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 contract, or within concluding a land acquisition contract, or within six month six months of acquiring real estate by means other than a of acquiring land by means other than a contract such as contract such as inheritance or auction. inheritance or auction. - To acquire land inside a district or area that requires Regulations - To acquire land inside a district or area that requires permission for transaction of land, the permission of the permission for transaction of land, the permission of the relevant Si/Gun/Gu should be obtained (identical to the relevant Si/Gun/Gu should be obtained. Foreigner’s Land Acquisition Act). - Fine: Any person who failed to report or falsely reported - Fine: Any person who failed to report or falsely reported real land acquisition shall be imposed a fine not exceeding estate acquisition by the following means shall be imposed KRW 3 million. Any person who failed to report or falsely a fine not exceeding the following amounts: KRW 5 million reported land acquisition by means other than a contract for real estate acquisition by a sale contract; KRW 3 million such as inheritance or auction shall be imposed a fine not for real estate acquisition by a contract other than a sale exceeding KRW 1 million. contract; KRW 1 million for real estate acquisition by means other than a contract such as inheritance or auction. ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ 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++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ 01 Foreign Direct Investment Doing Business In Korea 8
1. Foreign Direct Investment System
Foreign direct investment (FDI) refers to foreigners’ acquisition of the stocks or shares of a Korean company in order to build lasting economic relations, and generally involves participation in management or technology transfer. FDI differs from portfolio investment as it is intended to exercise substantive influence on the management of a company. In addition to cash investments, FDI includes investment in the objects of investment defined under the Foreign Investment Promotion Act (the “Act”) such as capital goods, industrial property, intellectual property rights, local real estate and the shares of a company listed overseas. Long-term loans with maturity of five years or longer provided by a foreign investor to a domestic company can also be recognized as FDI.
• Definition of Foreign Direct Investment • Forms of Foreign Direct Investment
1-1 Definition of Foreign Direct Investment
FDI refers to an investment made in order to forge lasting economic relations with a corporation of the Republic of Korea or a company run by a national of the Republic of Korea and includes the following forms of investment: acquisition of the stocks or shares of a Korean company; a foreign parent company’s provision of long-term loans with maturity of five years or longer to a foreign- invested company; and a foreign national’s contribution to a non-profit organization. It is regulated by the Foreign Investment Promotion Act and other related laws. FDI differs from portfolio investment, which is the purchase of stocks by foreign nationals with a view to realizing short-term financial gains.
1-2 Forms of Foreign Direct Investment
Under the Foreign Investment Promotion Act, FDI includes the acquisition of the stocks or shares of a Korean corporation or a company run by a national of the Republic of Korea, the supply of a long-term loan to a foreign-invested company, a contribution to a non-profit organization, etc.
(1) Acquisition of the Stocks or Shares of a Domestic Company ‘Acquisition of the stocks or shares of a domestic company’ refers to a foreigner’s purchase of the stocks or shares of a Korean corporation (including one in the process of being established) or a company run by a Korean national through any one of the following means as prescribed by
presidential decree for the purpose of establishing continuous economic relations with the corporation I . Investment or company through participation in management activities, etc. Guide 1) Acquisition of the newly issued stocks, etc. of a company managed by a Korean corporation or a Korean national. 2) Acquisition of the existing stocks or shares (existing stocks, etc.) of a company managed by a Korean corporation or a Korean national. 9 To be recognized as FDI, the investment amount should be KRW 100 million or more per foreigner and the foreigner should own at least 10 percent of either the total number of voting stocks issued by a Korean corporation (including a corporation in the process of being established) or a company run by a national of the Republic of Korea, or its total equity investment. However, even if a foreign- invested company registers as a foreign-invested company in accordance with Article 21 (1) and (2) of the Act but no longer satisfies the above conditions due to transfer of shares or capital reduction, the investment shall still be recognized as FDI (Article 2 (2) of the Enforcement Decree of the Act). Also, when a foreign investor of a registered foreign-invested company makes an additional investment, no limit shall be imposed on the investment amount and investment ratio.
If there are two or more foreign investors involved, each should satisfy the above conditions. The foreign investment ratio is measured when the investment is completed. The investment amount refers to the amount of acquisition of stocks, etc. (foreign investor-held shares after a foreign- invested company capitalizes its earned surplus reserves as prescribed by Article 458 and 461 of the Commercial Act [Article 2 (3) of the Enforcement Decree of the Act, enforced Oct. 6, 2010] shall be included). Even if the amount of the stocks, etc. held by a foreign investor decreases following the foreign-invested company’s capital reduction without consideration, the investment amount at the time of acquisition of stocks, etc. shall be maintained (Article 2 (3) of the Enforcement Decree of the Act, newly legislated on Dec. 30, 2015).
While no exceptions are recognized with regard to the investment amount, exceptions may apply to the foreign investment ratio. Even if the foreign investment ratio is less than 10 percent with the amount of foreign investment being KRW 100 million or more, the investment may be exceptionally recognized as FDI in the following case: •Where a foreign investor dispatches or appoints an executive to the domestic company concerned (* An ‘executive’ refers to directors, representative directors, unlimited liability employees, auditors or persons corresponding thereto holding the right to participate in important management decisions.)
(2) Long-Term Loans Loans with a maturity of not less than five years (based on the loan maturity prescribed in the first loan contract) supplied to a foreign-invested company by the following entities are recognized as FDI: ① An overseas parent company (OPC) of the foreign-invested company (corporation) ② A company that has capital investment relations with ① ③ A foreign investor (individual) ④ A company that has capital investment relations with a foreign investor (individual) (Article 2 (4), (5) of the Enforcement Decree of the Act) ※ A company that has capital investment relations refers to: •A company that holds at least 50 percent of the total number of stocks issued by, or of the total equity investment of, its OPC •A company whose OPC owns at least 50 percent of the total number of issued stocks or total equity investment of a foreign-invested company and falls under any one of the following: ––A company that holds at least 10 percent of the total number of issued stocks or the total equity investment of its OPC Doing Business In Korea ––A company whose OPC holds at least 50 percent of the total number of issued stocks or the total equity 10 investment of the company ––A company that holds at least 50 percent of the total number of issued stocks or the total equity investment of its OPC holds at least 50 percent of the total number of issued stocks or total equity investment of the company •A company of which at least 50 percent of the total issued stocks or total equity investment is held by an individual foreign investor who owns at least 50 percent of the foreign-invested company’s total issued stocks or total equity investment
(3) Contribution to a Non-Profit Organization (NPO) A contribution to a non-profit organization is recognized as FDI when: the foreign contribution amount is KRW 50 million or more and accounts for 10 percent or more of the total contribution amount; the NPO has independent research facilities in the field of science and technology; and the NPO meets any one of the following conditions: •The number of research staff members who are full-time employees as prescribed by Article 11 of the Employment Standards Act is five persons or more, consisting of persons with a master’s degree or higher in the field of science and technology, or persons with a bachelor’s degree in the field of science and technology with a research career of not less than three years. •The NPO’s business should be classified as ‘research and experimental development on natural sciences and engineering’ under the Korea Standard Industrial Classification as publicly announced by the Commissioner of Statistics Korea in accordance with Article 22 of the Statistics Act.
Other contributions to an NPO by a foreigner of not less than KRW 50 million accounting for 10 percent or more of the total contribution amount that meet one of the following conditions, and which are recognized as foreign investment by the Foreign Investment Committee as prescribed by Article 27 of the Act, are recognized as foreign investment.
•An NPO established for the purpose of promotion, etc. of science, art, medical services, or education and which continues to conduct its business with a view to developing professionals in the relevant fields and to expanding international exchanges •An NPO that is a regional office of an international organization that engages in international cooperation business between civilians or governments
Term Definition •An individual of foreign nationality •A corporation (foreign corporation) established in accordance with a foreign law •An international economic cooperation organization: ––An agency which vicariously performs the foreign economic cooperation business of a Foreigner foreign government ––An international organization that deals with business matters concerning development finance, such as the IBRD, IFC and ADB ––An international organization which either directly or vicariously deals with business matters concerning foreign investment Term Definition I
•An individual of Korean nationality who holds permanent residency of a foreign country as . Investment
prescribed by presidential decree (Article 3 of the Enforcement Decree of the Act): Guide ––Individuals who have obtained permanent residency of a foreign country ––Individuals who have obtained permission to stay in a foreign country for four years or longer in the case of countries without a permanent residency system ––Individuals who have resided for four years or longer and was granted a stay permit of one year or longer in a foreign country that does not have a permanent residency system and only grants a stay permit of less than four years 11 A foreigner who holds stocks, etc. or has contributed as prescribed by the Foreign Investment Foreign investor Promotion Act Foreign-invested A company in which a foreign investor has invested, or a non-profit organization to which a company (FIC) foreign investor has contributed Operator of establishments Any person who operates establishments, including schools and medical institutions, etc. built to improve the for foreigners, which are prescribed by the Enforcement Decree of the Foreign Investment foreign investment Promotion Act, in order to improve the foreign investment environment environment Any object in which a foreign investor invests in order to possess stocks, etc. under the Foreign Investment Promotion Act, and which falls under any of the following: •Foreign means of payment as prescribed by the Foreign Exchange Transaction Act or domestic means of payment by the exchange of the said foreign means of payment •Capital goods •Proceeds (dividends) from stocks, etc. acquired under the Foreign Investment Promotion Act •Industrial property rights, intellectual property rights (copyrights to be utilized in industrial activities and the layout design rights of semiconductor integrated circuits), other technologies corresponding thereto, and rights pertaining to the use of such rights or technologies Object of •Where a foreigner closes his/her own branch, office or corporation in Korea, the residual investment property allotted to the said foreigner upon liquidation of the said branch, office, or corporation •The amount of redemption of loans supplied to a foreign-invested company or other loans from foreign countries •Stocks of foreign corporations listed or registered on foreign stock markets •Stocks owned by foreigners under the Foreign Investment Promotion Act or the Foreign Exchange Transactions Act •Domestic real estate owned by a foreigner (The certificate of notification of capital transactions as prescribed by Article 18 of the Foreign Exchange Transactions Act should be attached.) •Proceeds from the sale of the stocks of a Korean company or real estate in Korea owned by a foreigner •Machinery, facilities, equipment, parts, accessories as industrial facilities, and livestock, breeds or seeds, trees, fish and shellfish which are necessary for the development of agriculture, forestry, and fisheries Capital goods •Such raw materials and reserve supplies as are deemed necessary by the competent Minister for the initial testing of the facilities concerned •Fees for transportation and insurance as required for the introduction thereof and other know-how or services necessary therefor 2. Foreign Investment Promotion Act
The Foreign Investment Promotion Act was enacted in Korea in 1998 for the purpose of courting foreign direct investment in the aftermath of the 1997 Asian financial crisis. In January 2014, to promote inbound FDI and to attract investments from global companies, the Foreign Investment Promotion Act was amended (Act no.12225, promulgated Jan.10, 2014, enforced Mar.11, 2014) Doing Business In Korea to allow exceptions against the regulations of the Monopoly Regulation and Fair Trade Act, which 12 requires that when the 2nd-tier subsidiary of a holding company establishes a 3rd-tier subsidiary through a joint investment with a foreigner, the 2nd-tier subsidiary should own 100 percent of the 3rd- tier subsidiary’s stocks. In other words, notwithstanding the Monopoly Regulation and Fair Trade Act, the amended Foreign Investment Promotion Act allows 2nd-tier subsidiaries to hold 50 percent or more of the 3rd-tier subsidiary’s stocks while the foreign partner holds 30 percent of more (individual- type foreign investment).
Several amendments were made to the Act in 2016. The foreign investment notification system was simplified, combining the separate notification procedures by form of investment. In other words, the foreign investment notification forms that differed by form of investment (i.e., FDI by acquisition of new shares or contribution, FDI by acquisition of existing shares, FDI by means of merger, etc.) were combined into a single form (i.e. Foreign investment by acquisition of stocks (or contribution) – Notification form). Also, notification of transfer or reduction of stocks was repealed and merged with ‘application for registration/ change of information of a foreign invested enterprise’. In addition, application for cancellation of registration of foreign-invested company was repealed and the system was changed to allow ex-officio cancellation of registration if the cause for cancellation was confirmed. Notification of technology introduction contract and notification of disposal of capital goods were also repealed.
The exceptional clauses for negotiated contracts related to the lease or sale of state-owned or public property were upgraded from enforcement regulation to law, and a regulation on imposition of a fine for nonconformance was added. Also, clauses on administrative matters subject to bulk processing stipulated by law shall apply automatically to the Foreign Investment Promotion Act (promulgated Jan. 27, 2016, enforced Jul. 28. 2016).
Before After (2016) Note Notification of foreign investment by acquisition of new shares or contribution Foreign investment by acquisition of stocks (or Single combined FDI notification Notification/ application for authorization of contribution) – Notification/ form for FDI by acquisition of stocks foreign investment by acquisition of existing application for authorization (form no.1 of the Enforcement Rules shares (combined FDI notification of the Act) Notification of stocks or shares through form) merger, etc. Replaced with application for Notification of transfer or reduction of Notification of transfer or registration of change of information shares reduction of stocks repealed of foreign-invested enterprise Replaced with application for Application for cancellation of registration Application for cancellation of registration of change of information of foreign-invested company registration repealed of foreign-invested enterprise or ex- officio cancellation • Understanding the Foreign Investment Promotion Act I . • Legislations Related to the Foreign Investment Promotion Act Investment Guide
2-1 Understanding the Foreign Investment Promotion Act
The Foreign Investment Promotion Act is designed to facilitate foreign investment by supporting foreign investment and enhancing investors’ convenience. The Act serves as the framework law 13 on foreign investment, and its subordinate statutes include the Enforcement Decree of the Foreign Investment Promotion Act and the Enforcement Rule of the Foreign Investment Promotion Act, which prescribe matters delegated by the Act and matters necessary for the enforcement thereof.
