost corporate interests in the country’s wide range of industries. Here again, interpersonal skills can make a lucrative kill. Therefore, travels to Korea, typically for market research, go a long way in consolidating long-lasting business relationships.


Conclusion

Go Global

At the end of this article, it can be concluded that for any business person or broader overview thought leader, venturing outside of the home country is inevitable in the present-day interlinked business community.

There is a plethora of opportunities of learning, development, expansion and breakthrough — for any determined entrepreneur or even for that matter, student. This plays an immensely important role in strengthening Korea’s future.

It goes without saying that for foreigners considering to set up a business in Korea, smart thinking would lead to hiring a corporate service provider to help them and their business be at their best there.

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Navigating the Process of Employee Relocation to South Korea

Amidst South Korea's increasing international population and a conducive environment for foreign investment, opportunities for relocating employees are on the rise. With a notable surge in international residents, reaching 2,448,401 as of late January, the nation presents a compelling destination for global talent. This article offers a concise guide to navigating the streamlined procedures for obtaining visas, particularly the sought-after D-7 Intra-Company Transfer Visa, and outlines pathways to residency in this dynamic East Asian nation.   The number of non-native residents Amidst a record low birth rate and the trends of aging and declining population, South Korea has seen a continuous increase in its international population. According to a Ministry of Justice monthly statistical report on immigration and foreign resident policy, the number of international residents in South Korea stood at 2,448,401 as of late January, marking a 14.1% increase from the same month in 2023. Among these, there were 1,893,911 long-term residents, approximately three times higher than the count of 554,490 short-term international residents. The population of international residents has seen a steady rise from about 1.96 million in late 2021 to 2.25 million in late 2022. By late 2023, it had reached 2.51 million, constituting roughly 5% of the total population.   Procedure for Relocating Employees Relocating personnel to South Korea involves applying for either a D-7 visa or an intra-company transfer permit. The applicant, typically the employee being relocated, is required to apply for the visa in person at the South Korean embassy or consulate in their home country or the jurisdiction where they are currently employed. For applicants who already possess a certificate of visa issuance or a certification number of visa issuance, the required documents include their valid passports, the completed application form, and the certificate of visa issuance or certification number of visa issuance. The certification number of visa issuance indicates obtaining approval from the South Korean Immigration Department before the transfer. Obtaining the visa certificate typically takes around 2 weeks, followed by the issuance of the D visa in approximately 5 to 7 business days.   The Visa for Intra-Company Transfers(D-7) Employees transferred to South Korea are issued the D-7 Intra-Company Transfer Visa. The D-7-1 visa is designated for individuals who have previously worked for a multinational company and are now relocating to a South Korean office, while the D-7-2 visa is intended for employees who have previously worked for a South Korean corporation in a foreign branch and are now moving to a domestic branch. The relocation process for employees to South Korea remains consistent for both visa types, with only minor variations in the necessary documentation. For those seeking South Korean residency, several options are available, including launching a business, investing in an existing company, purchasing real estate, participating in a government-supported fund, or contributing to a development project.   Documents Required for Obtaining a Visa Certificate As mentioned earlier, before commencing the intra-company transfer process to Korea, it is necessary to obtain a visa certificate on behalf of the foreign employee. For this purpose, the following documents should be prepared: - A completed visa application form - A passport with at least 6 months of validity remaining, along with a copy of the travel document - Recent photos (taken no more than 3 months prior) - Certificates of professional qualifications or other relevant credentials - The employment contract - The business registration license (if applicable) - Tax reports and financial transactions conducted by the business during the previous fiscal year - A sponsorship letter from a South Korean company - Receipts for fee payments Upon arrival in South Korea, the foreign employee will also be issued an Alien Registration Card, typically within approximately 5 weeks. The maximum validity period for this visa is 3 years. There is a specific long-term stay visa frequently obtained by expatriates, which grants rights similar to those of permanent residency and operates on a point system. However, permanent residence in South Korea is only possible with a permanent residence permit.   Conclusion South Korea's burgeoning international population and welcoming environment make it an attractive hub for foreign investment. Streamlined visa procedures, notably the D-7 Intra-Company Transfer Visa, facilitate employee relocation, while diverse residency pathways offer flexibility for long-term endeavors. With its thriving economy and cultural vibrancy, South Korea beckons as a promising destination for global talent and business ventures alike. Pearson & Partners offer expert guidance on legal requirements, regulatory adherence, and strategic planning, customized to enhance your prospects in this dynamic market. Contact us for assistance with intra-company transfers and company formation in Korea.

