Doing Business in Korea
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Contents ++++++++++++++++++ Ⅰ. Foreign Direct Investment ++++++++++++++++++ ++++++++++++++++++ I++++++++++++++++++ 1. Foreign Direct Investment System……………………………… 8 ++++++++++++++++++ ++++++++++++++++++ 2. Foreign Investment Promotion Act ………………………… 12 Investment++++++++++++++++++ 3. Foreign Investment Promotion and Control ……………… 14 ++++++++++++++++++ ++++++++++++++++++ ++++++++++++++++++ Guide++++++++++++++++++ ++++++++++++++++++ ++++++++++++++++++ ++++++++++++++++++ Ⅱ. FDI Procedures ++++++++++++++++++ ++++++++++++++++++ 1. Foreign Investment Procedures……………………………… 21 ++++++++++++++++++ 2. Follow-up Management of Foreign Investment…………… 29 ++++++++++++++++++ ++++++++++++++++++ ++++++++++++++++++ ++++++++++++++++++ ++++++++++++++++++ ++++++++++++++++++ ++++++++++++++++++ Ⅲ. Establishment of a Corporation ++++++++++++++++++ ++++++++++++++++++ ++++++++++++++++++ 1. How Foreigners Advance Into Korea………………………… 32 ++++++++++++++++++ 2. Establishment of a Local Corporation ……………………… 33 ++++++++++++++++++ ++++++++++++++++++ 3. Establishment of a Foreign Company’s Domestic Branch… 37 ++++++++++++++++++ ++++++++++++++++++ ++++++++++++++++++ ++++++++++++++++++ ++++++++++++++++++ ++++++++++++++++++ Ⅳ. FDI Incentives ++++++++++++++++++ ++++++++++++++++++ ++++++++++++++++++ 1. Tax Support ……………………………………………………… 41 ++++++++++++++++++ ++++++++++++++++++ 2. Cash Grant ……………………………………………………… 53 ++++++++++++++++++ 3. Industrial Site Support ………………………………………… 61 ++++++++++++++++++ ++++++++++++++++++ ++++++++++++++++++ ++++++++++++++++++ ++++++++++++++++++ ++++++++++++++++++ The regulations on foreign direct investment are subject to change. Therefore, when using the information provided in this book for business purposes, it is advised to contact KOTRA for confirmation of the relevant information. •Copyrightⓒ2017 by the Investment Consulting Center of KOTRA. All rights reserved. -Address: Investment Consulting Center, KOTRA, 7 Heolleung-ro, Seocho-gu, Seoul, Republic of Korea (137-749) -Phone: +82-2-1600- 7119 -Website : www.investkorea.org ※The Act, Decree, Rules, and Regulations referred to in this publication are the Foreign Investment Promotion Act, its Enforcement Decree, its Enforcement Rules, and the Regulations on Foreign Investment. Doing Business in Korea ++++++++++++++++++ Ⅰ. Visa and Stay in Korea ++++++++++++++++++ ………………………………………………………………… ++++++++++++++++++ 1. Visa 84 II++++++++++++++++++ 2. Stay in Korea …………………………………………………… 88 ++++++++++++++++++ ++++++++++++++++++ 3. Policies for the Favorable Treatment of Foreign Investors 94 Business++++++++++++++++++ ++++++++++++++++++ ++++++++++++++++++ Ⅱ. Labor ++++++++++++++++++ 1. Labor Laws ……………………………………………………… 98 Management++++++++++++++++++ ++++++++++++++++++ 2. Labor Management …………………………………………… 100 ++++++++++++++++++ ++++++++++++++++++ ++++++++++++++++++ Ⅲ. Taxation ++++++++++++++++++ 1. Taxation…………………………………………………………… 106 ++++++++++++++++++ 2. National Tax……………………………………………………… 107 ++++++++++++++++++ ++++++++++++++++++ 3. Local Tax ………………………………………………………… 111 ++++++++++++++++++ ++++++++++++++++++ ++++++++++++++++++ Ⅳ. Customs Clearance & Tariffs ++++++++++++++++++ …………………………………………… ++++++++++++++++++ 1. Customs Clearance 118 ++++++++++++++++++ 2. Tariff Reduction, Exemption & Refund……………………… 125 ++++++++++++++++++ ++++++++++++++++++ ++++++++++++++++++ Ⅴ. Finance / Accounting ++++++++++++++++++ ++++++++++++++++++ 1. Korea’s Financial System ……………………………………… 127 ++++++++++++++++++ 2. Korea’s Accounting System…………………………………… 133 ++++++++++++++++++ ++++++++++++++++++ ++++++++++++++++++ ++++++++++++++++++ Ⅵ. Foreigners’ Real Estate Acquisition ++++++++++++++++++ 1. Regulations on Foreigners’ Real Estate Acquisition ……… 136 ++++++++++++++++++ ++++++++++++++++++ 2. Foreigners’ Real Estate Acquisition Procedures…………… 140 ++++++++++++++++++ 3. Transfer of Real Estate Transaction Funds ………………… 143 ++++++++++++++++++ ++++++++++++++++++ 4. Real Estate-Related Taxes …………………………………… 144 ++++++++++++++++++ ++++++++++++++++++ ++++++++++++++++++ Ⅶ. Factory Establishment ++++++++++++++++++ ++++++++++++++++++ 1. Definition of Factory …………………………………………… 148 ++++++++++++++++++ 2. Factory Establishment and Registration …………………… 154 ++++++++++++++++++ ++++++++++++++++++ 3. Factory Sites and Factory Establishment Approval Procedure…159 ++++++++++++++++++ ++++++++++++++++++ ++++++++++++++++++ Ⅷ. Intellectual Property Rights ++++++++++++++++++ ………………………… ++++++++++++++++++ 1. Intellectual Property Rights System 162 ++++++++++++++++++ 2. Efforts to Protect Intellectual Property Rights……………… 171 ++++++++++++++++++ Overseas FDI Network…………………………………………… 176 ++++++++++++++++++ Appendices++++++++++++++++++ List of Delegated Agencies……………………………………… 181 ++++++++++++++++++ List of Law Firms and Accounting Firms……………………… 183 Major Revisions in 2017 Tax Support •Changes to scope of businesses subject to tax reduction or exemption •‘Businesses accompanying high technology’ and ‘industry supporting service businesses’ were replaced with ‘businesses accompanying new growth driver industry technology’. •New growth driver industry technology – Technologies for new growth driver industries and source technologies (designated under Attached Table 7 of the Enforcement Decree of the Restriction of Special Taxation Act) – Technologies on materials and production processes directly related to new growth driver industry technologies and source technologies (designated under Attached Table 14 of the Enforcement Rules of the Restriction of Special Taxation Act) •New regulations on the upper limit of corporate tax reduction for businesses accompanying new growth driver technology (tax reduction based on employment) •The upper limit of corporate tax reduction (based on employment) for ‘businesses accompanying high technology’ and ‘industry supporting service businesses’ was 40 percent of the cumulative foreign investment amount. However, with the replacement of ‘businesses accompanying high technology’ and ‘industry supporting service businesses’ with ‘businesses accompanying new growth driver industry technology’, the upper limit of corporate tax reduction for the businesses has been set at 50 percent of the cumulative foreign investment amount. •Upper limit of corporate tax reduction for foreign-invested companies Businesses subject to corporate tax reduction or exemption (7 years) Businesses subject to Businesses accompanying new growth corporate tax reduction or Other businesses driver industry technology exemption (5 years) Based on investment 50% of the cumulative foreign investment 40% of the cumulative foreign Same as left amount amount investment amount The number of full-time employees of the Based on A foreign-invested company × KRW 10-20 Same as left Same as left employment (the million lesser of A and 50% of the cumulative foreign investment 40% of the cumulative foreign 30% of the cumulative foreign B) B amount investment amount investment amount •Change of special taxation for foreign employees Before After (Revised Dec. 20, 2016) Applicable for five years from the first day of providing Applicable for five years for foreign employees who started service in Korea (applicable until Dec. 31, 2016) providing service in Korea on or before Dec. 31, 2018. Applicable ※The five year restriction does not apply to foreign ※The five year restriction shall apply also to foreign employees period employees who started providing service in Korea who started working in Korea before Jan. 1, 2014. (The flat tax before Jan. 1, 2014. (i.e., The flat tax rate can be rate applied shall be 19% in 2017 and onwards.) applied until the foreigner leaves Korea.) Foreign employees can choose a flat tax rate of 17% Foreign employees can choose a flat tax rate of 19% instead Special taxation instead of global taxation. of global taxation. Applicable until Dec. 31, 2016 Dec. 31, 2018 Doing Business in Korea FDI Regulations •Change in businesses restricted from FDI Type of business Change Note Other supporting air transport activities Deleted with the division of the Aviation Act and enforcement of Deleted (Mar. 30, 2017) (52939) the Aviation Business Act. Labor •Change in minimum wage Before (2017) After (2018) KRW 6,470 per hour KRW 7,530 per hour KRW 51,760 per day (8 hour workday) KRW 60,240 per day (8 hour workday) Foreigners’ Real Estate Acquisition •Report of real estate transactions Before After - Act on Report on Real Estate Transactions, Etc. (legislated) * The Act on Report on Real Estate Transactions and the Governing law - Foreigner’s Land Acquisition Act (repealed) Foreigner’s Land Acquisition Act were repealed and the Act on Report on Real Estate Transactions, Etc. was legislated. - Matters on foreigners’ land acquisition, and report or - Chapter 3. Special cases concerning acquisition, etc. of real Subject authorization of land acquisition estate by foreigners, etc. - Foreigners: A foreign individual or foreign government prescribed by the Foreigner’s Land Acquisition Act and - Foreigners: An individual who does not have the nationality international organizations prescribed by Presidential Decree of the Republic of Korea and a juristic person or an organization that meets certain conditions. - A foreigner shall report the acquisition of real estate, etc. (i.e., land, buildings and the right to acquire thereof) to the - A foreigner shall report land acquisition to the relevant relevant Si/Gun/Gu. The report shall be made within 60 days Si/Gun/Gu. The report shall be made within 60 days of of concluding a real estate acquisition