2-2 Legislations Related to the Foreign Investment Promotion Act
Unless provided otherwise in the Foreign Investment Promotion Act, all matters concerning foreign exchange and foreign transactions related to foreign investment are governed by the Foreign Exchange Transaction Act. For foreign investment, taxes may be abated or exempted under the conditions prescribed by the Restriction of Special Taxation Act, the Enforcement Decree of the Restriction of Special Taxation Act, the Enforcement Rules of the Restriction of Special Taxation Act, and the Regulations on Tax Abatement or Exemption on Foreign Investment. Since a foreign-invested company is a domestic corporation established under domestic law, the company is governed by the same laws that apply to purely domestic corporations even if the foreign-invested company has followed the procedures prescribed by the Foreign Investment Promotion Act. Therefore, a foreign- invested company should obtain permission or authorization under the domestic law when it is required.
< Acts and Statutes on Foreign Investment >
※ Basic Acts and Statutes •Foreign Investment Promotion Act, Enforcement Decree and Enforcement Rules of the Foreign Investment Promotion Act •Regulations on Foreign Investment (Promulgated by the Ministry of Trade, Industry & Energy on Sep. 22, 2016; formerly Regulations on Foreign Investment and Technology Introduction) •Consolidated Public Notice for Foreign Investment (Promulgated by the Ministry of Trade, Industry & Energy) •Regulations on Tax Abatement or Exemption for Foreign Investment (Promulgated by the Ministry of Strategy and Finance) •Restriction of Special Taxation Act (Chapter 5. Special Cases Concerning Taxation for Foreigners’ Investment, Etc.), Enforcement Decree and Enforcement Rules of the Restriction of Special Taxation Act
※ Other Related Acts •Foreign Exchange Transactions Act: Matters concerning foreign exchange and foreign transactions •Act on the Designation and Management of Free Trade Zones •Special Act on the Designation and Management of Free Economic Zones •Financial Investment Services and Capital Markets Act 3. Foreign Investment Promotion and Control
Foreign investors may face various difficulties caused by the political and economic circumstances of a country in which they operate, besides the normal business risks. Given the risk factors, Korea has implemented various schemes to protect foreign investors. Meanwhile, the Regulations on Foreign Investment and the Integrated Public Notice of Foreign Investment prescribe details on businesses Doing Business In Korea restricted from foreign investment. 14
• Liberalization of Foreign Investment • Protection of Foreign Investment • Restrictions and Prohibitions on Foreign Investment
3-1 Liberalization of Foreign Investment
Except as otherwise prescribed by the Acts of the Republic of Korea, a foreigner may conduct, without restraint, various activities of foreign investment in the Republic of Korea. Foreigners are restricted from foreign investment in the following cases: where it is deemed to threaten the maintenance of national security and public order; where it is deemed to have harmful effects on public hygiene or environmental preservation or run counter to Korean morals and customs; and where it violates the laws and subordinate statutes of the Republic of Korea.
3-2 Protection of Foreign Investment
Foreign direct investment is protected stronger than indirect investment such as investment in securities and bonds, as prescribed by the Foreign Investment Promotion Act.
(1) Guarantee of Remittance to Foreign Countries With regard to the proceeds from stocks, etc. acquired by a foreign investor; proceeds from the sale of stocks, etc.; and the principal, interest and service charges paid in accordance with the loan contract as prescribed by the Foreign Investment Promotion Act (Article 2 (1) 4 (b)), their remittance to foreign countries shall be guaranteed in accordance with the details of the notified or authorized foreign investment at the time when the said remittance is made.
(2) Exceptions to the Safeguard Clause on Foreign Exchange Transactions The Minister of Strategy and Finance may temporarily suspend or restrict foreign exchange transactions, if such measures are deemed inevitable on account of the outbreak of a natural calamity, war, conflicts of arms, grave and sudden changes in domestic and foreign economic conditions, or other situations equivalent thereto (Article 6 (1) to (3) of the Foreign Exchange Transactions Act). However, such measures shall not apply to foreign investment as provided for in the Foreign Investment Promotion Act (Article 6 (4) of the Foreign Exchange Transactions Act).
(3) National Treatment Except as otherwise prescribed by the Acts of the Republic of Korea, foreign investors and foreign- invested companies shall be treated in the same way as the nationals of the Republic of Korea and Korean corporations in respect of their business operations. I . Investment
(4) Equal Application of Tax Abatement Regulations, etc. Guide Except as otherwise prescribed by the Acts of the Republic of Korea, the provisions concerning the abatement or exemption of taxes from the tax laws applied to the nationals of the Republic of Korea or Korean corporations shall also apply to foreign investors, foreign-invested corporations, persons who have extended loans as prescribed by the Foreign Investment Promotion Act, and persons who have provided technology thereto. 15
3-3 Restrictions and Prohibitions on Foreign Investment
Out of a total of 1,145 categories of business listed under the Korean Standard Industrial Classification (KSIC), foreign investment is not permitted in 61 categories including public administration, diplomacy, and national defense (unpermitted categories of business), while foreign investment is partially permitted in 28 categories (restricted categories of business), as prescribed by the Foreign Investment Promotion Act.
(1) Unpermitted Categories of Business The categories of business in which foreign investment is not permitted generally have public features, hence the difficulties in applying the Foreign Investment Promotion Act. The prohibition of foreign investment in the said categories is prescribed by the Regulations on Foreign Investment and the Integrated Public Notice of Foreign Investment.
< Unpermitted Categories of Business >
•Postal services, central banking, individual mutual aid organizations, pension funding, administration of financial markets, activities auxiliary to financial service activities, etc. •Legislative, judiciary, administrative bodies, foreign embassies, extra-territorial organizations and bodies •Education (pre-primary, primary, secondary, higher education, universities, graduate schools, schools for the disabled, etc.) •Artists’, religious, business, professional, environmental advocacy, political, and labor organizations
(2) Restricted Categories of Business In principle, foreign investment is also prohibited in certain restricted categories of business. However, when there are standards for permission, foreign investment is partially permitted. The restriction of foreign investment is prescribed by the Regulations on Foreign Investment and the Integrated Public Notice of Foreign Investment.
No foreigner shall be permitted to make an investment in any company concurrently running both a category of business in which foreign investment is not permitted and a category of business in which foreign investment is only partially permitted. And, when intending to invest in any company operating two or more categories of business in which foreign investment is only partially permitted, a foreign investor shall be prohibited from investing in the company in excess of the ratio of foreign investment in the category of business in which the ratio of permissible foreign investment is the lowest.
Over-the-air broadcasting Korea Communications . Prohibited Investment
(60210) Commission Guide Permitted where the foreign investment ratio is 49% or less (20% or less in the case of general programming channel operators or program providers and 10% or less in the case of news channel operators) ※‘Program providers’ refers to program providing 17 business operators under the Broadcasting Act.
However, in the case of program providing business operators excluding operators of general programming channels or news channels and operators of channels Ministry of Science, ICT Program distribution (60221) that engage in featuring and selling products, a and Future Planning company whose stocks or shares are owned by the government, organization or individual of a counterpart country to a bilateral or multilateral free trade agreement with Korea designated by the Minister of Science, ICT and Future Planning shall not be deemed a foreign fictitious company as prescribed by Article 14 (1) 3 of the Broadcasting Act.
※For more information, refer to the relevant free trade agreement. Permitted where a cable system operator’s foreign Ministry of Science, ICT Cable networks (60222) investment ratio is 49% or less and Future Planning (20% or less in the case of relay cable operators) Permitted where the foreign investment ratio is 49% or less (20% or less in the case of Internet multimedia broadcasting content providers that operate general programming channels or news channels)
However, in the case of Internet multimedia broadcasting content providers excluding operators of general programming channels or news channels and Broadcasting via satellite and operators of channels that engage in featuring and Ministry of Science, ICT other forms of broadcasting selling products, a company whose stocks or shares are and Future Planning (60229) owned by the government, organization or individual of a counterpart country to a bilateral or multilateral free trade agreement with Korea designated by the Minister of Science, ICT and Future Planning shall not be deemed a foreign fictitious company as prescribed by Article 9 (2) 3 of the Internet Multimedia Broadcast Services Act.
※For more information, refer to the relevant free trade agreement. Permitted where the sum of shares (limited to voting shares, including depositary receipt (DR) and other share equivalents and equity interests) held by a foreign government or a foreigner (including a fictitious Wired telecommunications Ministry of Science, ICT corporation of foreigners) is 49% or less of the total (61210) and Future Planning issued shares of the company. (Foreigners are not allowed to become a majority shareholder of KT. However, they may invest in KT if they own less than 5% of the total shares.) Category of Business (KSIC) Standards for Permission Competent Authorities ※Foreign fictitious company: A company whose largest shareholder is a foreign government or a foreign national (including a specially-related person as referred to in Article 9 (1) 1 of the Financial Investment Services and Capital Markets Act), where not less than 15/100 of the gross number of whose issued stocks is
Doing Business In Korea owned by the said foreign government or foreigner. Wired telecommunications Ministry of Science, ICT 18 However, foreign fictitious companies of a country that (61210) and Future Planning is a counterpart to a bilateral or multilateral free trade agreement with Korea designated by the Minister of Science, ICT and Future Planning, which are determined by the Minister as not likely to harm public interest shall not be deemed a foreigner.
※For more information, refer to the relevant free trade agreement. Same as the permission standards for wired Mobile communications (61220) telecommunications •Ministry of Science, Satellite communications Same as the permission standards for wired ICT and Future (61230) telecommunications Planning Other electronic Same as above (No restrictions for supplementary •Ministry of Culture, communications (61299) communications business [61299]) Sports and Tourism Investment is permitted where the foreign investment News agency business (63910) ratio is less than 25%. •Ministry of Permitted with the exception of the National Agricultural Agriculture, Food and Cooperative Foundation (finance) under the Agricultural Rural Affairs Domestic commercial bank Cooperative Act and the National Federation of Fisheries •Ministry of Oceans (64121) Cooperative (finance) under the Fisheries Cooperatives and Fisheries Act. •Financial Services Commission
※ Major revisions •‘Inshore and coastal fishing (03112)’ deleted from the list (If the foreign investment ratio is 50 percent, the competent mayor, governor or head of the relevant si/gun/gu shall grant a fishing license or permit after consulting with the Minister of Oceans and Fisheries.) •Change of restrictions on ‘publication of newspapers (58121)’ •Change of restrictions on foreign investment and the competent authority of ‘domestic commercial banks (64121)’ •‘Other supporting air transport activities (52939)’ is deleted from the list (Restrictions on foreign investment were removed on Mar. 30, 2017 with the division of the Aviation Act and enforcement of the Aviation Business Act.)
KSIC code Business Competent authority Guide Ministry of Science, ICT and Future 61100 Postal services Planning 64110 Central banking Ministry of Strategy and Finance 64912 Development financial institutions Financial Services Commission 65301 Individual mutual aid organizations Governing ministry 19 65302 Business mutual aid organizations Governing ministry 65303 Pension fund Governing ministry 66110 Administration of financial markets Financial Services Commission Other activities to auxiliary to financial service activities ※Foreign investment is permitted in financial service •Financial Services Commission 66199 businesses excluding financial instrument clearing services •Ministry of Strategy and Finance such as financial clearing businesses (e.g. financial asset brokerage, loan brokerage, currency exchange service) 84111 Legislative administration 84112 National executive offices •Ministry of Strategy and Finance 84114 Administration of financial and economic policy •Financial Services Commission 84119 Other general public service activities Ministry of the Interior 84120 Ancillary service activities for government Ministry of the Interior 84211 Regulation of activities of education affairs Ministry of Education 84212 Regulation of activities of cultural and tourism affairs Ministry of Culture, Sports and Tourism 84213 Regulation of activities of environment affairs Ministry of Environment 84214 Administration of health care and welfare Ministry of Health and Welfare Other regulation of activities of agencies that provide 84219 healthcare, education, cultural services, excluding social Governing ministry security 84221 Administration of general labor affairs Ministry of Labor and Employment •Ministry of Agriculture, Food and Administration of agricultural, forestry, fishing and hunting 84222 Rural Affairs affairs •Ministry of Oceans and Fisheries •Ministry of Land, Infrastructure and 84223 Administration of construction and transportation programs Transport •Ministry of Oceans and Fisheries Ministry of Science, ICT and Future 84224 Administration of communications Planning Other regulation and contribution to more efficient operation 84229 Ministry of Trade, Industry and Energy of business 84310 Foreign affairs Ministry of Foreign Affairs 84320 Defense activities Ministry of Defense 84401 Courts 84402 Prosecution services Ministry of Justice Correctional institutions ※With the enforcement of the Act on the Establishment and 84403 Operation of Private Correctional Institutions in July 2001, Ministry of Justice foreign investment is permitted in private correctional institutions. 84404 Police protection Ministry of the Interior KSIC code Business Competent authority 84405 Fire protection Ministry of the Interior 84409 Other justice, public order and safety activities Governing ministry 84500 Compulsory social security activities Ministry of Health and Welfare 85110 Pre-primary education Ministry of Education 85120 Primary schools Ministry of Education
Doing Business In Korea 85211 Junior high schools Ministry of Education 20 85212 General senior high schools Ministry of Education 85221 Commercial and information industry high schools Ministry of Education 85222 Industrial high schools Ministry of Education 85229 Other technical and vocational secondary education Ministry of Education 85301 Junior technical and vocational colleges Ministry of Education 85302 Universities Ministry of Education 85303 Graduate schools Ministry of Education 85410 Schools for the handicapped Ministry of Education Facilities for social education ※Foreign investment is permitted in lifelong education 85630 Ministry of Education facilities for adults that are not established for the purpose of recognition of academic credit or provision of diploma. ※Among other educational institutions not elsewhere classified, foreign investment in private teaching institutes 85699 prescribed by the Act on the Establishment and Operation Ministry of Education of Private Teaching Institutes and Extracurricular Lessons is permitted. 90131 Independent performing artists Ministry of Culture, Sports and Tourism 90132 Independent non-performing artists Ministry of Culture, Sports and Tourism 94110 Business organizations Governing ministry 94120 Professional organizations Governing ministry 94200 Labor organizations Ministry of Labor and Employment 94911 Buddhism organizations Ministry of Labor and Employment 94912 Christianity organizations Ministry of Labor and Employment 94913 Catholicism organizations Ministry of Labor and Employment 94914 Korean religious organizations Ministry of Labor and Employment 94919 Other religious organizations Ministry of Labor and Employment 94920 Political organizations 94931 Environmental advocacy organizations Ministry of Environment 94939 Other social advocacy organizations Governing ministry 94990 Other membership organizations Governing ministry 99001 Foreign embassies Ministry of Foreign Affairs 99009 Other extra-terrestrial organizations and bodies Ministry of Foreign Affairs
※ Revision: ‘Development financial institutions (64912)’ added to the list. 02 I . Investment FDI Procedures Guide
21
1. Foreign Investment Procedures
Foreign investment procedures mainly consist of the following: foreign investment notification, remittance of investment funds, registration of incorporation and business registration, and registration of foreign-invested company. The procedures applied to foreigners are basically the same as those applied to Koreans with the exception of two additional steps: foreign investment notification and registration of foreign-invested company. Where a foreign investor registers a privately-owned business, ‘registration of incorporation’ is not required.
