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Guide to Establishing a Korean Branch Office for a Foreign Corporation
A Korean branch office of a foreign company is not a separate, independent legal entity but rather a business office subordinate to the parent company. Therefore, it functions as a business location of the foreign parent company within Korea and has the following advantages and disadvantages.
Pros
- You can register a branch office and obtain a business license without any initial investment.
- Sales activities and contracts aimed at generating revenue
- Foreign Corporations Can Open Corporate Accounts for Their Domestic Branches
- If visa requirements are met, employees may be dispatched on a D7 visa.
Cons
- Since it is classified as a domestic business location of an overseas subsidiary, it is not eligible for registration as a small and medium-sized enterprise or a venture company.
- The scope of operations is limited to the business objectives of the overseas headquarters
- Liability extends to foreign headquarters in the event of a legal dispute
Establishment Process / Time Frame
In some ways, establishing a domestic branch office may be the most complex option among the various ways for foreigners to set up a company. This is because there are almost no documents that can be omitted—including those from the overseas headquarters, documents regarding the Korean representative, registration-related documents, shareholder documents, and documents related to opening a bank account.
| Procedures for Establishing a Domestic Branch | Time Required |
| Preparing Apostille Documents (Administrative Agent) | |
| Local Apostille (Overseas Headquarters) | |
| Notarized Korean Translation (Local or Domestic) | If necessary |
| ⇒ Report of establishment of Korea branch (designated foreign exchange bank) | 1 day |
| ⇒ Branch Registration (Court Registry) | 4–5 days |
| ⇒ Issuance of Business Registration Certificate (Tax Office) | 2 days |
| ⇒ Opening a Corporate Bank Account (at a Designated Foreign Exchange Bank) | Day 1 |
In practice, preparing documents for an Apostille and completing the Apostille process overseas takes a significant amount of time, while the subsequent administrative procedures in Korea generally do not deviate significantly from the timeframes specified in the table.
Points to Note in Practice
Issuance of Valid Apostille Documents
If there are errors or ambiguities in the Apostille documents, the registration office will reject them when you register a branch, and you will need to prepare the documents again and obtain a new Apostille.
There are various factors to consider when preparing Apostille documents, such as whether the company has two CEOs, whether the representative of the Korean branch is a foreign national or a Korean national, whether the registered address differs from the actual office location, whether required information is missing from the corporate registration, or whether the jurisdiction for the Apostille differs.
If you have to reapply for an apostille, it will not only cause delays but also incur significant additional costs, so you must prepare thoroughly from the very beginning.
Issues with Certified Translations of Korean Documents
To register a branch office, all documents must be translated into Korean and notarized. The standard procedure is to obtain an Apostille for the foreign documents and then have them translated and notarized in Korea. In such cases, the cost of the Korean translation and notarization can be quite significant. To reduce costs, it is also possible to translate the documents into Korean in advance and obtain a combined Apostille, but this method is not permitted in all countries.
Lack of Familiarity with the Duties of the Reporting Agency
When filing a notification to establish a domestic branch, you must coordinate with institutions such as foreign exchange banks, the registry office, and the tax office; however, the staff at these institutions are often unfamiliar with the procedures. In such cases, you may have to visit multiple banks, or you may be asked to provide unnecessary Apostille documents, which slows down the process.
Avoiding Filing a Branch Office Establishment Report
As the process of opening a bank account is becoming more stringent by the day, banks often hesitate to accept applications from individuals with no prior banking history or from agencies acting on their behalf. Even though banks are the designated authorities for reporting the establishment of domestic branches, some bank branches are reluctant to do so because it does not generate immediate profit for them, and because there have been instances of misconduct following the opening of accounts.
Therefore, when establishing a domestic branch, it is important to find experienced professionals with a proven track record in company formation, firms that have partner banks where it is easy to open accounts, and administrative experts with extensive experience handling foreign documents.
Documents Required for Establishing a Domestic Branch Office
The required documents vary depending on the circumstances, such as the type of entity the overseas headquarters is organized as or whether the country has a seal registration system. The basic documents are as follows.
Documents Required for the Overseas Headquarters
- Certificate of Incorporation
- Board resolutions
- Articles of Incorporation
- Shareholder List
- Letter of Appointment
- Inauguration acceptance letter
- A copy of the headquarters representative’s passport
- In writing to the headquarters representative
- A copy of the Korean representative’s passport
- Power of Attorney
Documents to Prepare in Korea
- South Korea office lease
- ID, seal stamp, and seal certificate if the branch manager is Korean
Apostille (or Consular Certification)
When submitting documents issued abroad in Korea, documents from countries that are parties to the Apostille Convention must be accompanied by an Apostille, while those from non-party countries must be accompanied by a consular certification to be valid.
Official documents can receive an Apostille directly, but private documents must first be notarized by a lawyer before receiving an Apostille. Consular certification must also be obtained after notarization by a lawyer.
In some countries, it is possible to obtain an Apostille for documents containing both Korean and foreign languages, while in others, Apostilles are only issued for documents issued entirely overseas. Therefore, you should check the website of the local Apostille authority before proceeding.
In a federal country such as the United States, an apostille can only be obtained in the relevant state.
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
- 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 on 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)
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
Establish a domestic branch and apply for a D7 visa
Once a domestic branch office has been established, employees can be seconded on a D7 visa, provided they meet the visa requirements.
Key Requirements for the D7 Visa
- Details of Working Capital Raising
- Domestic Branch Operations and Business Performance
- Whether to Hire Domestic Candidates
- Eligibility of the Assignee as Essential Personnel
- Business Scale of Overseas Headquarters
- For newly established businesses, business plans, etc.
Inquire about establishing a branch in Korea
- English and Chinese services available
- We can help you incorporate a company quickly and accurately, drawing on our extensive experience.
- An administrative agent prepares and provides the Apostille documents to ensure they are accurate.
- The client only needs to obtain a local apostille.
- One-stop service covering everything from incorporation filing and corporate registration to business registration and opening a bank account
- Easy Account Opening Through a Partnership with Foreign Exchange Banks
- From providing an office address to appointing a tax agent—we’ve got you covered
Provide samples for accurate documentation
- Foreign Investment Registration / Registration of Branch Offices and Liaison Offices
- Application to Designate a Primary Bank
- Register of incorporation
- Issuance of Business Registration Certificate / Unique Identification Number Certificate
- Issuance of a Foreign-Invested Enterprise Registration Certificate
- Open a bank account
- Visa Issuance
- Tax Services
- Ministry of Justice-Registered Immigration Service Agency
- Corporate Assignment Visa
- Investor Visa
- Digital Nomad Visa
- Work Visa
- Marriage Visa
- Permanent Residency in Korea
- Student Visa
- Residence Visa