Foreign Direct Investment - How Foreigners Advance into Korea - Business Start Up in South Korea

There are three types of a foreigner's advancement into Korea for the purpose of operating business: the establishment of a local corporation or a private business by a foreigner or a foreign corporation; or the establishment of a local branch or a liaison office in Korea by a foreign corporation.

• 1. How Foreigners Advance into Korea
• 2. Comparison of a Foreign-Invested Company and a Domestic Branch

1. How Foreigners Advance into Korea

	Type	Act	Note
1	Local Corporation	Foreign Investment Promotion Act	Recognized as a foreign investment
2	Branch	Foreign Exchange Transactions Act	Categorized as a domestic branch of the foreign corporation
3	Liaison office

2.Comparison of a Foreign-Invested Company and a Domestic Branch

 A Foreign-Invested Company under the Foreign Investment Promotion Act

Establishment of a local corporation in Korea by a foreign national or a foreign corporation is regulated by the Foreign Investment Promotion Act and the Commercial Act. A foreigner shall invest not less than 100 million won for the local corporation concerned to be recognized as foreign investment under the Foreign Investment Promotion Act.

Private business established by a foreigner with the investment of not less than 100 million won is also recognized as foreign investment under the Foreign Investment Promotion Act. (If an investee corporation is a private business, the company cannot issue a business investment (D-8) visa. A trade (D-9) visa shall be issued if it invests KRW 300 million or more.)

 Domestic Branch of a Non-resident (a foreign company, etc.) under the Foreign Exchange Transactions Act

A 'branch' operates business that generates profits in Korea, and is not recognized as foreign direct investment.

An 'liaison office' does not carry out business that generates profits in Korea, but instead undertakes a non-sales function such as market research, R&D etc. An 'office' is granted a distinct number, equivalent to business registration, at a jurisdictional tax office in Korea without the need for registration, which is different from a 'branch.'

<Comparison of a Foreign-Invested Company and a Domestic Branch of a Foreign Company>

Category	Foreign-Invested Company	Domestic Branch of a Foreign Company
Act	Foreign Investment Promotion Act	Foreign Exchange Transactions Act
Corporation Type	Domestic corporation	Foreign corporation
Identity	Foreign investors and foreign-invested companies are of separate entities (independent accounting & settlement)	Headquarters and branches are of a single entity (the same accounting & settlement)
Authorities in charge of accepting registration and granting permission	Invest KOREA (KOTRA) or headquarters of a foreign exchange bank	Headquarters of a foreign exchange bank for registration, and the Ministry of Strategy and Finance for permission of establishment of a financial business
Minimum/Maximum Investment	Minimum of KRW 100 million per investment (No upper limit)	No limit in investment amount
Scope of Tax Obligations	Tax obligations for all domestic and overseas income Corporate tax rate: 10% for KRW 200 million or less, 20% for over KRW 200 million and 20 billion or less, 22% for over KRW 20 billion	Tax obligations for income from domestic sources only Corporate tax rate: 10% for KRW 200 million or less, 20% for over KRW 200 million In some cases, branch tax shall be paid.

<Original Source :http://www.investkorea.org/ikwork/iko/eng/cont/contents.jsp?code=102040202>

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