• Foreign Investment Notification • Foreign Investment Notification Procedure by Form of Investment
1-1 Foreign Investment Notification
A foreign investor may notify foreign investment as follows: •Notifying person: A foreign investor or his/her agent (A power-of-attorney should be attached in the case of notification by an agent.) •Where to notify: Headquarters and branches of domestic banks, domestic branches of delegated foreign banks, KOTRA, or KOTRA’s overseas offices •Processing period: On the spot (The certificate of completion of notification is issued without delay.) Foreign investment notification is classified into pre-notification - notification prior to the acquisition of stocks - and post-notification - notification after the acquisition of stocks or the conclusion of a contract. The details are as follows:
< Pre- & Post-Notification > Category Matters to be Notified Note Doing Business In Korea Acquisition of new stocks or existing 22 •Notification/ Application for authorization of foreign stocks, or contribution (The authorization investment by acquisition of stocks (or contribution) of the Ministry of Trade, Industry & Energy Pre- •Notification of change of information of the above is needed to acquire the existing stocks of notification a defense industry company.) •Notification of foreign investment in the form of a - long-term loan or notification of change of information Notification within 60 days in the case of •Notification/ Application for authorization of foreign acquiring the existing stocks of a listed investment by acquisition of stocks (or contribution) company •Notification/ Application for authorization of foreign investment by acquisition of stocks (or contribution): Same notification form applies to ‘Notification of acquisition of stocks, etc. through merger, etc.’ ––Acquisition by capitalization of reserves, revaluation reserves, etc. of a foreign-invested company ––Acquisition by merger, company division, or an all- inclusive stock swap or transfer Notification within 60 days of acquisition Post- ––Acquisition by investing the proceeds (dividends) notification from acquired stocks ––Acquisition by purchase, inheritance, testamentary gift, or gift ––Acquisition by using convertible bonds, exchangeable bonds, stock depository receipts, and such similar items as may be converted into, available for the acceptance of, or exchanged for stocks, etc. Replaced with application for registration •Notification of transfer/ reduction of stocks of foreign-invested enterprise Notification within 60 days of the date of •Application for registration of foreign-invested occurrence of the cause (30 days in the company (new registration and change of information) case of change of information)
※ Required documents •Two copies of the foreign investment notification form •Documents certifying the applicant's nationality (foreigner’s certificate of nationality) ––A foreign corporation or organization: certificate of incorporation issued by the government or other authorized organizations of the foreign country, or proof that the said corporation or organization is based in the said country ––Foreign individuals: certificate of citizenship, passport, or other proof of a foreign investor's nationality, issued by the government or other authorized organizations of the country in question ––If a foreign investor holds the nationality of the Republic of Korea, the above documents may be replaced with a certificate of evidence of residential status issued by the government or other authorized organizations of the country in which he/she resides, or a certificate of overseas residence, etc. issued by embassies and overseas legations of the Republic of Korea. •Letter of attorney (where an agent who has received the right to represent a foreign investor files a notification or applies for authorization) ※ Additional documents required when necessary I
•Document certifying objects of investment . Investment
•Document certifying share acquisition Guide
1-2 Foreign Investment Notification Procedures by Form of Investment 1) Notification of Foreign Investment by Acquisition of Stocks or Contribution 23 In cases where a foreign investor intends to invest by means of purchasing the newly issued or existing stocks of a Korean corporation or a company run by a national of the Republic of Korea, the foreign investor shall notify such fact in advance (pre-notification).
※ Required documents •Two copies of the notification form of foreign investment by acquisition of stocks or contribution (A letter of attorney shall be attached when notified by an agent.) •Document certifying foreign investor's nationality •Contract to appoint executives, report on appointment (dispatch) of executives (e.g. minutes of a board of directors’ meeting or general meeting of shareholders) – Applicable to investments with foreign investment ratio of less than 10% to be exceptionally recognized as FDI •Document certifying specially related party relations between the transferees (if there are multiple investors when acquiring existing shares) •A copy of a document certifying the acquisition of stocks (in the case of acquisition of stocks by merger, etc. as prescribed by Article 5 (2) of the Act) •Documents certifying object of investment (If necessary) ––Documents certifying the monetary value of industrial property rights, etc. *Note) ––Documents certifying the residual assets after liquidation of a branch, office or corporation ––Documents certifying the amount the applicant has repaid against a domestic or overseas loan ––Documents certifying the stocks of a corporation listed in overseas securities markets ––Documents certifying the ownership of stocks held by a foreigner under the Foreign Investment Promotion Act or the Foreign Exchange Transactions Act ––Documents certifying that the investor has duly registered all capital transactions involving Korean real estate in which the investment will be made ––Documents certifying the funds received through the sale of stocks or real estate under the Foreign Investment Promotion Act or the Foreign Exchange Transactions Act •Documents certifying contribution to a non-profit organization
※Additionally required documents can be submitted before application for registration of foreign-invested enterprise
* Note) Agencies that evaluate technologies including industrial property rights: Korea Institute for Technology Advancement, Korea Technology Finance Corporation, Korea Institute of Industrial Technology Evaluation, Korea Environment Corporation, Korean Agency for Technology and Standards, Korea Institute of Science and Technology, Korea Institute of Science and Technology Information, and National IT Industry Promotion Agency
(1) Acquisition of Newly Issued Stocks •Where a foreigner establishes a new corporation either independently or jointly with a Korean national •Where a foreigner participates in a Korean company’s paid-in capital increase •Where a foreigner (individual) operates a private business in Korea •Where a foreigner makes a contribution to a non-profit corporation (i.e., acquisition of newly issued stocks in the form of a contribution) Changes to the following should also be notified: trade name or title and nationality of the foreign investor, foreign investment amount, foreign investment ratio (ratio of stocks held by a foreign investor to the total number of stocks of a foreign-invested company), investment method, type of business to be operated, etc.
※ Where a foreign investor makes an investment-in-kind with capital goods Doing Business In Korea A foreign investor is required to apply for an examination and confirmation of the specifications of imported 24 capital goods prior to the acceptance of declaration of import as prescribed by Article 241 (1) of the Customs Act, after notifying foreign investment by acquisition of newly issued stocks, etc.
※ Required documents: •Three copies of the application form for examination and confirmation of the specifications of imported capital goods •Three copies of a document certifying the monetary value thereof, such as an offer sheet •Application for written confirmation of completion of investment-in-kind to be submitted to an officer from the Korea Customs Service dispatched to KOTRA, upon completion of the import of capital goods
(2) Acquisition of Existing Stocks Where a foreign national intends to invest by the acquisition of stocks that have already been issued by a company run by a national of the Republic of Korea or a Korean corporation, he/she shall notify the facts in advance (pre-notification). However, acquisition of existing stocks, etc. issued by a listed corporation under the Financial Investment Services and Capital Markets Act can be notified within 60 days of the date of such acquisition.
※If a foreigner who has acquired nine percent of the stocks of a listed company under the Financial Investment Services and Capital Markets Act intends to additionally acquire 3.5 percent of the stocks of the said company (the additional investment amount is more than KRW 100 million and the acquisition will raise the foreigner’s stake above 10 percent), the additionally acquired stocks will be recognized as foreign investment under the Foreign Investment Promotion Act. Therefore, the foreigner should notify (or apply for authorization of) foreign investment by acquisition of existing stocks, etc. In this case, exceptions to the pre-notification regulations apply, and foreign investment can be notified within 60 days of the date of such acquisition.
Acquisition of existing stocks: •Where a foreign investor directly purchases 10 percent or more of the stocks of an unlisted company from a domestic shareholder •Where a foreign investor acquires 10 percent or more of the stocks of a listed corporation
However, the Minister of Trade, Industry & Energy’s authorization should be obtained in advance when a foreigner intends to invest in a defense industry company by acquiring its existing stocks (application for authorization). If the existing stocks are acquired without obtaining authorization, the foreigner shall be banned from exercising his/her voting rights of such existing stocks and may receive an order from the Minister of Trade, Industry & Energy to transfer the stocks to a third party.
Notification of information change can be filed where there are changes to the following: foreign investment amount, foreign investment ratio, transferor of stocks, etc. Where there are changes to the authorized details, an application for authorization of information change can be filed. (3) Acquisition of Stocks, etc. by Merger, etc. I
Unlike acquisition of newly issued or existing stocks, the acquisition of stocks, etc. by merger, etc. . Investment should be notified within 60 days of the date of acquisition thereof (post-notification). In most cases, Guide foreigners who notify acquisition of stocks, etc. by merger, etc. are subject to foreign-invested company registration or registration of change of information.
Acquisition of stocks, etc. by merger, etc.: •Where a foreign investor acquires the stocks of the foreign-invested company issued through 25 capitalization of reserves, revaluation reserves and reserves as prescribed by other Acts •Where a foreign investor acquires stocks, etc. of a newly incorporated corporation or a surviving corporation after a merger, an all-inclusive stock swap or transfer, or a company division with the stocks he/she is holding at the time of the relevant foreign-invested company’s merger, all-inclusive stock swap or transfer with another company, or a company division •Where a foreigner has acquired stocks, etc. of a registered foreign-invested company by means of purchase, inheritance, testamentary gift, or gift from a foreign investor •Where a foreign investor has acquired stocks, etc. by means of investing the proceeds from the stocks, etc. acquired under the laws of Korea •Where a foreigner has acquired stocks, etc. using convertible bonds, exchangeable bonds, stock depositary receipts, and other such similar items as may be converted into, taken over as, or exchanged for stocks, etc.
2) Notification of Foreign Investment in the Form of a Long-Term Loan Where the overseas parent company of a foreign-invested company, a foreign investor, or an enterprise with a capital investment relationship with the overseas parent company or the investor intends to make a foreign investment in the form of a long-term loan with maturity of not less than five years supplied to the foreign-invested company, the foreign investment should be notified in advance (pre-notification).
A borrower of a long-term loan should be a foreign-invested company, while a foreign-invested company in the process of being established cannot be a borrower. Therefore, foreign investment in the form of a long-term loan can be notified after a foreign-invested company has been established. Since the amount of a loan is not an object of investment, the loan amount is not required to be stated in the foreign-invested company registration certificate. A foreigner should notify the arrival of a long-term loan and attach documents certifying that the foreign investor has purchased or deposited foreign currency, in order for a long-term loan to be recognized as foreign investment.
※ Required documents •Two copies of the notification form of foreign investment in the form of a long-term loan (A letter of attorney should be attached when notified by an agent.) •A copy of the loan contract •A document certifying investment relations and a certificate of nationality of the loan provider ※ The copy of the loan contract can be submitted before the long-term loan is remitted. When there are changes to the notified amount of loans or conditions of loans (interest rate, repayment period, grace period), a notification of change of information should be filed.
Owns 50% stake or more Overseas sister company of overseas parent company Doing Business In Korea Parent company of Supply of loan 26 overseas parent company Quasi-parent company of (FDI ratio should be (grandparent company) overseas parent company 50% or more)
Overseas subsidiary of Owns 50% Owns 100% Owns 50% overseas parent company stake or more stake or more stake or more
Overseas parent company (corporate) Domestic company (=foreign-invested Foreign investor Supply of loan (FDI ratio should be 10% or more) company) (Individual)
Owns 50% stake or more Supply of loan Overseas subsidiary of (FDI ratio should be foreign investor (indvidual) 50% or more) 3) Foreign Investment Procedure by Form of Investment I . Investment
※ The ‘Act’ refers to the Foreign Investment Promotion Act
Foreign investment by acquisition of stocks (or contribution) - Notification/ Application for authorization
Notification of foreign Application for authorization investment by acquisition of new/ of foreign investment Notification of acquisition of stocks by merger, etc. 27 existing stocks or contribution by acquisition of existing stocks (Post-notification within 60 days): (Pre-or post-notification): (Pre-notification): Article 5 (2) 2 - 6 of the Act Article 5 of the Act Article 6 of the Act Investment-in-kind of Investment-in-kind capital goods Application for review - Capital increase without consideration of specification of Remittance of investment funds (capitalization of reserves, revaluation reserves, etc.) imported capital goods (Remitted through a bank - Corporate merger/split, all-inclusive stock or carried-through customs) Import clearance of exchange/transfer capital goods - Foreigners’ purchase, inheritance, testation, donation - Investment of proceeds Application for Deposit of payment for (cash dividends, stock dividends) confirmation of completion shares/currency conversion Payment for shares of investment-in-kind of private business funds - Stock conversion of CB, EB, DR
Incorporation (capital increase) registration and business registration (*private business registration)
Notification of investment in the form Foreign-invested company registration (new registration): of a long-term loan (pre-notification): Article 21 of the Act, Article 27 of the Enforcement Decree of the Act Article 5 of the Act
Initial notification of loans after foreign-invested Application for company registration visa issuance
- Transfer or reduction of stocks - Change in loan provider - Notification of acquisition of stocks by merger, etc. - Change in loan amount - Notification of acquisition of newly issued stocks (additional investment) - Change in loan conditions - Notification of acquisition of exiting stocks (additional investment) (repayment conditions, interest rates, - Notification of change of information (if applicable) early repayment, debt-equity swap)
Registration of foreign-invested company – Occurrence of cause for registration of information change Registration/ Change of information: - Change in capital (capital increase/ CB conversion, etc.) Article 21 of the Act, Article 27 of the Enforcement - Merger with foreign investor, change in company name Decree, Article 17 of the Enforcement Rules - Change in foreign-invested company name and address, etc.
