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Setting up a Korean liaison office for a foreign corporation
This post is about setting up a liaison office, one of the ways foreign companies can enter Korea.
There are two types of domestic offices: branches (sales offices) and liaison offices. Unlike a branch office, a liaison office of a foreign entity cannot engage in sales activities and can only perform non-sales activities for the headquarters.
What you can do with your contact center
- Simple purchase of assets
- Storage and archiving of assets not intended for sale
- Advertising outreach
- Collecting and providing information
- Market research
- Activities that cause someone else to process your assets
Pros
- Setup is simple and fast as there is no investment and no incorporation process.
- No restrictions on office conditions in Korea. -> shared office available
Cons
- No revenue-generating business activities -> Business license cannot be issued, only a unique number certificate
- Limited business contacts, market research, advertising, research and development, and information gathering
Establishment Process / Time Required
The process for establishing a liaison office is as follows
- Apostille or consular confirmation of foreign headquarters documentation
- Report the establishment of a liaison office / Report the designated foreign currency
- Issue a unique number
- Open a business account
The process of setting up a liaison office is straightforward, but there are some things to keep in mind.
- You must provide the correct personal information when filling out an apostille
- Many banks are reluctant to report the establishment of a contact center and open an account because it is not only unprofitable for the bank, but there are many cases where the bank is involved in unsavory things after issuing an account. We recommend using a specialized agency that has a good relationship with the bank.
- This can be done with a power of attorney when opening an account, but some banks require a visit from a Korean branch manager.
How long does it take to set up a contact center?
The apostille of offshore headquarters documents is time-consuming, and once the documents are complete, the company can be established within 3-4 days.
Documentation
The following documents are required to obtain an apostille from the foreign country
- Certificate of Legal Authority
- Board resolutions
- Articles of Incorporation
- Shareholder List
- Letter of appointment of Korean representative
- A copy of the passport of the representative of South Korea
- A copy of the headquarters representative’s passport
- Power of Attorney
Domestic documents
- Office lease agreement
- A copy of your ID if the contact center representative is Korean
Tax accounting after setting up a liaison office
Liaison office tax obligations
- Because a liaison office is not considered a domestic business, it is not subject to corporate tax and VAT reporting.
- You will be issued a unique number by the tax office, so you are obliged to report and pay withholding tax (payroll), submit VAT, etc.
- Since you are not in business, you cannot issue a tax invoice and cannot be deducted for the purchase tax amount. However, if you are a foreign business that falls under Article 107(6) of the Tax Exemption Restriction Act, there is a provision to refund the following purchase tax amount (apply to the local tax commissioner by June 30 of the following year).
- Food and lodging
- Advertising Services
- Electricity, telecommunications
- Real estate leasing services
- Domestic office buildings, structures, and repair services
- Office equipment, fixtures, and rental services
Withholding on representative/employee’s paychecks
- If you’re paid directly by a foreign entity
- If you file your taxes abroad and get paid directly into your representative’s personal account, then you’re not required to withhold.
- 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
- Withholding taxes are due by the 10th of the month following the paycheck date, and year-end reconciliation is done in February of the following year.
- Apply the foreign tax exemption to receive a special tax rate of 19% for 5 years (optional)
Establishing a liaison office and applying for a D7 visa
When trying to apply for a D7 visa through the establishment of a liaison office, it is not impossible, but the conditions are very demanding.
In order to apply for a visa, the following conditions must be met: size of headquarters / introduction of sales funds / use of sales funds.
- Revenue data from headquarters (financial statements, tax returns)
- Documents that sales funds were sent to the liaison office from the foreign headquarters.
- How you used the operating funds introduced
- Existing contact offices submit additional proof of tax delinquency
Inquire about establishing a liaison office in Korea
- Specializing in Korean visa and settlement services for foreigners
- English, Chinese, Japanese, Spanish, and Mongolian support
- Non-stop service from document preparation, translation, ID card issuance to account opening
- Find an office and set up a tax preparer
Provide samples for accurate documentation
- 외국인투자법인 설립
- 외국기업 국내지사 설치
- 외국기업 연락사무소 설치
- 법인설립 등기
- 사업자등록증 / 고유번호증 발급
- 외투기업등록증 발급
- 은행계좌개설
- 비자발급
- 세무대행