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Entering the Korean Market Coupang

Coupang is one of the largest and most popular e-commerce platforms in South Korea. Founded in 2010, Coupang offers a wide range of products including electronics, clothing, household goods, groceries, and more. It is known for its efficient delivery system, often providing same-day or next-day delivery for many items. Coupang has gained significant popularity in South Korea for its convenient shopping experience, extensive product selection, and reliable service.   The surge of e-commerce in South Korea has been remarkable.  In 2023 alone, e-commerce sales in the country witnessed a 10% increase, reaching a staggering US$140 billion. This growth solidified South Korea's position as the 5th largest e-commerce market globally, with projections indicating a further rise to US$160.4 billion by 2026. What's particularly noteworthy is the shift in consumer behavior highlighted by recent data from the South Korean industry ministry. Online purchases now command a significant share, constituting 50.5% of total sales, surpassing traditional brick-and-mortar stores for the first time in history. Fueling this digital transformation is South Korea's exceptional internet penetration rate, standing at an impressive 97% in the Asia-Pacific region. This digital dominance is further accentuated by the country's early adoption of 5G technology, which was prominently showcased during the Pyeongchang Winter Olympics in April 2019. These advancements have positioned South Korea as a prime destination for cross-border e-commerce ventures, attracting global brands looking to tap into the lucrative Asian market. Central to this e-commerce revolution is Coupang, a behemoth at the forefront of change. Coupang's approach revolves around delivering unparalleled customer experiences, offering a diverse array of products, and employing engaging strategies to foster long-term customer loyalty. The platform's recent triumphant US IPO, which raised an impressive US$4.6 billion, underscores its commitment to competitive pricing, extensive product selection, and cutting-edge logistics solutions. With its innovative strategies and market dominance, Coupang continues to lead the charge in reshaping the landscape of e-commerce in South Korea.   What is Coupang’s Competitive Advantages? Coupang boasts several competitive advantages that have contributed to its success in the e-commerce industry, including:   1. Efficient Delivery System: Coupang is renowned for its fast and reliable delivery services, often providing same-day or next-day delivery for a wide range of products. This efficient logistics network enhances customer satisfaction and loyalty. 2. Wide Product Selection: The platform offers a diverse array of products, ranging from electronics and clothing to household goods and groceries. This extensive product selection caters to the diverse needs and preferences of consumers, attracting a broad customer base. 3. Enhanced Customer Experience: Coupang prioritizes customer satisfaction by providing a seamless shopping experience through user-friendly interfaces, personalized recommendations, and responsive customer support. These efforts contribute to increased customer retention and positive word-of-mouth. 4. Innovative Technology and Infrastructure: Coupang leverages advanced technology and infrastructure, including data analytics, artificial intelligence, and automation, to optimize its operations and enhance efficiency. This enables the company to stay ahead of competitors and adapt to evolving market trends. 5. Strategic Partnerships and Investments: Coupang has forged strategic partnerships with suppliers, brands, and logistics companies to strengthen its supply chain and expand its product offerings. Additionally, the company has received significant investments from key stakeholders, enabling it to invest in research and development, marketing, and infrastructure.  6. Brand Recognition and Market Dominance: Over the years, Coupang has built a strong brand presence and established itself as a market leader in South Korea's e-commerce landscape. Its widespread recognition and market dominance give it a competitive edge over rivals. Overall, Coupang's combination of efficient logistics, extensive product selection, focus on customer experience, technological innovation, strategic partnerships, and strong brand presence contribute to its competitive advantages in the e-commerce industry.   Coupang serves as an entry point for global brands aiming to penetrate new markets. Entering Coupang presents a promising opportunity for sellers in the Chinese market. With its substantial market share in South Korea's e-commerce landscape, Coupang offers considerable potential for revenue and growth, particularly appealing to Chinese sellers.  Through Coupang, Chinese sellers can strengthen trade relations between China and South Korea while accessing a broader consumer base. Coupang's robust logistics and delivery systems facilitate the efficient distribution of Chinese products into the Korean market. Moreover, Coupang boasts a diverse customer base, and Chinese products are anticipated to garner significant interest among South Korean consumers. The variety of products manufactured in China provides both competitive pricing and diversity, offering excellent prospects for success in the Korean market. Additionally, Coupang provides extensive support and services to Chinese sellers, easing the process of onboarding and operation. This fosters trust and reliability for Chinese sellers venturing into the Korean market. In summary, Coupang offers Chinese sellers a compelling opportunity to penetrate the Korean market, with its robust platform and support ensuring potential success in this endeavor.   Conclusion In conclusion, Coupang stands as a powerhouse in the South Korean e-commerce landscape, offering a diverse array of products, efficient delivery services, and a seamless shopping experience. With its strong market presence and innovative strategies, Coupang continues to lead the way in reshaping the e-commerce industry in South Korea. Moreover, Coupang serves as a gateway for international brands, providing them with access to the lucrative South Korean market and facilitating their expansion efforts. For sellers looking to tap into this dynamic market, partnering with Coupang presents a promising opportunity for growth and success. Contact us today to explore how Coupang can help elevate your brand in the South Korean e-commerce space.