Occurrence of cause for cancellation of foreign-invested company registration Cancellation of foreign-invested company registration - Closure (individual: certificate of business closure; corporate: certified copy of (ex-officio cancellation): Article 21 (4) of the Act, liquidation registration; investment association: resolution of dissolution Article 28 of the Enforcement Decree, of association members, etc.) Article 17-2 of the Enforcement Rules - Transfer of all foreign-held shares/ capital reduction of all foreign-held shares - Liquidation (corporation: certified copy of liquidation registration), etc. 4) Investment Fund Remittance In principle, investment funds should be remitted through a foreign exchange bank under the name of the foreign investor. Funds from domestic sources are not recognized as foreign investment funds. In the process of paying up for stocks, the bank issues a certificate of deposit of funds for payment for shares (required for registration of incorporation) and a certificate of foreign currency purchase (required for registration of a foreign-invested company). Doing Business In Korea
28 5) Registration of Incorporation and Business Registration (refer to Chapter 3. Establishment of a Corporation) Registration of incorporation and business registration should be completed at the jurisdictional court and tax office, respectively, after preparing all necessary documents.
6) Transfer of Paid-in Capital to Corporate Account Upon completion of registration of incorporation and business registration, the new company becomes a legally valid corporation, and the bank collects the required documents and transfers paid- in capital to the account of the newly established corporation.
7) Registration of a Foreign-Invested Company A foreign investor (or an agent) or a foreign-invested company should register the foreign-invested company at a delegated authority within 60 days (30 days in the case of contribution) of the date on which any of the following occurred (the delegated authority shall issue a certificate of foreign- invested company registration):
•Where payment for the object of investment has been completed (acquisition of newly issued stocks) •Where existing stocks have been acquired (acquisition of existing stocks) •Where stocks have been acquired by a merger, etc. (acquisition of newly issued stocks after a company division or using convertible bonds, etc.) •Where a contribution to a non-profit organization has been completed (acquisition by means of contribution)
※ Required documents •Application form for registration of a foreign-invested company •A copy of the foreign-invested company’s incorporation registration certificate and business registration certificate •A copy of foreign currency purchase certificate or foreign currency deposit certificate that certifies the remitter (investor) •Stock ledger (corporate seal, certified copy of the original) or documents certifying that the payment for stocks has been transferred
※ Additional documents required when necessary •Documents certifying the object of investment •Copy of certificate of completion of investment-in-kind (where a foreign investor makes an investment-in-kind with capital goods) •Copy of an inspection report by an inspector or a written statement by an appraiser, in accordance with the Commercial Act (when a foreign investor makes an investment in stocks or domestic real estate) ––Documents pertaining to the acquisition of stocks ––Letter of attorney where an agent files an application 2. Follow-up Management of Foreign Investment I . Investment
Where a foreign investor or foreign-invested company has completed payment for the object of Guide investment or acquired existing stocks, etc., he/she/it should file an application for registration of foreign-invested company to the president of KOTRA or the head of a foreign exchange bank as prescribed by the Acts and statutes of the Republic of Korea. When changes occur in the shareholdings or the company name after registration of foreign-invested company, an application for information change should be filed. Also, when a cause for cancellation of registration occurs, 29 the Minister of Trade, Industry & Energy or the head of the delegated agency should cancel the registration ex-officio.
• Registration of a Foreign-Invested Company’s Change of Information • A Foreign-Invested Company’s Additional Business Operation or Acquisition of Another Domestic Company’s Stocks • Cancellation of Foreign-Invested Company Registration • Notice of Confirmation of Foreign-Invested Company Registration
2-1 Registration of a Foreign-Invested Company’s Change of Information
(1) Where a Foreign Investor Acquired Stocks by Merger, etc. A foreign investor (or his/her agent) or a foreign-invested company should notify the foreign-invested company’s change of information to a delegated agency within 30 days of the date of occurrence of any of the following:
•Where stocks have been acquired by merger, etc. (acquisition of stocks by merger, capital increase without consideration, etc.) •Where the shareholdings or investment ratio of a foreign investor changes due to stock transfer or capital reduction by a foreign investor •Where the shareholdings or investment ratio of a foreign investor changes due to capital increase by a national of the Republic of Korea •Where there are changes to the trade name or title of a foreign-invested company or the nationality of a foreign investor •Where there are changes to notified details such as the foreign investment amount, foreign investment ratio, or the address of a foreign-invested company
※ Required documents •Application form for change of information of foreign-invested company registration (The current foreign- invested company registration certificate should be returned.) •Copy of the foreign-invested company incorporation certificate (Matters concerning cancellation shall be stated.) •Copy of the foreign currency purchase certificate or foreign currency deposit certificate •Stock ledger (certified copy of the original bearing corporate seal) or documents certifying that the payment for stocks has been transferred ※ Additional documents required when necessary •Documents certifying the objects of investment •Copies of documents certifying that the transfer of assets has been completed (where a foreign investor makes an investment in kind with capital goods) •Copy of an inspection report by an inspector or an appraisal report by an appraiser, in accordance with the Commercial Act (where a foreign investor makes an investment in stocks or domestic real estate) •Other documents pertaining to the acquisition of stocks and documents certifying changes Doing Business In Korea •Letter of attorney where an agent makes the notification 30 (2) Where a Foreign Investor Transferred or Reduced the Acquired Stocks Where stocks are reduced or transferred, the foreign investor (or his/her agent) should apply for registration of a foreign-invested company’s change of information within 30 days of the date on which the relevant transfer contract has been concluded in the case of stock transfer, and within 60 days of the date on which the peremptory notice to creditors has expired in the case of stock reduction (capital reduction). If the foreign investor transfers stocks to another foreigner, the transferee foreigner should notify the acquisition of stocks (the investment amount shall be within the transferring foreign investor’s investment amount).
(3) Where the Foreign Investment Ratio or the Trade Name of a Foreign-Invested Company is Changed •Where the foreign investment amount or foreign investment ratio is changed •Where the trade name or nationality of a foreign investor is changed •Where a foreign-invested company’s trade name or address is changed •Where the business that a foreign-invested company intends to operate is changed or added
※ Required documents •Application form for foreign-invested company registration (or change of information) (the current foreign- invested company registration certificate should be returned) •Foreign-invested company’s certified copy of corporate registration •Copy of stock transfer contract •Copy of document certifying the transfer or reduction of stocks such as a certified copy of registration of capital reduction (certified copy of registration after capital reduction, statement of resolution of the board of directors or general meeting of shareholders) •A copy of a document certifying other changes •Letter of attorney in the case of notification by an agent
2-2 A Foreign-Invested Company’s Additional Business Operation or Acquisition of Another Domestic Company’s Stocks
A foreign-invested company should not operate an additional business beyond the permitted limit in business categories where foreign investment is restricted. However, such foreign investment is allowed where the foreign investment ratio is less than 10/100.
Though a foreign-invested company should not acquire the stocks of another domestic company that conducts business in which foreign investment is restricted beyond the permitted limit, such acquisition is permitted in the following cases as an exception: •Where a company whose foreign investment ratio is less than 50/100 and whose largest
shareholder is not a foreigner acquires the stocks of a domestic company I . Investment
•Where a foreign-invested company (excluding private equity funds as prescribed by Article 9 (19) Guide 1 of the Financial Investment Services and Capital Markets Act) engaging in financial or insurance business, all or a part of whose business activities consist of the acquisition of stocks, etc. of other companies, acquires stocks, etc. of other companies under other Acts and subordinate statutes •Where not more than 10/100 of a domestic company’s total number of issued stocks or total equity investment is acquired 31
2-3 Cancellation of Foreign-Invested Company Registration
Where a foreign-invested company closes its business or has registered as a foreign-invested company by fraudulently disguising the payment for objects of investment, or where a foreign investor has transferred all of the stocks held by himself to a national (or company) of the Republic of Korea or ceases to hold any of the stocks previously held by himself due to capital reduction, the Minister of Trade, Industry & Energy (or head of the delegated agency) should revoke the authorization of the foreign-invested company or cancel the registration thereof.
The causes for cancellation of registration of a foreign-invested company are as follows: •Where a foreign-invested company has notified business closure in accordance with Article 8 (6) of the Value Added Tax Act •Where all foreign investors have transferred all of the stocks held by themselves to a national or company of the Republic of Korea •Where all foreign investors reduced all of the stocks held by themselves •Where a foreign investor registered a foreign-invested company by fraudulently disguising the payment for objects of investment
※ Required documents •Application form for registration of foreign-invested enterprise (change of information) •Document certifying cancellation of registration (e.g. certified copy of registration of liquidation, document certifying business closure, contract for the transfer of stocks, resolution of capital reduction)
※ The foreign-invested company registration certificate should be returned.
2-4 Notice of Confirmation of Cancellation of Foreign-Invested Company Registration
Where the Minister of Trade, Industry & Energy (or head of delegated agency) intends to cancel the registration of a foreign-invested company in accordance with Article 21 (4) of the Act, a notice of confirmation of cancellation of foreign-invested company registration (form no. 18-2 of the Enforcement Rules of the Act) should be sent to the foreign-invested company (the foreign-invested company registration certificate should be returned). 03 Establishment of a Corporation Doing Business In Korea 32
1. How Foreigners Advance Into Korea
There are three ways by which foreigners (foreign corporations) can enter Korea for business purposes: establishing a local corporation, a local branch, or a liaison office.
• How Foreigners Advance Into Korea • Comparison of a Foreign-Invested Company and a Domestic Branch
1-1 How Foreigners Advance Into Korea
No. Form of Entry Governing Law Note 1 Local corporation Foreign Investment Promotion Act Recognized as foreign direct investment 2 Branch Considered a domestic branch of a foreign Foreign Exchange Transactions Act 3 Liaison office corporation
1-2 Comparison of a Foreign-Invested Company and a Domestic Branch
(1) Establishment of a Foreign-Invested Company Under the Foreign Investment Promotion Act The establishment of a local corporation in Korea by a foreigner (individual or corporation) is regulated by the Foreign Investment Promotion Act and the Commercial Act. For a local corporation to be recognized as a foreign-invested company under the Foreign Investment Promotion Act, a foreigner must invest not less than KRW 100 million in the local corporation and acquire not less than 10 percent of the company’s stocks with voting rights.
※ Status of foreigners operating a private business In January 2012, the Daegu District Court of Korea ruled that private businesses run by foreigners cannot be recognized as foreign-invested companies. In accordance with such ruling, the Ministry of Justice issues a D-9 visa instead of a D-8 visa to foreigners operating a private business that is not a joint venture with a domestic private business when the invested amount is KRW 300 million or more. (2) Domestic Branch of a Non-Resident (Foreign Company) Under the Foreign Exchange
Transactions Act I . Investment
A domestic branch of a foreign company can be classified into a branch and a liaison office depending Guide on whether the entity engages in sales activities. Establishment of a branch that operates a business that generates profit in Korea is not considered foreign direct investment because it is a branch of a foreign company, not a domestic company.
A liaison office does not carry out businesses that generate profit in Korea, but instead undertakes 33 non-sales functions such as market research and R&D. Unlike a branch, a liaison office does not need to undergo registration, and is issued an identification number equivalent to the business registration number at a jurisdictional tax office in Korea.
< Comparison of a Foreign-Invested Company and a Domestic Branch > Category Foreign-Invested Company Domestic Branch of a Foreign Company Governing law Foreign Investment Promotion Act Foreign Exchange Transactions Act
Type of corporation Domestic corporation Foreign corporation
The foreign investor and foreign-invested The headquarter and branch are a single Identity company are separate entities (independent entity (consolidated accounting & settlement) accounting & settlement)
Delegated agency to Designated foreign exchange bank, the KOTRA (Invest KOREA) or a foreign exchange process notification Ministry of Strategy and Finance (securities, bank and grant permission insurance, etc.)
Minimum (maximum) KRW 100 million or more per case, no upper No restrictions on the investment amount investment amount limit
•Tax obligations for all domestic and overseas income •Tax obligations apply only to income from Scope of tax •Corporate tax rate: 10% for KRW 200 domestic sources obligations million or less; 20% for more than KRW •Corporate tax rate: Same as left 200 million but not more than KRW 20 •In some cases, branch tax should be paid. billion; 22% for over KRW 20 billion
2. Establishment of a Local Corporation
The procedure for the establishment of a local corporation by a foreign investor is almost identical to that pertaining to the establishment of a domestic corporation, but requires the additional steps of pre-notification of foreign investment and foreign-invested company registration.
• The Procedure for Establishing a Local Corporation • The Procedure for Establishing a Stock Company 2-1 The Procedure for Establishing a Local Corporation
The procedure for establishing a local corporation consists of foreign investment notification, registration of incorporation, registration of business and foreign-invested company registration. The following provides the details of the important steps of the incorporation registration procedure and business registration procedure. Doing Business In Korea 34
2-2 The Procedure for Establishing a Stock Company
The Commercial Act recognizes five different forms of companies - partnership company, limited partnership company, limited liability company, limited company and stock company. As most companies fall into the category of “stock company”, the procedure for establishing a stock company will be explained here.
(1) Ways of Establishing a Stock Company There are two ways of establishing a stock company: promotion of incorporation and subscriptive incorporation. Promotion of incorporation means that promoters subscribe to all of the shares issued at the time of incorporation. On the other hand, subscriptive incorporation means that promoters subscribe to only part of the shares issued at the time of incorporation and the remaining shares are offered for subscription.
