To register a company in Korea, one can pick the most suitable setup specific to one’s business suitability, from many different kinds of enterprises and branches of industry. This decision is determined by the line of business and respective rules and regulatory provisions.
This article talks about the requirements and procedure of a Korea company registration, the important things a foreigner must know concerning accountancy and taxation framework and also the advantages and options open to a foreigner.
All the topics have been aligned in an order that is easy to understand, starting with the most attractive part; the advantages.
Placed between two of the world's economic giants, Japan and China, South Korea has a perfect geographic location. International trade between these economies is hassle-free. This makes it a strategic location to incorporate a company. An industrial installation in South Korea has the following plus points:
1. If you want to incorporate a limited liability company, you will need at least one director and a shareholder. The person doesn't have to be Korean - any nationality can play a role as a director and a shareholder. For foreigners though, you must have at least KRW 100M (equivalent to USD 90,000) to set up a foreign-invested company and apply for an entrepreneur visa (D-8).
2. There can be any number of foreign currency accounts and at the same time, there are no limitations on the returns of capital gains.
3. In 1998, the Foreign Investment Promotion Act was framed by the Korean government, to draw Foreign Direct Investment (FDI) in South Korea foreign company. The Act brought 99.8% of Korea's industries within the reach of foreign investment and served as a strong security cover for investors' interests. The Act also provides foreign investors with incentives such as tax relief, cash benefits and inexpensive land.
4. South Korea prospers in an environment of technologically advanced air, land and sea transport system, making it quicker to move goods and raw materials within the country.
5. South Korea is made up of very qualified manpower having a literacy level higher than 97% and a technologically advanced rate of 60%. According to employment surveys, 80% of adults between the age group of 25 to 64 are university educated.
6. Incheon International Airport is a major supply and transport hub in Northeast Asia, having the latest and advanced features. This is likely to enable entrepreneurs to clear their customs 50% faster.
7. South Korea’s national IQ is evaluated as the world's best. It tops the ranks in science, mathematics and resolution of issues, as declared by the OECD.
Foreign businesses or persons who are not the residents of South Korea have three main choices in terms of putting together and registering a business or company in South Korea:
This is the registration that defines a local company. However, by investing at least KRW 100M (equivalent to USD 90,000), it will fall into the category of a Foreign Capital Invested Company, or a Foreign Direct Investment Company (FDI). Korean law is beneficial to FDI firms in several ways, as against normal local companies.
An FDI company can be set up as one of the following kinds of business:
· Private Limited Company (‘Yuhan Hoesa’ in Korean) – this company has a configuration that comprises a maximum of 50 shareholders and it is not open to the public. This type of company often known as an LLC.
· Joint Stock Company (‘Chusik Hoesa’ in Korean) – this is a very popularly used corporate structure in Korea, even for FDI companies. Often, the names of companies registered on the lines of this pattern had Corp. / Ltd / Co., Ltd., at the end.
· General Partnership Company – (‘Hapmyung Hoesa’ in Korean) – this is a company structure that requires two or more partners who keep up unlimited liability.
· Limited Liability Company (‘Yuhan Chaekim Hoesa’ in Korean) – this configuration of a company is like a limited liability company (LLC) in the US.
· Limited Liability Partnership – (‘Hapja Johap’ in Korean) – This kind of a business structure resembles a Limited Partnership Company. Its legal entity is bound with its members. This resembles an LLP in the US.
· Limited Partnership Company – (‘Hapja Hoesa’ in Korean) – Different from a General Partnership Company, in this type of company, a few partners may have limited liability.
Although the FDI Company is regarded as a domestic corporation, a branch office is regarded as a foreign corporation. In this registration, the foreign headquarter and the Korean branch are one legal entity. A branch office can get into profit-making operations in Korea and is liable to the tax laws and rates that apply to local Korean firms. However, the benefits in terms of tax incentives and government support will be limited compared to local corporations or FDI companies.
