korea branches / liaison offices / foreign-invested corporations

2024-04-03BY Immikorea

Compare foreign investment corporations / branches / liaison offices

When a foreigner (foreign company) wants to start a business in Korea, the first step is to determine what type of business entity they should organize.

1. If an individual wants to start a Korean business to settle in Korea, they can establish a foreign investment corporation and get a D8 visa.

2. If a foreign company wants to do business in Korea, it can establish a foreign-invested corporation, branch, or liaison office. For employees who will be working in South Korea, foreign company can apply for a D8 dispatch visa or a D7 expatriate visa.

Topics	Foreign Investment Corporation	Branches	Liaison office
Supporting legislation	Foreign Investment Promotion Act	Foreign Exchange Act	Foreign Exchange Transaction Act
Legal Entity	Domestic Corporation	Foreign Corporation	Foreign corporation
Foreign Direct Investment	Recognized	Disqualified	Disqualified
Company name	No restrictions	Must be the same name as the headquarters	Must be the same business name as the headquarters
Scope of business activities	Unlimited within the scope of the authorization	Must be the same as the head office’s business and within the scope of authorization	Cannot be monetized and can only be for contact purposes
Minimum Capital Requirements	100 million	None	None
Liability	Attributable to local corporation only	Extend to headquarters	Extend to headquarters
Independence	Legally independent	Subordinate to headquarters	Subordinate to headquarters
Domestic borrowing	Depending on the creditworthiness of the local entity, borrowing is possible	Almost impossible	Impossible
Establishment process	1. Foreign Investment Report 2. remittance funds 3. corporate registration 4. business registration 5. Foreign Investment Company Registration	1. Report the establishment of a korea branch 2. corporate registration 3. business registration	1. Report the establishment of a liasion office 2. Register a unique number
Accounting and tax	Books and records must be recorded and maintained in accordance with Korean IFRS, with certain requirements for external audit	Books must be recorded and maintained in accordance with Korean Accounting Standards; no external audit required	No bookkeeping obligation
Corporate Tax Rates	Tax liability	Tax liability	No tax liability
Amount of taxable income	Total all profits from the local corporation	Combined for all profits from domestic source income of domestic branches Pay branch tax in some countries	None
Tax incentives	Tax incentives for foreign-invested enterprises and small and medium-sized enterprises under the “Tax Exception Limitation Act”	No	None

(Source: KOTRA)

It is possible to establish a corporation even if a foreigner invests less than 100 million won, but in this case, it is not considered a foreign-invested company and is subject to notification of securities acquisition under the Foreign Exchange Transactions Act.