(2) Registration of Incorporation of a Stock Company The registration of incorporation of a stock company should be effected within: two weeks of the date on which a review of the process of establishment is completed in the case of promotion of incorporation; and two weeks of the date on which the inaugural general meeting is closed in the case of subscriptive incorporation.
The composition of promoters and whether the trade name or title is used by another company should be reviewed prior to registration. Since a trade name that has been registered by another person cannot be registered as a trade name for the same line of business in the same city (si) or county (gun), it is necessary to check whether an identical trade name has already been registered on the website of the Supreme Court (www.iros.go.kr). Documents Required for Registration of Incorporation I
1. Application form for stock company 13. A written statement by an appraiser . Investment
incorporation registration 14. A certified copy of the inspector’s report Guide 2. Articles of incorporation (notarization required if 15. Foreign investment notification certificate the total capital of the company is KRW 1 billion 16. Certificate of inauguration acceptance or more) a. A Korean national should put his/her seal on the 3. Documents certifying subscription to shares certificate, and attach a certificate of the seal and a 4. Subscription form (in the case of subscriptive certified copy of his/her resident registration incorporation ) b. A foreign national should attach the original copy with 5. Written consent to matters concerning the his/her signature notarized and a copy of his/her passport 35 issuance of shares 17. Certificate of seal registration (with his/her signature 6. Written consent to shortening the period for notice notarized) of convocation before the date of the inauguration 18. Resident registration certificate (certification of address) general meeting (if the period is shortened) 19. Translation of documents (in cases where the required 7. The minutes of the inaugural general meeting documents including the director’s inauguration (notarization required if the total capital of the acceptance are written in a foreign language) * company is KRW 1 billion or more) 20. Receipt for payment of registration tax (issued by the 8. The minutes of the Board of Directors district office which has jurisdiction over the area where (notarization required if the total capital of the the company headquarters is located) company is KRW 1 billion or more) 21. Revenue stamp of the Supreme Court of Korea 9. A certificate of deposit of payment for shares or 22. Power of attorney (where an agent makes the application) certificate of balance 23. Corporate seal 10. A review report by a director, auditor or the 24. Application form for issuance of corporate seal card (after audit committee registration of incorporation) 11. Certificate of delivery of the pertinent property (in the case of investment-in-kind) * Documents 11, 12, 13 and 14 are required in cases where 12. A public notary's report on the particulars of there are particulars of abnormal incorporation, such as in- abnormal incorporation kind investment.
* For documents 16, 17 and 18, an Apostille is required. In the case of countries that are not signatories of the Apostille Convention, notarization by the consul in Korea is required after obtaining notarization in the home country.
※ Documents required for a foreign investor The documents to be submitted by a foreign investor differ, depending on whether the investor concerned is an individual or a corporation. A foreign investor of Japan or Taiwan must submit the same documents as a national of the Republic of Korea or a Korean corporation.
< Documents Required for Individual Investors >
Certificate of corporate The personal seal or signature of the company representative should be placed on the seal registration certificate of corporate seal registration and be notarized (for countries that do not use seals).
A certificate of Those who are inaugurated as executives of the new company inauguration acceptance •Korea/Japan/Taiwan: Place seal on the certificate of inauguration acceptance and attach and a certificate a certificate of registered seal impression of registered seal • impression Other countries: Place signature on the certificate of inauguration and have it notarized Representative To be attached to the certificate of inauguration acceptance director’s abstract of •Korea/Japan/Taiwan: Abstract of resident registration or resident registration card resident registration or •Other countries: Notarized address affidavit of the respective countries (not required for address affidavit directors and auditors) When delegating matters regarding notification of foreign investment •Japan/Taiwan: Place seal on the power of attorney and attach a certificate of registered Power of attorney seal impression •Other countries: Place signature on the power of attorney and have it notarized A copy of passport All foreign nationals < Documents Required for Corporate Investors >
Certified copy of corporate Taiwan and Japan: A certified copy of corporate registration registration (the investing Other countries: Certificate of corporation or notarization certificate proving the corporation) existence of the corporation Certificate of corporate seal Place the personal seal or signature of the company representative on the certificate impression (the corporation of corporate seal registration and have it notarized (for countries that do not use
Doing Business In Korea being established) seals) Those who are inaugurated as executives of the new company A certificate of inauguration 36 •Korea/Japan/Taiwan: Place seal on the certificate of inauguration acceptance and acceptance and attach a certificate of registered seal impression a certificate of seal •Other countries: Place signature on the certificate of inauguration and have it impression notarized
Representative director’s To be attached to the certificate of inauguration acceptance abstract of resident •Korea/Japan/Taiwan: Abstract of resident registration or resident registration card registration or address •Other countries: Notarized address affidavit of the respective countries (not affidavit required for directors and auditors)
When delegating matters regarding notification of foreign investment •Japan/Taiwan: Place seal on the power of attorney and attach a certificate of Power of attorney registered seal impression •Other countries: Place signature of the representative director on the power of attorney and have it notarized
A copy of passport All foreigners
(3) The Cost of Establishing a Stock Company Registration tax, local education tax, registration application fees, etc. are the main costs involved in establishing a stock company.
※Other fees such as legal service fees may occur.
(4) Business Registration Business registration can be filed at a tax office with jurisdiction over the company headquarters or any other tax office, or at KOTRA. Registration should be completed within 20 days of the date of business commencement. ※ Required documents I
•Application form for business registration . Investment
•For corporations: Specification of shareholders or investors, copy of the articles of incorporation, certified copy Guide of corporate registration certificate •A copy of the lease contract (if the business establishment has been leased) •A copy of the foreign investment notification form and foreign currency purchase (or deposit) certificate •A copy of the representative’s alien registration card or passport •A copy of the foreign currency purchase (or deposit) certificate •Additional documents when required: 37 ––A copy of the power of attorney and the agent’s ID when applying through an agent ––Notification form of the appointment of a tax agent (in the case where the representative is a non-resident) ––A copy of the required business permit, registration or notification certificate in the case of government licensed businesses •Specification of the source of funds (for operators of gold bullion wholesale and retail, business for supply of fuel for vehicles and household use, recyclable materials business, collection and sales business, and taxable entertainment establishments)
In cases where a foreign investor makes an investment-in-kind to establish a corporation, a certificate of business registration is required in order to receive a value added tax refund when the object of investment in kind clears customs. Therefore, business registration has to be completed prior to importation of the object of investment.
※ Required documents in cases where business registration is filed in advance (for investment in kind) •Application form for business registration •Certified copy of the resident registration certificate of all promoters •Application form for business permission (in cases where the business requires authorization and permission) •Business plan * A certified copy of corporate registration is not required when applying for business registration, and all other required documents must be submitted after company establishment.
3. Establishment of a Foreign Company’s Domestic Branch
The establishment and private registration of a local corporation is recognized as foreign investment under the Foreign Investment Promotion Act. However, the establishment of a domestic branch is not recognized as foreign investment, and is regulated by the Foreign Exchange Transactions Act.
• Types of a Foreign Company’s Domestic Branch • Procedure for Establishing a Foreign Company’s Domestic Branch 3-1 Types of a Foreign Company’s Domestic Branch
There are two types of domestic branches: a branch and a liaison office. A branch undertakes sales activities in Korea to generate profit, whereas a liaison office does not conduct sales activities to create profit but instead carries out non-sales functions such as business contacts, market research and R&D. Liaison offices can carry out quality control, market surveys, advertising, and other
Doing Business In Korea incidental and supportive roles. However, they are limited in the scope of their activities since they are not permitted to sell products directly or to stock inventory for sale on behalf of the headquarters. 38 3-2 Procedure for Establishing a Foreign Company’s Domestic Branch
(1) Notification of Branch Establishment In order for a foreign company to establish a domestic branch, a notification should be filed to the head of a designated foreign exchange bank.
※ Documents required: •Notification form of the establishment of a foreign company’s domestic branch •Certificate of appointment of the head of the domestic branch •Documents certifying the foreign company (headquarters)’s name, location and major business operations (Notarization of the location of the headquarters is required if the documents are not original copies) •Where a permit, etc. is required for the establishment of a branch in accordance with other Acts and statutes, a copy of documents certifying that such permit, etc. has been obtained •Articles of association of the headquarters •Board meeting minutes containing the company’s plans to establish a branch or liaison office in Korea and details on the appointment of its representative in Korea •Specifications of the line of business that the company intends to operate in Korea and the scope of business •Power of attorney in cases where the establishment of a domestic branch is commissioned to a person other than the branch head (Notarization of the location of the headquarters is required.)
Both a branch and an office should notify the Minister of Strategy and Finance if it intends to operate any of the following business:
•Financial business other than banking business, including fund loans, brokering and arranging overseas finance, cards, and installment financing •Businesses related to securities and insurances •Businesses that are not permitted under the Foreign Investment Promotion Act or other laws
(2) Registration of Branch Establishment Under the Commercial Act, a branch is required to establish and register a business office. A liaison office does not require registration because it is not permitted to conduct sales activities and is only allowed to engage in activities such as information exchange. The following documents should be attached to the application form for registration of branch
establishment: I . Investment Guide •Notification form of the establishment of a foreign company’s domestic branch •Documents certifying the foreign company (headquarters)’s name, location and major business operations (Notarization of the location of the headquarters is required if the documents are not original copies.) •Where a permit, etc. is required for the establishment of a branch in accordance with other Acts 39 and statutes, a copy of documents certifying that such permit, etc. has been obtained •Articles of association of the headquarters •Board meeting minutes containing the company’s plans to establish a branch or liaison office in Korea and details on the appointment of its representative in Korea •Specifications of the line of business that the company intends to operate in Korea and the scope of business •Power of attorney in cases where the establishment of a domestic branch is commissioned to another person (Notarization of the location of the headquarters is required.) •Application form for seal registration of the representative of the Korean office (for the convenience of the representative and is not mandatory) •The branch representative’s acceptance of appointment with a notarized signature, and certificate of location
All the above documents must be certified by a competent government authority of the foreign company’s home country.
If the country where the foreign company’s headquarters is based is a signatory of the Hague Convention Abolishing the Requirement for Legalization for Foreign Public Documents, or the Apostille Convention, the company may receive an Apostille certification on the documents certified by the competent government authority of the respective country.
If the home country of a foreign company is not a signatory of the Apostille Convention, a consul’s notarization is required after obtaining a general notarization.
(3) Branch Closure and Retrieval of Liquidated Funds If a person who has been approved to establish a business office pursuant to the relevant regulations intends to close his/her local branch office or to dispose of the locally owned assets and return the funds to a foreign country after branch closure, he/she should report the relevant facts to the head of a designated foreign exchange bank. In this case, the retrieved funds should not exceed the sum of the operating funds introduced to the local branch office, earned surplus and other reserve funds (after deducting deficits, if any).
※ Documents required for notification of branch closure •Certificate of notification of closure of a foreign company’s domestic branch: The notification should be filed under the name of the liquidator •Documents certifying branch closure (issued by the company headquarters) •Original copy of certification of notification of a foreign company’s establishment of a domestic branch ※ Documents required for retrieval of funds •A copy of the notification form of closure of a foreign-invested company’s domestic branch •A CPA-audited liquidation report (including the balance sheet, income statement as of the date of branch closure and date of completion of liquidation) •Tax payment certificate (national tax and local tax, issued by the competent tax office) •Specification of introduced operating funds, earned surplus and other reserve funds. •Bank balance certificate (should match the remittable amount in the liquidation report.) Doing Business In Korea •A certified copy of the liquidation-closure register in the case of branches that engaged in sales activities 40 •The following documents should be submitted if a certified copy of the liquidation-closure register is not available: ––Business closure certificate (issued by the competent tax office) ––A document certifying the appointment of a liquidator ––A document certifying that a peremptory notice for creditors has been issued (i.e. a copy of a newspaper on which the notice has been published) ––Certificate of clearance of overdue wages for Korean workers (issued by the head of the competent labor office) 04 I . Investment FDI Incentives Guide
41
1. Tax Support
For foreign investments that meet certain conditions, corporate tax, customs duties, etc. are reduced or exempted in accordance with the Restriction of Special Taxation Act. Also, acquisition tax and property tax are reduced or exempted under local government ordinances mandated by the Restriction of Special Taxation Act.
• Types of Tax Support • Application for Tax Reduction or Exemption and Collection of Tax • Other Tax Support
1.1 Types of Tax Support
(1) Corporate Tax Reduction or Exemption Corporate tax reduction or exemption for foreign-invested companies applies to income generated by businesses that are eligible for tax exemption or reduction under the Restriction of Special Taxation Act. However, in cases where a Korean national (or Korean corporation) directly or indirectly holds five percent or more of the voting shares of a foreign company or a foreign corporation that has invested in a business subject to tax reduction or exemption, the portion of investment corresponding to the said shareholding is not subject to tax reduction or exemption. In other words, tax reduction or exemption shall not apply to overseas round-trip investment by a domestic resident.
1. Corporate tax reduction for seven years (reduction rate: equal to the foreign investment ratio for the first five years, 50% of the foreign investment ratio for the following two years)
Eligible Businesses Investment Requirements, etc. Doing Business In Korea •Businesses accompanying new growth driver industry •Businesses accompanying new growth driver 42 technology (Subparagraph 1 of the Act) industry technology necessary for upgrading the domestic industrial structure and enhancing * New growth driver industry technology: Technologies for new domestic industries' global competitiveness, growth driver industries and source technologies (designated which satisfy both of the following conditions under Attached Table 7 of the Enforcement Decree of (Article 116-2 of the Enforcement Decree of the the Restriction of Special Taxation Act), technologies on Restriction of Special Taxation Act): materials and production processes directly related to new ––A manufacturing facility is installed or operated growth driver industry technologies and source technologies for business operation. (designated under Attached Table 14 of the Enforcement ––The foreign investment amount is USD 2 Rules of the Restriction of Special Taxation Act) million or more.
