Foreign company Domestic Branch (Korea Branch) installation agency

2024-04-05BY Immikorea

Setting up a korea branch for a foreign company

The purpose of establishing a korea branch of a foreign company is to conduct business activities in Korea. The legal status of a foreign company’s korea branch is subordinate to its foreign headquarters, meaning that it is not a separate and distinct company and the laws that apply to the headquarters also apply to the korea branch.

The advantage of establishing a domestic branch (sales office) of a foreign company is that unlike the establishment of a foreign-invested corporation, which requires a capital investment of 100 million KRW or more, it is possible to register a corporation and conduct business activities to generate revenue without investing capital.

However, the business is limited to the work of the overseas headquarters, and the liability extends to the headquarters in the event of a legal dispute.

외국투자법인 / 국내지사 / 연락사무소 비교

Documents to be prepared when establishing a korea branch of a foreign company

The preparatory documents for establishing a korea branch include, first, documents to prove the existence of the foreign headquarters, second, documents related to the representitive of the Korean branch, and third, documents related to the lease contract of the Korean office.

Documents and powers of attorney issued abroad must go through the apostille process.

headquarters documents

Certificate of incorporation for foreign headquarters
Board resolutions
Articles of Incorporation
Shareholder list (if required)
Letter of Appointment for Korea Branch Manager
Inauguration acceptance letter
A copy of the headquarters representative’s passport
Notarize the address signature
A copy of the Korean representative’s passport
Power of Attorney

Domestic documents

Office lease agreement
ID, seal stamp, and seal certificate if the branch manager is Korean

Installation procedure and duration

Procedure	How long does it take
Prepare notarized documents (headquarters)
⇒ Report of establishment of Korea branch (designated foreign exchange bank)	1 day
⇒ Corporate Registration (Registry)	3-5 days
⇒ Business Registration (Tax Office)	2 days
⇒ Open Bank Account (Designated Foreign Exchange Bank)	1 day

Tax accounting after establishing a branch

Corporate tax and VAT filing obligations

Books must be recorded and maintained in accordance with Korean Accounting Standards and there is no requirement for an external audit.
A branch tax is imposed on after-tax income after corporate tax. Branch tax is a tax on amounts repatriated, or recognized as repatriated, to the home country by a domestic branch in lieu of the dividend income tax rate. The branch tax rate is 20%, with treaty rates taking precedence for countries that have tax treaties.

Withholding on representative/employee’s paychecks

If you’re paid by a foreign entity
1. If you file your taxes abroad and get paid directly into your representative’s personal account, then you’re not required to withhold.
2. You must file and pay comprehensive income tax in May of the following year, and taxes paid abroad are deductible.
If you’re being paid by your local office
1. Withholding taxes are due on the 10th of the month following the paycheck date, and year-end reconciliation is done in February of the following year.
2. Apply the foreign tax exemption to receive a special tax rate of 19% for 5 years (optional)

Sending sales proceeds overseas

You can’t send net profit to headquarters during the fiscal year, only after the end of the fiscal year.
Must be sent through a designated correspondent foreign exchange bank

Related visa: D7 visa

If the Korean representative is a foreigner, Headquarter can apply for a D7 dispatch visa. The size of your headquarters and whether you remit funds for operations are key criteria.

D7비자 알아보기

Inquiries about setting up a domestic branch of a foreign company