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2024 Business Formation in South Korea: A Comprehensive Guide

If you are considering expanding your business into South Korea, understanding the complexities of business formation and the evolving economic landscape is crucial. This comprehensive guide explores the step-by-step procedures for establishing a business, international investment opportunities, incentives for investors, various business formations, and bilateral tax agreements. Additionally, it addresses critical aspects such as data security regulations and recent legislative developments. As of 2024, South Korea presents an optimistic economy with untapped opportunities, making it a strategic choice for global entrepreneurs. Discover the keys to unlocking success in this dynamic market. Business Formation and Establishment Procedures In the process of establishing a business in South Korea, several prerequisites must be satisfied. Key steps for business formation include:- Drafting the necessary incorporation documents.- Subscription of shares by the facilitator(s) and other participants.- Transfer of the subscription amount.- Evaluation by directors and legal auditors to ensure compliance with regulations and proper handling of any unusual incorporation elements, such as special entitlements for promoters, in-kind benefits, and pre-transferred assets, in accordance with relevant regulations. Court-appointed inspectors may also investigate if necessary.- Appointment of director(s) and corporate auditor(s).- Registration of the incorporation at a competent commercial registry, a process that must occur within two weeks following the completion of the investigation into unusual incorporation elements and any subsequent modification procedures. Subsequently, obtaining a business registration certificate from the local tax office is the next crucial step. For detailed registration requirements, please refer to www.iros.go.kr. International Investment and Business Formation Overseas investment displays heightened activity, especially in specific sectors, including:- Cultivation of food grains (rice and barley)- Wholesale of meat (partially)- Power generation (partially)- Processing of nuclear fuel- Radio and ground-level television communications. Investments in various broadcasting types receive partial permission.- Telecommunications (partially)- Publication of newspapers, journals, and periodicals (partially)- Passenger transportation and freight transport (partially). Compliance with the Foreign Investment Promotion Act (FIPA) is mandatory for reporting foreign investment, if not falling under the purview of the Foreign Exchange Transaction Act. Foreign Direct Investments (FDI) operating within the FIPA framework can benefit from an expedited registration process. To file applications, an FDI entity:- Must hold a minimum of 10% of voting shares in a Korean enterprise or establish a business connection with a Korean company.- Must have a minimum investment of KRW 100 million. Upon successful completion of foreign investment, no specific restrictions apply to international shareholders. Incentives for Investors in Business Formation Domestic businesses driven by foreign investment in designated high-tech sectors, as outlined in the Special Tax Treatment Act, or operating within specific industrial estates identified by the Foreign Investment Promotion Act, qualify for specific tax exemptions or deductions. These may include corporate income tax, personal income tax, customs duty, VAT, acquisition taxes, and property taxes for a predetermined period, accompanied by the possibility of receiving a cash grant and support for site location. Varieties of Business Formations As per the Commercial Code, South Korea recognizes several business formations, including:- Partnership Company (hapmyeong hoesa).- Limited Partnership Company (hapja johap).- Limited Liability Company (yuhan chaegim hoesa).- Stock Company (jusik hoesa).- Limited company (yuhan hoesa). Additionally, the Capital Market and Financial Investment Business Act introduces the option of an investment trust. Among these, foreign companies most commonly opt for a stock company (jusik hoesa) due to its widespread usage. Another favored choice for foreign companies is a limited liability company (yuhan hoesa) due to its streamlined incorporation process and simplified corporate governance framework. Bilateral Tax Agreements South Korea has entered into double tax treaties with more than 80 nations, including major economies like the US, Japan, Germany, France, Italy, and the UK. Payments of interest, dividends, and royalties to a foreign entity without a physical business presence in South Korea are subject to the maximum withholding tax rates specified in the relevant double tax treaties. Data Security and Business Formation Regulations governing data protection encompass various acts:- The Act on the Promotion of Use of Electric Communication Networks specifically applies to personal information collection and processing essential to telecommunications service providers and related business entities, impacting company operations.