Similar to the branch office, this structure of a business can be seen as a foreign corporation. However, it differs from a branch office in the way that it can only get involved in non-sales operations like market research, R&D, advertisement, business development, etc., in favor of the foreign company.
Here are the accounting and tax regulations that global investors must know before they step into the South Korean market:
1. Corporate income on South Korea is taxed at 10% on the first 200 million won, 20% on income between US$180,000 and US$20m and 22% for incomes more than US$20m.
2. The VAT in South Korea comes down to 10% on sale and transfer of goods and services. It is mandatory to submit VAT invoicing in an electronic format and if it is not done this way, penalties apply.
3. South Korea non-resident companies that have no Permanent Establishments (PEs) in South Korea have to pay withholding tax on every income item.
4. Resident foreigners have to pay taxes on their global income, in case they have lived in South Korea for more than 5 years from a 10-year period. For individuals who have lived for shorter periods are required to pay taxes only on their locally earned income and foreign-sourced income.
5. Foreigners employed in Korea are given a special rebate, while foreign immigrants and workers can apply for a fixed tax rate of 16.5% on their earnings.
6. Three-monthly VAT filing is essential even if the company is inactive.
7. Yearly tax returns must be submitted to the National Tax Service of South Korea after putting a business in place in South Korea.
8. South Korea does not levy export duties.
9. After a South Korean company is set up, yearly external audits need to be carried out if a company’s total assets exceed US$1 million.
10. Before importing any product to Korea from abroad its customs duties must be paid. The tax amount is dependent on the type of imported goods and quantity.
11. The only tax that non-resident individuals must pay on their earnings in South Korea is personal income tax.
12. For drawing foreign direct investment (FDI), the Korean government offers tax incentives to small and medium-sized enterprises (SME) like;
i) An SME investing in factory machinery or advanced office supply may avail a 5% tax credit of the invested amount, and
ii) the tax rebate for improving technology and manpower has been hiked from 10% to 15%.
13. South Korea has signed 54 DTAs (double taxation treaties), cutting down local withholding tax on payments to non-residents.
14. A company is required to file a provisional tax return with the Korean Government, including i) balance sheet ii) profit and loss statement and iii) a trial balance.
In the next 5 years, South Korea will call for tenders from foreign building firms to assist the building of infrastructure with an expenditure of US$300bn on airports, roads and railways by the end of 2020. Hence, a high inflow of global investors is expected in the times to come.
1) All business establishments must be registered.
2) In case you register multiple businesses, each business requires to be registered individually.
3) Registration can be applied for in 20 days from the start date of your business, with the necessary papers, in the civil service area of the national tax service, with jurisdiction in the area of your business address. The process of business registration can start before the start of business, but you must apply personally.
4) When applying through agents, both your and your agent’s ID cards are required. The business registration application must have all personal information and it should be personally applied for.
5) In a joint business, the registration should be in the name of one of the joint operatives of that business.
1) If one individual operates two businesses and that an individual is registered as a per-business unit taxpayer with the National Tax Service in the authority where the principal place of business is done, the individual may report and pay the related taxes for each business together.
2) Setting up 2 or more businesses including the main office or the business hub and seeking taxation per business unit, one must register with the head of the National Tax Service with authority on the location of the head office or the business hub in not more than 20 days from the launch of your business. (the business registration form)
3) If the
current businessperson seeks per business unit taxation, he/she must register
20 days before the start of the taxation period. (business unit taxpayer
Online Application: To apply online, connect to the National Tax Service website to apply.
The required documentation (on the webpage) is required in a scanned format.
Korean citizens living overseas will require the extra documents listed below:
i. A registration certificate as a Korean national living overseas, a copy of the registration report, or a copy of the Korean national’s passport photo page.
ii. In case the entrepreneur does not typically live in the business setup or has lived there for less than 6 months, he/she may appoint a tax manager and report it.
1) Basic taxpayer: Single business with anticipated
yearly sales lower than KRW 48,000,000
General taxpayers are taxed at 10% and all the VAT on the purchase tax invoice it gets while purchasing goods.
