Foreign Direct Investment - Establishment of a Foreign Company's Domestic Branch -Business Start Up in South Korea

The establishment of a local corporation and private business registration are recognized as foreign investment under the Foreign Investment Promotion Act. However, the establishment of a domestic branch is not recognized as a foreign investment, and regulated by the Foreign Exchange Transactions Act.

• 1.Types a Foreign Company's Domestic Branch
• 2.Procedures to Establish a Foreign Company's Domestic Branch

1.Types a Foreign Company's Domestic Branch

There are two types of domestic branches: a branch and a liaison office. A branch undertakes sales activities in Korea to generate profits. Meanwhile, a liaison office does not conduct sales activities to create profits, but instead carries out non-sales functions such as business contacts, market research, R&D, etc. Liaison offices can carry out quality control, market surveys, advertisements, and other incidental and supportive roles. However, they are limited in their scope of activities, since they are not allowed to sell products directly, or to stock inventory for sale on behalf of the headquarters.

2.Procedures to Establish a Foreign Company's Domestic Branch

 Branch Establishment Report 

In order for a foreign company to establish a domestic branch, report shall be made to the head of a designated foreign exchange bank

Required Documents

 Report form of the establishment of a foreign company's domestic branch

 Article of association (Notarization of the location of the headquarters is required)

 A certified copy of registration or operation permission of headquarters

 General principles of headquarters

 Minutes of board of directors meeting that state the establishment of a branch or liaison office in Korea and the appointment of a Korean representative.

 A certificate of permission for business

 Power of attorney where the establishment of a domestic branch is commissioned to another person (Notarization of the location of the headquarters is required)

Both a branch and an office shall make a report to the Minister of Strategy and Finance in any of the following cases:

 Financial businesses other than banking business, including fund loans, brokering and arranging overseas finance, cards, installment financing, etc.

 Businesses related to securities and insurances

 Businesses, which are not permitted under the Foreign Investment Promotion Act or other laws

 Branch Establishment Registration 

• Installation declaration of a branch office in Korea of a foreign company

• Document that certifies the name, location and businesses of the headquarter (a notarization of the location of the headquarter is required.)

• A copy of the document that certifies the permission of installation in accordance with a regulation of a different law

• General priciples of headquarters

• Minutes of Board of Directors’ meeting that include the establishment of a branch or a liaison office in Korea and the appointment of a Korean representative

• A certificate of permission for doing business in Korea

• A certificate of power of attorney when delegating the work to establish a branch (notarization of the location of the headquarter is required.)

• Application form for seal registration of the representative of the business office in Korea (not a mandatory requirement.)

• A written consent of the appointment of the branch representative, written notarization and certificate of location

 Closing of Branch and Transfer of Liquidated Assets 

In case one who won an approval for corporate establishment wants to close his or her domestic branch or transfer his or her liquidated assets to a foreign country, he or she shall report the closing or transfer to the president of a bank designated for foreign exchange transaction. In this case, the money shall not exceed the combined amount of operating fund brought when establishing a branch, retailed earnings and other reserves of the branch (in case of deficit, the amount of loss not included).

Required documents

 Application form: under the name liquidator when assigning an applicant

 Application statement

 Liquidation report authorized by certified public accountants (including balance sheets and income statements as of closing or liquidation day)

 Certificate of tax payment (national and local tax)

 Operating fund brought when establishing a branch, documents to identify retained earnings and other reserves

 Bank deposit balance sheet (its amount shall be equal to the amount that can be transferred based on the liquidation report)

 Certificate copy of the register to prove the completion of liquidation in case of a branch engaged in business activities

 In case one cannot submit the certificate copy of the register to prove the completion of liquidation, he or she shall submit the following documents:

- Certificate to prove business closing (issued by the tax office having the jurisdiction over the place of tax payment)

- Documents to prove the appointment of liquidator

- Documents to identify the public announcement of securities (copy of newspaper to report the announcement)

- Certificate to identify whether the overdue payment for Korean employees is made (issued by the chief of the relevant labor office)

 Original document of the report for closing of the Korean branch of the foreign company

<Original Source : http://www.investkorea.org/ikwork/iko/eng/cont/contents.jsp?code=102040205>

Please visit our homepage :Click