•Companies in a foreign investment zone (individual type) •Manufacturing business: USD 30 million or more as prescribed by Article 18 (1) 2 of the Foreign Investment •System integration and management, data Promotion Act and companies in a free trade zone, processing, etc.: USD 30 million or more Saemangeum project area, Jeju advanced science and •Tourism and resort business: USD 20 million or technology complexes, Jeju investment promotion zone, etc. more that have undergone deliberation and received approval by •International convention, youth training facilities: the relevant committees. (Subparagraph 2 of the Act) USD 20 million or more •Logistics: USD 10 million or more * Companies in a free export zone are granted the same •SOC: USD 10 million or more tax reduction as companies in a foreign investment zone •R&D: USD 2 million or more (individual-type). •Joint venture business: USD 30 million or more
2. Corporate tax reduction for five years (reduction rate: equal to the foreign investment ratio for the first three years, 50% of the foreign investment ratio for the following two years)
Eligible Businesses Investment Requirements, etc. •Businesses in a free economic zone (Subparagraph 2-2 •Manufacturing business: USD 10 million or more of the Act) •Engineering, system integration and management, * Article 2 Subparagraph 1 of the Special Act on etc.: USD 10 million or more Designation and Management of Free Economic Zones •Tourism and resort business: USD 10 million or more •International convention, youth training facilities: USD •Businesses in the Saemangeum project area 10 million or more (Subparagraph 2-8 of the Act) •Logistics business: USD 5 million or more * Article 2, Special Act on the Promotion of the •Medical institutions: USD 5 million or more Saemangeum Project •R&D: USD 1 million or more
•Free economic zone development project entity (Subparagraph 2-3 of the Act) * Article 8-3 (1) & (2), Special Act on Designation and •Total development projects worth USD 500 million or Management of Free Economic Zones more with: ––Foreign investment of USD 30 million or more or; •Development project entities in Saemangeum project ––Foreign investment ratio of 50% or more area (Subparagraph 2-9 of the Act) * Article 8 (1), Special Act on the Promotion of the Saemangeum Project Eligible Businesses Investment Requirements, etc. I
•Development project entities in Jeju investment . •Total development projects worth USD 100 million or Investment promotion zone (Subparagraph 2-4 of the Act) Guide more with: * Article 162, Special Act on the Establishment of Jeju ––Foreign investment of USD 10 million or more or; Special Self-Governing Province and the Development ––Foreign investment ratio of 50% or more of Free International City
•Companies in a foreign investment zone (complex type) •Manufacturing business: USD 10 million or more as prescribed by Article 18 (1) 1 of the Foreign Investment •Logistics business: USD 5 million or more Promotion Act (Subparagraph 2-5 of the Act) 43
•Companies in an enterprise city development zone •Manufacturing business, etc.: USD 10 million or more (Subparagraph 2-6 of the Act) •Logistics business: USD 5 million or more * Article 2, Subparagraph 2 of the Special Act on the •R&D: USD 2 million or more Development of Enterprise Cities
•Development project entities in enterprise city •Total development projects worth USD 500 million or development projects (Subparagraph 2-7 of the Act) more with: * Article 10 (1), Special Act on the Development of ––Foreign investment of USD 30 million or more or; Enterprise Cities ––Foreign investment ratio of 50% or more
•Businesses for which a tax reduction or exemption is inevitably allowed (Subparagraph 3 of the Act) •Manufacturing business: USD 10 million or more * Article 10 (1) 2 and 5, Act on Designation and •Logistics business: USD 5 million or more Management of Free Trade Zones
Tax reduction shall apply starting from whichever is the sooner between: the year in which income was first generated and; the taxable year to which the fifth year from the date of business commencement belongs.
※ Date of business commencement •In manufacturing, the first date on which goods are manufactured at each manufacturing facility •In mining, the first date on which minerals are collected/mined at each worksite •In other businesses, the first date on which goods or services are supplied
In the case of capital increase, the date of registration of capital increase shall be considered the business commencement date. In regard to stocks, etc. acquired by a foreign investor due to the capitalization of reserves, revaluation reserves and reserves as prescribed by other Acts, tax reduction or exemption shall apply during the remainder of their reduction or exemption period and by the ratio of reduction for the relevant remaining period, in conformity with the examples of tax reduction or exemption for the stocks, etc. which form a ground for such occurrences. If an application for tax reduction is filed after increasing capital within five years of making paid-in capital reduction, the decision on tax reduction or exemption shall be made only for the foreign investment ratio against the portion of net increase from before the capital reduction. If a paid-in capital decrease is made after a capital increase, the portion of the increased capital shall be deemed to have decreased first. However, in cases where a purely domestic company receives an investment from a foreigner through a capital increase and becomes a foreign-invested company, the capital increase shall be considered a new foreign investment, and not a case of capital increase as described above. < How to Compute the Amount of Reduced or Exempted Tax > Category Calculation Method Reduced tax amount 1) Tax reduction Tax base for business subject to tax reduction/exemption = Calculated tax amount x x Reduction rate for new ( The whole tax base ) investments Foreign investor’s capital Tax reduction rate = x Tax reduction rate of the business year(100%,50%) ( Total capital ) Doing Business In Korea 1. In general Tax base for business subject to tax reduction/exemption Reduced tax amount = Calculated tax amount x 44 ( The whole tax base )
x Tax reduction rate
Foreign investor’s capital prior to capital increase x tax reduction rate+foreign-invested capital Tax reduction rate = at the time of capital increase x tax reduction rate ( Total capital ) * Tax reduction rate: 100%, 50% or 0% according to the reduction period
2. For businesses subject to tax reduction or exemption for increased capital
Tax base for businesses subject to tax reduction for increased capital Reduced tax amount = Calculated tax amount x ( The whole tax base )
x Tax reduction rate 2) Tax reduction for capital Foreign-invested capital of business subject to tax reduction for increased capital Tax reduction rate = increase or Total capital of business subject to tax reduction for increased capital
merger x Tax reduction rate of the business year (100%,50%)
3. For foreign-invested companies operating businesses that are not subject to tax reduction but become eligible for tax reduction through capital increase or merger
Tax base for business subject to tax reduction or exemption Reduced tax amount = Calculated tax amount x ( The whole tax base ) x Tax reduction rate
(Foreign-invested capital eligible for tax reduction for increased capital x Tax reduction rate) Tax reduction rate = Total foreign investment capital eligible for tax reduction x Foreign investment ratio
* Tax reduction rate: 100%, 50% or 0% according to the reduction period * Foreign investment ratio: foreign investment capital / total capital
※ Upper limit of tax reduction In the case that the total amount of the reduced or exempted income tax or corporate tax during the eligible period exceeds the sum of 1 and 2, the sum of 1 and 2 shall be the upper limit of tax reduction or exemption.
1. The following amount (based on investment amount): a. Businesses accompanying new growth driver industry technology, companies moving into an individual-type foreign investment zone: 50% of the cumulative foreign investment amount b. Other foreign-invested companies eligible for tax reduction or exemption: 40% of the cumulative foreign investment amount 2. The lesser of the following amount (based on employment): a. The sum of 1), 2) and 3) 1) The number of full-time employees in the taxable year who are graduates of a meister high school X KRW 20 million 2) The number of full-time employees excluding the employees described in (1) who are youth employees, disabled employees and employees aged 60 or older X KRW 15 million 3) [ The number of full-time employees in the taxable year – the number of employees described in (1) – the number of employees described in (2)] X KRW 10 million b. 50% of the cumulative foreign investment amount (for businesses accompanying new growth driver I
industry technology), 40% of the cumulative foreign investment amount (for companies in an individual- . Investment
type foreign investment zone), or 30% of the cumulative foreign investment amount (for companies in a Guide complex-type foreign investment zone, etc.)
* Cumulative foreign investment amount: The amount of capital paid into the foreign-invested company concerned as foreign investment as stipulated under the Foreign Investment Promotion Act up to the end of the taxable year during the tax reduction/exemption period 45 ※ Businesses accompanying new growth driver technology •Definition: Businesses accompanying new growth driver industry technology* necessary for upgrading the domestic industrial structure and enhancing domestic industries’ global competitiveness, which satisfy both of the following conditions: ––A manufacturing facility** is installed or operated*** for business operation. ––The foreign investment amount is USD 2 million or more.
*** 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) *** In the case of businesses other than those classified as manufacturing businesses under the Korea Standard Industrial Classification, ‘manufacturing facility’ shall be business establishments. *** In addition to the establishment of a new factory or facility, operation of an existing facility is also permitted.
•Attached Table 7 of the Enforcement Decree of the Restriction of Special Taxation Act: 11 industries, 36 sub-categories (total of 157 technologies) •Attached Table 14 of the Enforcement Rules of the Restriction of Special Taxation Act: Seven material related technologies and four process related technologies (total of 11 technologies)
※ Businesses accompanying new growth driver industry technology (11 categories) ①Future vehicles: Autonomous vehicles, electric vehicles ②Intelligent information: IoT, cloud, big data, wearable smart appliances, IT convergence ③Next-generation software & security: Software technology, convergence security ④Content: Realistic content, cultural content ⑤Next-generation electronic information device: Intelligent semiconductors and sensors, materials for semiconductors, etc., OLED, 3D printing ⑥Next-generation broadcasting and telecommunication: 5G mobile telecom, UHD ⑦Bio & health: Biologic medicine, compound medicine, medical devices, healthcare products, biotechnology for agricultural, marine and food products ⑧New energy business, environment: ESS, new & renewable energy, enhancement of energy efficiency, greenhouse gas reduction, carbon capture and sequestration, nuclear energy ⑨Composite & integrated materials: High performance textiles, ultralight metal, hyperplastic, titanium ⑩Robot: High-tech manufacturing robots, medical robots, service robots, robots in general ⑪Aerospace: Unmanned vehicles, space technology (2) Local Tax (Acquisition Tax, Property Tax) Reduction or Exemption With regard to properties acquired or held by a foreign-invested company in order to engage in a business entitled to tax reduction or exemption, tax is reduced or exempted, or deducted from the tax base for the same reduction or exemption period for corporate tax.
As for acquisition tax and property tax on properties acquired on or after the date of business Doing Business In Korea commencement, the amount calculated by multiplying the computed tax amount on the properties 46 concerned by the foreign investment ratio (tax amount subject to reduction or exemption) shall be exempted for three to five years from the date of business commencement, and reduced by 50 percent for two years thereafter. However, where there exists any tax amount already paid prior to a decision to grant tax reduction or exemption, the relevant tax amount shall not be refunded, even if the properties subject to taxation have been acquired on or after the date of business commencement.
However, in the case of property acquired before the date of business commencement, 100 percent of the acquisition tax subject to reduction or exemption for the property acquired on or after the date on which the decision to grant tax reduction or exemption was made shall be reduced. In the case of property tax, 100 percent of the tax amount subject to reduction or exemption shall be exempted for three to five years from the date on which the property was acquired, and an amount equivalent to 50 percent of the amount subject to deduction shall be deducted from the tax base for two years thereafter.
Under ordinances, the local tax reduction or exemption period may be extended by up to 15 years, or the rate of reduction, exemption or deduction may be raised.
(3) Exemption from Customs Duties, etc. Under the Restriction of Special Taxation Act, customs duties, etc. are exempted for the following capital goods that are used directly in a business subject to reduction or exemption of corporate tax or income tax, and are notified as foreign investment by acquisition of newly issued stocks, etc.
•Capital goods brought in by a foreign-invested company with a foreign or domestic means of payment it obtained as equity investment from a foreign investor •Capital goods that are brought in by a foreign investor as an object of investment
Exemption from customs duties, etc. shall only be applied to capital goods for which import declaration under the Customs Act has been completed within five years of the date on which foreign investment notification was filed. Where it is impossible to make the import declaration within the said period due to a delay in the approval of factory establishment or other causes, the period can be extended by one year through an approval of the Minister of Strategy and Finance.
Customs duties, special excise tax, and value-added tax shall be exempted for businesses accompanying new growth driver industry technology or businesses operated by foreign-invested companies in individual-type foreign investment zones under the Foreign Investment Promotion Act. Customs duties shall be exempted for businesses operated by foreign-invested companies in complex-type foreign investment zones, certain companies in free trade zones, foreign-invested companies in free economic zones, foreign-invested companies that execute free economic zone development projects, executors of the Jeju investment promotion district development project, etc. ※ Where to apply: Customs of clearance I
▶ Required documents . Investment
•Application form for exemption from customs duties Guide •A copy of the confirmation certificate of the specifications of imported capital goods •Documents certifying capital goods imported through investment in kind or cash •Documents certifying that the business is subject to reduction of or exemption from corporate tax, etc. •Invoice, bill of lading (B/L) or air waybill (AWB), price declaration, packing list, certificate of origin, etc.
※ Special taxation for investment-in-kind: Confirmation of completion of investment-in-kind 47 Where a foreign investor makes an investment-in-kind, an inspector shall write an inspection report on the performance of the investment-in-kind and submit it to the court as prescribed by the Commercial Act. As for investment-in-kind with capital goods, notwithstanding the provisions of the Commercial Act, the certificate of in-kind-investment completion confirmation which confirms the execution of the investment-in-kind and the type, quantity, price, etc. of the object of investment issued by the Commissioner of the Korea Customs Service shall be considered the inspector’s report under the Commercial Registration Act (Article 80).
Therefore, where a foreign investor intends to register capital at a jurisdictional court after he/she has imported capital goods acquired through investment-in-kind, he/she should receive a confirmation of investment-in-kind by an official representing the Korea Customs Service at KOTRA.