Put differently, the tax amount of the purchase tax invoice (10% of the purchase amount) is taken away.
If your previous year’s annual sales have been KRW 48 million or more, you are a general taxpayer.
2) General taxpayer: Single taxpayer apart from a
Businesses qualifying for various tax benefits when VAT is charged.
In single businesses, whose annual sales are not KRW 48 million, (VAT included), retail stores, restaurants, hair salons operating a business in non-urban regions or outside the capital area and the real estate sales, real estate brokerages, assessment businesses do not qualify for simplified taxing.
Although tax of 0.5-3% is applicable, only 5-30% of purchase tax amount may be charged and no tax invoice may be issued.
Tax amount calculation: sales × value-added
rate per business × tax rate (10%)
Although the sales amount of the businesses in the center of the city does not equal KRW 48 million, producers and real estate sales do not qualify for basic taxation.
1. One copy of Korea Business Registration form
2. Copy of
lease agreement (only for businesses that lease).
Given for sublease agreements, a copy of the sublease agreement was required (consent or authorization from the building owner shall be marked.)
3. Copy of the Permission (registration, report) Certificate, (corresponding businesses) – If registration has happened before the Permission (registration, report), the Copy of the Business Registration Application or such as Permission (registration, report) or the Prospectus
4. Partnership Agreement (for Cooperative Businesses)
5. Korean citizens living overseas, documents showing that they are foreigners: passport copy or copy of the alien registration card. For non-Korean residents: tax manager designation report.
2) For-profit Corporation
1. One copy of the Application for Korea Company Registration Incorporation and the Business Registration Form
2. One copy of the Korea Corporate Registration
If no consent is given to confirm the personnel in charge, the applicant should directly submit the document.
3. (Corporation Name) One copy of lease agreement (only for currently leasing businesses)
4. One copy of Shareholders or Investors List
5. One copy of the Business Approval, Registry, and Report stamped Certificate (only for the respective enterprises) – In case the registration (registration, report), before the permission registration: a copy of the permission (registration) application or business plan
6. One copy of List of in-kind Contributions (limited for in-kind contribution corporations)
3) Non-profit Koreans
1. A single copy of Application for Registration Incorporation and Business Registration form
2. A single copy
of the Corporate Register
If there is no consent to the confirmation of the personnel, the applicant must personally submit the document.
3. (Corporation Name) A single copy of the lease agreement (solely for businesses currently leasing)
4. One copy of the Business Permission, Registration, and Report stamped Certificate (only for the corresponding corporations) – If the registration (registration, report), before the permission registration: a copy of the permission (registration) application or business plan.
5. A single copy of Incorporation Permission Certificate from the concerned authority.
1. A single copy of the Application for Registration Incorporation and Business Registration form
2. A single copy
of the Corporate Register
Refusal of consent to the confirmation of the personnel in charge requires the applicant to directly submit the document.
If the registering business is a non-registered corporate branch, the minutes from a board of directors’ meeting can confirm setting up of the branch. (Calling a board of directors’ meeting is tough because of issues like direct sales shop creation, a copy of the document with the CEO’s sanction.)
3. One copy of the lease agreement (only for business leasing at present)
1) A business registration certificate is issued 3 days after applying for registration.
2) The certificate is issued after consultation and verification of the essential paperwork in the civil service area.
3) Given that, however, from the application content, if there seems to be a doubt of the hidden name or the hidden membership of the credit card, etc., before giving the business registration certificate, the national tax office carries out the site review and issues the certificate after confirmation of normal business.
Since the last few years, South Korea company registration has become as easy as attracting more investment and entrepreneurship. With a well-to-do economy and an inviting stance towards foreign investment, Korea is definitely where your business should be, especially for expansion in the Asian market.
We provide from Korea company incorporation, monthly accounting, payroll, tax and visa services. Most importantly, we put our best efforts to understand your company registration requirements and give you solutions that are not just best for you, but also comply best with the local laws. Get in touch with us to know more.
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.read more
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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. 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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.read more
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.read more