- The Personal Information Protection Act governs the collection and processing of information by government agencies, enterprises, private entities, and individuals, a crucial consideration during business formation.- The Act on the Use and Protection of Credit Information and the Act on the Use and Protection of Information on Location protect privacy and prevent the misuse of personal data, crucial considerations for companies, especially those involved in financial transactions.- The Cloud Computing Development and User Protection Act standardizes cloud computing and includes legal provisions to safeguard user data, particularly relevant for companies utilizing cloud services in their formation.- The Act on Real Name Financial Transactions and Guarantee of Secrecy regulates the privacy of financial transactions, impacting financial aspects of business formation.- The Act on Consumer Protection in Electronic Commerce ensures the proper use of consumer data gathered during e-commerce transactions, a relevant consideration for companies engaging in online business during formation. Recent Developments in South Korea South Korea has undergone significant changes in recent times:- The enactment of the Act on Prohibition of Improper Solicitation and the Provision/Receipt of Money and Valuables (Kim Young-Ran Law) on September 28, 2016, introduced penal liability for providing cash and valuables to a civil servant, expanding the definition of government officials to include individuals like journalists, teaching staff, and spouses of public officials.- The South Korean Government is set to propose an amendment bill regarding class actions, allowing five additional types (products, fair trade, advertisements, public information, and food) of class actions. Currently, only securities investors can file class actions.- The modified Act on Promotion of Information and Communications Network Utilization and Information Protection now mandates that a large foreign company with a liaison office in South Korea must appoint an agent for communication with government agencies and handling complaints or submission requests.- The recently amended Labour Standards Act reduces the maximum weekly working hours from 68 to 52, reflecting changes in labor standards. Economic Dynamics and Business Formation in South Korea Between 2020 and 2024, South Korea's economic landscape underwent significant changes influenced by various factors. Despite temporary deviations, such as eased trade tensions and extensive fiscal measures in 2020, challenges persisted due to stringent regulations and rising labor costs. Nevertheless, indicators such as a projected 2.4% increase in gross domestic product and stable stock market performance suggested a positive trajectory. Notably, sectors like technology and manufacturing, led by companies like Samsung Electronics and LG Chem, experienced growth, contributing to the overall economic outlook. South Korea's robust export revival and projected growth further solidified its position as a major player in global trade and technology. Unlocking Opportunities: South Korea's Business Environment and Business Formation In 2024, South Korea presents enticing opportunities for global firms, potentially still underrated despite recent shifts towards a more open economy. Overcoming language and cultural barriers, the country has improved its business environment, making it more attractive for foreign investment. For ambitious entrepreneurs, South Korea offers promising growth prospects and serves as a gateway to Northeast Asian markets. While challenges persist in areas like hiring and brand building, the rewards for navigating these hurdles are substantial. With a skilled and dedicated workforce, South Korea is an ideal destination for collaboration with international establishments. Conclusion Navigating the intricacies of business formation amidst South Korea's evolving economic landscape requires careful consideration. This comprehensive guide has outlined the step-by-step procedures for establishing a business, explored international investment opportunities, and elucidated incentives for investors. Additionally, it has provided insights into various business formations, bilateral tax agreements, data security regulations, and recent legislative developments. As of 2024, South Korea stands as a promising destination with untapped opportunities, making it strategically attractive for global entrepreneurs. Pearson & Partners, a consulting firm specializing in aiding expansion into Korea, offers tailored guidance and support to ensure entrepreneurs successfully establish their presence in this thriving economic landscape. Contact us for expert assistance in navigating the complexities of business formation and maximizing your potential for success in South Korea.

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