▶ Required documents •Two copies of the application form for confirmation of completion of investment-in-kind •Import declaration certificate
※ Customs Clearance Procedure for Capital Goods Procedure Related Agencies & Required Documents Notification of foreign •KOTRA, foreign exchange bank investment •Two copies of the certificate of investment notification •The foreign exchange bank where foreign investment notification was filed, KOTRA Confirmation of the •Capital goods subject to exemption from customs duties should be confirmed specifications of imported •Three copies of the application form, documents certifying monetary values (offer capital goods sheet, contract, etc.) •Certificate of business registration under the name of the foreign-invested company •Application form for exemption (customs office), investment notification form Customs clearance •Certificate of the decision on tax reduction or exemption, invoice, certificate of the country of origin (if required), bill of lading (B/L), packing list •Certificate of confirmation of specification of imported capital goods •Application and confirmation: The officer of Korea Customs Service dispatched to Confirmation of KOTRA completion of in-kind- •Application form for confirmation of completion of in-kind investment investment •Import declaration certificate •Registry office Registration of •Application form for registration, certificate of confirmation of completion of incorporation investment-in-kind •The institution to which the initial investment notification was filed Registration of foreign- •Certified copy of corporation registration, certificate of confirmation of completion invested company of investment-in-kind 1-2 Application for Tax Reduction or Exemption and Additional Collection of Tax
(1) Application for Tax Reduction or Exemption ① Confirmation of Whether a Business is Subject to Tax Reduction or Exemption A foreign investor or a foreign-invested company may request the Minister of Strategy and Finance
Doing Business In Korea to confirm whether an intended business is subject to tax reduction or exemption, before he/she/it 48 notifies foreign investment under the Foreign Investment Promotion Act. The Minister shall decide on the matter and notify the applicant within 20 days of the date on which the application was filed.
A foreign investor or a foreign-invested company should apply for tax reduction or exemption after notifying foreign investment, since the confirmation mentioned above is intended to simply verify whether the business concerned possesses high technology, and the effect of the decision is invalid.
② Application for Tax Reduction or Exemption To receive tax reduction or exemption, a foreign-invested company should file an application to the Minister of Strategy and Finance (the administrator of a free trade zone in the case of foreign investment in a free trade zone).
In the case of newly incorporated companies, an application for tax reduction or exemption should be filed by no later than the last day of the taxable year to which the foreign-invested company’s business commencement date belongs. Meanwhile, the deadline for application for tax reduction or exemption for capital increase shall be determined based on the provisions on tax reduction or exemption for new investment of the Restriction of Special Taxation Act (Articles 121-2, 121-3). In cases where any foreign-invested company increases its capital within the scope of the notified investment amount that has been confirmed upon the decision on the tax reduction or exemption prior to the date on which three years elapse from the date on which the first notice concerning the decision on the tax reduction or exemption is served after notification of the foreign investment, even if no application for tax reduction or exemption has been filed, the foreign-invested company shall be deemed eligible for tax reduction or exemption for the portion of the increased capital.
Where any foreign investor or foreign-invested company alters the business contents subject to a decision on tax reduction or exemption and intends to have any reduction or exemption applied to the modified business, he/she/it shall make an application for modification of the contents of tax reduction or exemption no later than the date on which two years elapse from the date on which the causes of the relevant modification occur. (The content of the relevant decision on modification shall apply only to the remainder of the reduction or exemption period.)
Where a foreign investor or foreign-invested company is granted tax reduction or exemption by applying for reduction or exemption after the expiry of the deadline for application, the tax reduction or exemption shall apply only to the taxable year in which the date of such application falls, and to the remainder of the reduction or exemption period thereafter. In such cases, where there exists any tax amount already paid prior to a decision to grant reduction or exemption, the relevant tax amount shall not be refunded. ※ Required documents (Attached Table 2, Public Notice no. 2017-10 of the Ministry of Strategy and Finance) I
Documents required when applying for tax reduction or exemption (or applying for tax reduction or exemption . Investment
for altered business, or verification of whether a business is eligible for tax reduction or exemption) Guide
•Description of the relevant technologies (Korean translation required when written in English or other foreign languages) ––Catalog or other reference materials for the products or services produced or provided using the technologies •Documents describing the scope of utilization of the products or services produced or provided using the technologies 49 •Production methods and process chart (for manufacturing technologies) ––The process chart shall include every step of the process, and the steps requiring new growth driver industry technologies shall be marked. ––For each process, whether production is carried out in Korea or not shall be indicated. •Documents certifying the anticipated economic effects or technological performance ––Comparison of the performance, quality, or cost reduction effects between 'products and services produced or provided with the technology' and 'products and services in the same or similar category’ •The following documents certifying that the technology concerned is a new growth driver industry technology: ––Certificates, test results, evaluations reports, etc. from foreign governments and other authorized institutions on the products, etc. produced or provided with the technology ––Documents on industrial property rights such as patents regarding the technology ––Documents on the development of the technology (R&D institution, developers, development costs and period, etc.) ––Investments in or contributions to a third-party country to utilize a technology similar to the technology concerned ––Other documents certifying the qualification of the technology concerned •Copy of the certificate of completion of foreign investment notification (for applications for tax reduction or exemption as prescribed by Article 121-2 (6) of the Restriction of Special Taxation Act or applications for tax reduction or exemption for altered business) •Copy of the official document stating the decision concerning tax reduction or exemption (for applications for tax reduction or exemption for altered business as prescribed by Article 121-2 (6) of the Restriction of Special Taxation Act) •The following documents verifying that the business concerned has direct relations to a new growth driver industry (Article 116-2 (25) of the Enforcement Decree of the Restriction of Special Taxation Act): ––Documents stating the production method and process chart, etc. of the business entitled to tax reduction or exemption and its related businesses. A related business means a business directly related to a business entitled to tax reduction or exemption, and refers to a business concerning the part of the production process where new growth driver industry technologies are not used and tax reduction or exemption does not apply.
③ Decision and Notification of Tax Reduction or Exemption The Minister of Strategy and Finance shall, upon receipt of an application for tax reduction or exemption or an application for revision of the particulars of tax reduction or exemption, examine whether the relevant application meets the standards for tax reduction or exemption, and make a decision on whether to grant the reduction or exemption or whether to make any revision to the particulars of reduction or exemption within 20 days, and notify the applicant thereof. The Minister may, in cases where it is deemed inevitable that a long period of time will be required to make a decision on whether to grant the reduction or exemption or whether to make any revision to the particulars of reduction or exemption, extend the said review period by up to 20 days. In such cases, the applicant shall be notified of the relevant causes and the review period.
The Minister of Strategy and Finance shall, upon making a decision on whether to grant the reduction or exemption or whether to make any revision to the particulars of reduction or exemption, notify the Commissioner of the National Tax Service, the Commissioner of the Korea Customs Service, and the head of the relevant local government of the fact thereof. The Minister of Strategy and Finance shall, when intending to determine a business as ineligible for tax reduction or exemption upon receiving an application for tax reduction or exemption for businesses accompanying new growth driver industry technology, give preliminary notice of such determination within 20 days of the application date. A person who receives a preliminary notice of determination may file a request to the Minister of Strategy and Finance, in writing, for a review of the appropriateness of the determination thus notified within 20 days of the date on which the notice has
Doing Business In Korea been delivered, with supporting materials attached thereto. The Ministry of Strategy and Finance shall 50 make a decision on whether to grant the reduction or exemption or whether to make any revisions to the particulars of reduction or exemption within 20 days of the date on which the request is delivered, and shall notify the applicant of the result thereof.
< Procedure for Foreign-Invested Companies’ Application for Tax Reduction or Exemption > Application for Relevant law: Article 121-2 (7) of the Restriction of Special Taxation Act confirmation of whether a Step 1 Application can be filed if the technology concerned qualifies as a new growth business is eligible for tax driver industry technology. reduction or exemption Relevant law: Article 5 of the Foreign Investment Promotion Act Notification of foreign •Competent authority: Investment Policy Team of the Ministry of Trade, Step 2 investment by acquisition Industry & Energy of new shares, etc. •Delegated authority: KOTRA’s Investment Consulting Center (82-2-3497- 1967), a foreign exchange bank (headquarter or branch) Relevant law: Article 121-2 (6) of the Restriction of Special Taxation Act International Economic Affairs Division of the Ministry of Strategy and Finance Deadline for application: 1. New investment: The closing date of the taxable year to which the date of commencement of the business eligible for tax reduction or exemption belongs 2. Capital increase: Same as new investment Application for tax Step 3 3. Modification: Within two years of the date on which the cause for reduction or exemption modification occurs Required documents: •Three copies of the notification form for foreign investment by acquisition of new shares, etc. •Three copies of the application form for tax reduction or exemption (Form # 80) •Three copies of documents certifying that the technology concerned qualifies as a new growth driver industry technology Relevant law: Article 121-2 (8) of the Restriction of Special Taxation Act Delegated institution: The Minister of Strategy and Finance & the competent Minister Decision method: The Minister of Strategy and Finance consults with the Decision on whether to competent Minister to make a decision. The decision to reduce or exempt an Step 4 grant tax reduction or entity from a tax is made pursuant to their agreement on the matter. exemption Processing period: Within 20 days of the application date (In cases where technology related materials are insufficient or consultations among the competent Ministries are delayed, a request for additional materials shall be made and an extension of the processing period shall be notified.) Notification of decision Relevant law: Article 121-2 (8) of the Restriction of Special Taxation Act
Step 5 on whether to grant tax I .
Delegated authority: The Minister of Strategy and Finance Investment reduction or exemption Guide ※Foreign-invested companies that are granted tax reduction or exemption as a business accompanying new growth driver industry technology should submit a specification of investment, etc. to the head of the competent tax office when filing a tax return for the taxable year in which the tax reduction or exemption was applied.
(2) Additional Collection of Reduced or Exempted Tax 51 Tax reduction or exemption stipulated by the Restriction of Special Taxation Act is granted only when the requirements for tax reduction or exemption have been met for a certain period of time. In cases where such requirements have not been met, the reduced or exempted tax amounts shall be additionally collected as follows.
< Additional Collection of Reduced or Exempted Tax > Cause for additional collection Taxes Amount subject to additional collection Corporate tax, customs duty, Tax reduced or exempted for five years Cancellation of registration or special consumption tax, value- retroactively from the date of cancellation business closure added tax, acquisition tax, of registration or business closure (three property tax years for customs duty) Tax reduced or exempted for five years Failure to meet the requirements for Corporate tax retroactively from the date on which the tax reduction/exemption requirements are no longer satisfied Where the requirements on payment for objects of investment, introduction Taxes reduced or exempted for five years Corporate tax, customs duty, of loans, or number of employees are retroactively from the date on which the special consumption tax, value- no longer satisfied within five years of requirements are no longer satisfied (three added tax, acquisition tax, the date on which foreign investment years in the case of employment related property tax was notified (three years in the case requirements) of employment related requirements) Failure to comply with the correction Tax reduced or exempted for five years order for not executing foreign Corporate tax retroactively from the date of expiration of investment as notified the correction order period Amount calculated as follows: (Reduced or exempted tax amount for five years retroactively from the date of transfer of Corporate tax stocks, etc.) X (portion of transferred stocks among foreign-held stocks at the time of tax reduction or exemption) Tax reduced or exempted for the value Transfer of shares to a Korean of capital goods that exceed the foreign national, etc. Customs duty, special investment amount remaining after the consumption tax, value added transfer, among tax reduced or exempted tax for three years retroactively from the date of transfer Tax abated for five years retroactively from Acquisition tax, property tax the date of transfer multiplied by the share transfer ratio Tax reduced or exempted for capital goods Where the object of investment is Customs duty, special used for purposes other than those notified disposed of or used for purposes consumption tax, value added or are disposed of for five years (three years other than those notified tax in the case of customs duty) from the date of import declaration acceptance Cause for additional collection Taxes Amount subject to additional collection Collected amount = Taxes reduced or Where the ratio of stocks, etc. held exempted for five years retroactively from by a foreign investor falls short of the Acquisition tax, property tax the date on which the ratio of stocks, etc. foreign investment ratio at the time of is no longer satisfied X the ratio of shares, granting tax reduction or exemption etc. that falls short of the required ratio Doing Business In Korea The additional collection of taxes can be exempted in the following cases: 52 •Where the registration of a foreign-invested company is revoked in cases where the foreign- invested company is dissolved due to a merger. •Where imported capital goods exempted from customs duties cannot be used for the reported purposes due to natural disasters or other reasons corresponding thereto, depreciation, advancement of technologies, or other changes in economic conditions, and the capital goods concerned are used for purposes other than the reported ones or disposed of after obtaining the approval of the Minister of Strategy and Finance •Where stocks, etc. are transferred to Korean nationals or corporations in order to publicly offer the equity stocks of the foreign-invested company pursuant to the Financial Investment Services and Capital Markets Act •Where payment for the objects of investment has been completed within the deadline extended by a mayor or provincial governor in accordance with the Foreign Investment Promotion Act and the relevant tax reduction or exemption requirements have been satisfied •Where a foreign investor who invested in a business accompanying new growth driver industry technology transfers his/her stocks, etc. to a Korean national or Korean corporation, and the Minister of Strategy and Finance confirms that there is no difficulty for the relevant enterprise to provide independently in Korea such products or services produced or provided by the relevant business accompanying new growth driver industry technology. •Where a foreign investor transfers his/her stocks, etc. to a Korean national or Korean corporation pursuant to other Acts and subordinate statutes or government policies and such transfer is confirmed by the Minister of Strategy and Finance
1-3 Other Tax Support
(1) Tax Support for Foreign Engineers (Restriction of Special Taxation Act, Article 18) A non-Korean foreign engineer prescribed by law such as an individual providing technology to Korea under an engineering technology introduction contract or an individual working as a researcher in a foreign-invested company’s R&D facility shall be entitled to a 50 percent reduction of income tax on wage and salary income derived from the offer of his/her services to a Korean national in Korea until the month in which falls the date on which two years have elapsed since the first day on which the foreign engineer concerned offered his/her service in Korea. However, such reduction shall apply temporarily only to persons who began to provide his/her service in Korea on or before December 31, 2018.
