Foreign Direct Investment Promotion and Control - Business Start up in South Korea
1. Liberalization of Foreign Investment
Except as otherwise prescribed by the Acts of the Republic of Korea, a foreigner may conduct, without restraint, various activities of foreign investment in the Republic of Korea. Foreigners are restricted from foreign investment in the following cases: where it threatens the maintenance of national safety and public order; where it has harmful effects on public hygiene or the environmental preservation or is against Korean morals and customs; and where it violates the Acts and subordinate statutes of the Republic of Korea.
2. Protection of Foreign Investment
Protection of foreign direct investment has become stronger than that of indirect investment such as investment in securities and bonds, as prescribed by the Foreign Investment Promotion Act.
With respect to the proceeds that come from the stocks, etc. acquired by a foreign investor, proceeds from the sales of stocks, etc., the principal, interests, and service changes paid in accordance with the loan contract as prescribed by the Foreign Investment Promotion Act, and the compensation paid in accordance with a license agreement, their remittance to foreign countries shall be guaranteed in accordance with the details of the permission or report of the foreign investment contract or the license agreement at the time when the said remittance is made.
The Minister of Strategy and Finance may temporarily suspend or restrict foreign exchange transactions, if such measures are deemed inevitable on account of the outbreak of natural calamities, war, conflicts of arms, grave and sudden changes in domestic and foreign economic conditions, or other situations equivalent thereto (Article 6 (1) ~ (3) of the Foreign Exchange Transactions Act). However, such measures shall not apply to foreign investment as provided for in the Foreign Investment Promotion Act (Article 6 (4) of the Foreign Exchange Transactions Act).
Except as otherwise prescribed by the Acts of the Republic of Korea, foreign investors and foreign-invested companies shall be treated in the same way as nationals of the Republic of Korea and Korean corporations in respect of their business operation.
Except as otherwise prescribed by the Acts of the Republic of Korea, the provisions concerning the abatement or exemption of taxes from among the tax laws applied to nationals of the Republic of Korea or Korean corporations shall also apply to foreign investors, foreign-invested corporations, persons who have extended loans as prescribed by the Foreign Investment Promotion Act, and persons who have provided technology thereto.
3. Restrictions and Prohibitions on Foreign Investment
Out of a total of 1,145 categories of business under the Korean Standard Industrial Classification (KSIC), foreign investment is not permitted in 60 categories of business including public administration, diplomacy, and national defense (unpermitted category of business), while foreign investment is partially permitted in 29 categories of business (restricted category of business) out of the total 1,085 investment categories, as prescribed by the Foreign Investment Promotion Act.
Categories of business in which foreign investment is not permitted have public features, hence difficulties in applying the Foreign Investment Promotion Act. The prohibition of foreign investment in the said categories is notified by Regulations on Foreign Investment and Technology Introduction and Consolidated Public Notice for Foreign Investment.
Unpermitted Category of Business
Foreign investment is not permitted in restricted categories of business as well in principle. However, when there are standards for permission, foreign investment is partially permitted. The restriction of foreign investment is notified by Regulations on Foreign Investment and Technology Introduction and Consolidated Public Notice for Foreign Investment.
No foreigner shall make an investment in any company concurrently running both a category of business in which foreign investment is not permitted and a category of business in which foreign investment is only partially permitted. And where intending to make an investment in any company running not less than two categories of business in which foreign investment is only partially permitted, a foreigner shall be prohibited from making an investment in the company in excess of the ratio of foreign investment in the category of business in which the ratio of permissible foreign investment is lowest.
Restricted Category of Business(As of May, 2013)
Category of Business (KSIC)
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Standards for Permission
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|---|---|
Growing of cereal crops and other crops for food (01110)
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- Growing of rice and barley is prohibited
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Farming of beef cattle (01212)
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- Permitted where the foreign investment ratio is less than 50%
|
Inshore and coastal fishing (03112)
| |
Manufacture of other basic inorganic chemicals (20129)
|
- Permitted with the exception of manufacture and distribution of nuclear fuel
|
Manufacture of other smelting, refining and alloys of non-ferrous metals (24219)
| |
Nuclear power generation (35111)
|
- Prohibited
|
Hydroelectric power generation (35112)
Fire power generation (35113) Other power generation (35119) |
- The sum of power plant facilities purchased by foreigners from Korea Electric Power Corporation (KEPCO) must not surpass 30% of the total domestic power plant facilities
|
Transmission and distribution of electric power (35120)
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- The foreign investment ratio must be less than 50%
- Voting stocks owned by foreign investors < Dominant stocks held by Korean nationals |
Disposal of radioactive waste (38240)
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- Radioactive waste management business is prohibited under Article 9 of the Radioactive Waste Control Act
|
Wholesale of meat (46312)
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- Permitted where the foreign investment ratio is less than 50%
|
Coastal water passenger transport (50121)
Coastal water freight transport (50122) |
Permitted if each of the following conditions is met :
- Transport of passengers or freight between South and North Korea; - Joint venture with a shipping company of the Republic of Korea; - The foreign investment ratio is less than 50% |
International air transport (51)
Domestic air transport (51) Small air transport (51) |
- Permitted where the foreign investment ratio is less than 50%
|
Publishing of newspapers (58121)
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- Permitted where the foreign investment ratio is less than 30%
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Publishing of magazines and periodicals (58122)
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- Permitted where the foreign investment ratio is less than 50%
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Radio broadcasting (60100)
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Prohibited
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Over-the-air broadcasting (60210)
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Prohibited
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Program distribution (60221)
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- Permitted where the foreign investment ratio is 49% or less
(However, less than 20 percent for comprehensive programming channels program provider and less than 10 percent for report-oriented programming channels program provider.) |
Cable networks (60222)
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- CATV broadcasting business is permitted where foreign investment ratio is 49% or less (However, relay cable business is permitted where the foreign investment ratio is less than 20 percent.)
|
Broadcasting via satellite and other broadcasting (60229)
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- Permitted where foreign investment ratio is 33% or less
(However, the internet multimedia broadcasting business for comprehensive and report-oriented programming channels is permitted where the foreign investment ratio is less than 20 percent.) |
Wired telecommunications (61210)
|
- Permitted where the sum of shares (limited to voting shares, including depositary receipt (DR) and other share equivalents and equity interests) held by a foreign government or a foreigner (including fictitious corporation of foreigners) is 49% or less of the total issued shares of the company (Foreigners are not allowed to become a majority shareholder of KT. However, they may invest in KT where they own less than 5% of the total shares.)
* Fictitious corporation of foreigners: a corporation whose largest shareholder is a foreign government or a foreigner (including a specially-related person as referred to in Article 9.1.1 of the Capital Market and Financial Investment Business Act), and not less than 15/100 of the gross number of whose issued stocks are owned by the said foreign government or foreigner. - Telecommunications resellers business (61282) is permitted - Supplementary communications business is not restricted |
Mobile communications (61220)
| |
Satellite communications (61230)
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Other electronic communications (61299)
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News agency activities (63910)
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- Permitted where the foreign investment ratio is less than 25%
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Domestic commercial bank (64121)
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- Permission is limited to commercial banks and local banks
(* Specialized banks, and agricultural/fisheries/livestock cooperatives are prohibited.) |
<Original Source : http://www.investkorea.org/ikwork/iko/eng/cont/contents.jsp?code=102040104>
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