(2) Special Taxation for Foreign Employees (Restriction of Special Taxation Act, Article 18-2) Foreign executives or employees (referring to persons who are not daily workers) may choose between the following two taxation methods (The taxation methods apply for five years from the first day of providing service in Korea, and the flax tax rate of 19 percent may not be applied to employees who have a special relationship with their employer.): •A flat tax rate, set at 19 percent of the wage and salary income that a foreign worker earns for
providing service in Korea, shall be applied (limited to foreigners who started to provide service in I . Investment
Korea for the first time on or before Dec. 31, 2018. Tax reduction or exemption, tax credit, and other Guide regulations on income tax shall not apply. Also, since the flat income tax rate is a sunset clause, it is unclear whether it is applicable beyond Dec. 31, 2018.). However, in the case of wage and salary income that a foreign employee receives by providing service to a regional headquarters of a corporation, special taxation shall apply to tax on wage and salary income received for five taxable years starting from the first day of providing service in Korea for the first time (i.e., special taxation 53 shall apply even if the first day of providing service in Korea is after Dec. 31, 2018.). •The global income tax rate shall be applied. (If the foreigner concerned is a non-resident, basic deduction shall apply but personal deduction and special deduction shall not apply.)
※Advance Ruling System The advance ruling system provides a clear ruling with regard to a specific transaction of a taxpayer’s business, provided that a ruling is requested by the legal due date for tax return filing with the disclosure of the taxpayer’s identity and the specific facts and circumstances of the transaction in question. * Specific transaction: A transaction which can be objectively verified with relevant documents certifying that it has actually occurred or will occur in the near future
Benefits of the system •The advance ruling system resolves uncertainties concerning the interpretation of tax laws, and ensures the predictability of business activities. •The system binds the National Tax Service from imposing measures that run counter to the ruling results.
Application requirements •Only business operators (including those who may assume a tax responsibility from future business transactions) are eligible to apply for an advance ruling on a specific transaction. Applications in relation to any of the following, however, are excluded from consideration for an advance ruling: ––Matters which involve application of the tax law that is not relevant to the taxpayer ––Matters which require the judgement of facts ––Matters regarding assumed facts ––Ruling requests which involve transactions that have violated laws or have concerns for violation ––Ruling requests which have been submitted after the application deadline ––Ruling requests which appear to have been submitted for means of tax evasion or tax avoidance
How to request a ruling •Download the application form at the National Tax Service website (http://www.nts.go.kr Korean only). Complete and submit the form to the NTS Commissioner (Manager of Legal Affairs Division) via postal mail. •Applications should be filed by the business proprietor. However, a delegated agent (tax accountant, certified public accountant, or lawyer), if consigned by the business proprietor, may submit the application on his/her behalf.
2. Cash Grant
For foreign investments that satisfy certain conditions, the central and local governments of Korea may provide cash grants for certain purposes such as establishment of a factory facility. In the process, the Korean government takes into account whether the relevant foreign investment involves new growth driver industry technology, the effect of technology transfer, the scale of job creation, whether the foreign investment overlaps with domestic investment, the propriety of the location in which the foreign investment is to be made, etc. • Overview of the Cash Grant System • Cash Grant Application Procedure • Follow-up Management of Cash Grant
Doing Business In Korea 2-1 Overview of the Cash Grant System
54 (1) Qualifications Foreign investments with foreign investment ratio of 30 percent or higher falling under one of the following are eligible for a cash grant: •Where a new factory facility is installed or an existing factory facility is expanded (or a business establishment in the case of a non-manufacturing business) for the management of a business accompanying new growth driver industry technology •Where a new factory facility is installed or an existing factory facility is expanded for the production of parts and materials stipulated under the Act on Special Measures for the Promotion of Specialized Enterprises, etc. for Materials and Components which satisfy one of the following conditions:
––Parts and materials that contribute significantly to the high added value of the final product ––Parts and materials that require advanced technology or core high technology and have a high technology spillover effect or create significant added value ––Parts and materials that act as the basis of an industry or have high inter-industry linkage effects
•Where a foreign-invested company that creates new jobs in excess of the number stated in the table below installs a new factory facility (a business establishment in the case of non- manufacturing businesses) or expands an existing one
Number of Full-Time .
KSIC Business Category Investment
Employees Guide C Manufacturing B Mining F Construction H Transportation 300 J Publishing, film, broadcast/communications and information services 55 N Business facility management and industry-supporting services Q Health and social welfare services A Agriculture, forestry and fishery D Electricity, gas, steam and water supply G Wholesale and retail I Hotel and restaurant 200 K Finance and insurance M Professional, science and technology services R Arts, sports/leisure-related services E Sewage/waste treatment, raw material recycling and environment restoration P Educational service 100 S Association/organizations, repair and individual services L Real estate and lease 50
•Where a research facility is newly installed or expanded for R&D activities for a business accompanying new growth driver industry technology, or where a non-profit organization receiving a contribution that is considered foreign direct investment newly establishes or expands a research facility. The research facility should have five or more full-time researchers with a master’s degree in a relevant field or a bachelor’s degree in a relevant field supplemented with at least three years of research experience.
•Where an investment that makes significant contributions to the domestic economy relative to the amount of investment meets one of the following conditions and is recognized by the Foreign Investment Committee as an investment that needs support in regard to the qualifications required for foreign investors, etc. ––Where a foreign company that owns businesses in three or more countries establishes a regional headquarters having control over two or more countries in the Republic of Korea (The regional headquarters should hire 10 or more employees, invest KRW 100 million or more, and obtain the recognition of the Foreign Investment Committee. Also, the parent company’s stake should be at least 50 percent and the parent company’s average annual sales for the past five years should be KRW 3 trillion or more.) ––Where a foreign company is engaged in a regional strategic industry as stipulated in Article 2 Subparagraph 4 of The Special Act on Balanced National Development or a regional leading industry stipulated in Article 2 Subparagraph 5 of the said Act, and where it is recognized that the relevant industry will contribute to the development of the local economy.
(2) Cash Grant Ceiling The cash grant ceiling shall be decided by a committee for determining the cash grant ceiling comprised of five persons of more from the central government, local government, KOTRA and the private sector. The cash grant amount shall be decided through a negotiation with the foreign investor within the cash grant ceiling.
Where a foreign-invested company received rent reduction by leasing public or state-owned land or moving into a foreign investment zone, the total amount of reduced rent during the period in which the business eligible for cash grant was operated shall be included in the cash grant ceiling. Doing Business In Korea 56 ※Funding and cash grant provided under the “Criteria for the Central Government’s Funding for Local Governments’ Foreign Investment Attraction Activities” shall not be provided more than once for the same item. The total amount of funding shall not exceed the cash grant ceiling.
(3) Allotment Ratio of Financial Fund The allotment ratio of financial fund for cash grant between the central and local governments is as follows: •Land purchase and lease expenses: 30:70 for the Seoul metropolitan area and 60:40 for all regions outside the Seoul metropolitan area •Employment/education/training subsidy: 50:50 (The employment subsidy for interns in the engineering sector is entirely provided by the central government.) •Building construction expenses, expenses for purchasing capital goods and research equipment, expenses for the installation of infrastructure facilities, R&D expenses: 30:70 for the Seoul metropolitan area and 60:40 for other areas. (However, the ratio may be altered by a resolution of the Foreign Investment Committee.) •R&D facility purchase and lease expenses: 30:70 for the Seoul metropolitan area and 60:40 for all regions outside the Seoul metropolitan area
※ The above ratio can be changed by a resolution of the Foreign Investment Committee.
(4) Legal Usage A foreign-invested company should use a cash grant only for the following purposes:
•To purchase or lease land or a building for the installation of a factory or research facility •To construct a factory or research facility •To purchase capital goods and research equipment to be used at a factory or research facility for business or research purposes •To install infrastructure facilities, including power/communication facilities, required for building a factory or research facility •Employment subsidies or education and training subsidies
2-2 Cash Grant Application Procedure
(1) Application, Negotiation and Evaluation A foreigner seeking cash grant should submit an application form and an investment plan to the Minister of Trade, Industry & Energy. An evaluation team comprised of public officials and private sector experts shall perform an industrial and financial evaluation of the documents and submit an evaluation report to the Minister. The applicant can negotiate after submitting a cash grant application form. However, a request for
negotiation or consultation can be submitted to the Minister of Trade, Industry & Energy before I . Investment submitting the application form. On receiving an application form or request for negotiation or Guide consultation, the Minister shall designate a public official in charge of the negotiation or consultation (negotiation officer) and notify the applicant. Also, the Minister shall request the designation of a negotiation officer to the relevant local government, and demand the designation of a Project Manager to the President of KOTRA to support the applicant. 57 ※ Evaluation criteria for cash grant application •Whether a foreign investment accompanies new growth driver industry technology & the effects of technology transfer •Number of jobs created •Whether the foreign investment overlaps with any domestic investment •The adequacy of the location in which the foreign investment is made •Effects on the regional and national economy •Survivability of the project
< Application for Negotiation and Cash Grant & Evaluation >
Designation of negotiator
Request for negotiation Request for designation Local Negotiator (submission of investment of negotiator government proposals) Minister of Trade, Industry Negotiation Applicant & Negotiation after consultations Energy Request for with officials at the Ministry of KOTRA Applicant·PM Strategy and Finance and head of designation of PM local governments
(2) Approval of Cash Grant & Conclusion of Contract The Minister of Trade, Industry & Energy shall review the cash grant proposal including comments on the need for cash grant, the amount of cash grant, and method of cash grant payment with the Minister of Strategy and Finance and the head of the relevant local government bodies. Matters concerning cash grant shall be decided through the Foreign Investment Committee’s deliberation and resolution, and the cash grant funds will be transferred after a cash grant contract is signed. However, if the amount of the cash grant excluding grants for site support is less than KRW 1 billion, the cash grant contract shall be signed with the Foreign Investment Working Committee after due deliberation and resolution. The decision on whether to approve a cash grant shall be made within 60 days of receiving the application for a cash grant. However, the deadline for the decision may be extended by up to 30 days.
Recommendation for cash grant after consultations with officials at the Deliberation and Minister of Trade, decision by the Foreign Conclusion of cash Industry & Energy Ministry of Strategy and Finance and Investment Committee grant contract head of local governments (3) Documents to be Submitted •Cash grant application form (designated form) •Investment plan and summary of plan – five copies each •Financial statement of the applicant - five copies (including the financial statement of the foreign- invested company in the case of subsequent investment) •Copy of certificate of payment by source of invested funds – five copies Doing Business In Korea •Copy of foreign investment notification certificate – one copy (where the investment has been 58 notified) •Comments by the PM – one copy
※ Matters to be stated in the investment plan: •Applicant’s business performance and financial status (The parent company and overseas subsidiaries shall be included, and reference materials such as business reports shall be submitted separately.) •Total investment amount and foreign investment amount •Information on investment site (area, size, method of acquisition, cost, etc.) •Annual investment plan for the following five years (to be classified by fixed assets such as land, building, facilities) •Annual plan on procuring investment funds and operating funds for the following five years (to be classified by funds procured internally, funds procured externally, cash grant, etc.) •Detailed business plan (statement of business, product, technology, technology level, manufacturing process, front and back industries, business relationship with parent company and overseas subsidiaries, etc.) •Supply and demand in domestic and foreign markets and future outlook (including rival businesses and their outlook) •Business outlook of the company for the following 10 years (including investment profitability and supporting data such as return on investment, net current value, etc.) •Pro forma financial statement for the following five years (projections on factors comprising cost of sales and backup data should also be submitted) •Annual employment plan for the following five years (Data on number of employment of science and engineering majors classified by academic career. Number of employees classified by wage level, average wage comparison with similar business sectors, etc. should be included, and the new employments should be classified into regular/ non-regular workers and domestic employees/ foreign employees.) •Research and development plan for the following five years (training and education costs, existence of an affiliated research center, size of R&D personnel classified by academic career, joint research activities with domestic companies and research institutes, etc. should be included) •Reason for choosing Korea as an investment destination (including statement on Korea’s strengths and weaknesses compared with other investment destinations) •Contributions to the local and national economy for the following five years (scale of manufacturing, export and domestic sales, direct and indirect employments, tax payments, linkage effect on front and back industries through procurement of materials and product sales, function as an Asia regional headquarters, etc.) •Other necessary matters (4) Payment of Cash Grant I
A cash grant may be paid in lump sum within one year of the date on which approval was obtained, . Investment or in up to 10 installments over a period of up to five years. The cash grant applicant should set up a Guide separate account for the cash grant received, and account for revenue and expenses.
※Other matters regarding the payment and return of cash grant shall be determined as prescribed by the Subsidy Management Act and Local Finance Act.
(5) Pre-Evaluation Policy for Cash Grant The pre-evaluation policy is aimed at actively inducing foreign investments that are expected to have a major impact on the national economy. Under the policy, KOTRA (Invest KOREA) pre-evaluates projects and presents recommendations to the Minister of Trade, Industry & Energy and the Foreign Investment Committee to determine whether to approve cash grant. The policy is implemented under a dual system with the existing system of evaluating the projects after an application has been made. The decision on whether the cash grant is to be provided is made before the application is filed.
After experts’ review of candidate projects for investment attraction through cash grant, KOTRA (Invest KOREA) draws up negotiation plans and submits the recommendations of the Foreign Investment Committee to the Minister of Trade, Industry & Energy. In this process, the Foreign Investment Committee deliberates to determine whether or not to provide cash grant, as well as the cash grant ceiling. Negotiations with investors take place within one year after deliberation. Contract procedures and post management etc. after reaching an agreement in the negotiation are identical to existing methods. If negotiation and application are not completed within the given time, the Minister of Trade, Industry and Energy may extend the period up to one year by taking into consideration the introduction and development status of related technologies in Korea. ※ Pre-evaluation procedure
Receipt of investment plan KOTRA Organization of project evaluation team and evaluation meeting KOTRA(Evaluation team-MOTIE-local govn’t)
Doing Business In Korea Submission of negotiation plan and evaluation results to the Ministry of KOTRA 60 Trade, Industry & Energy (MOTIE)
Submission of recommendation to the Foreign Investment Committee – To MOTIE decide whether to provide cash grant and the cash grant ceiling
MOTIE/local govn’t - KOTRA – investing Negotiation on details – Detailed cash grant matters company
Receipt of cash grant application (official evaluation) MOTIE-investing company Negotiation: MOTIE – Applicant company – Local government MOTIE/local govn’t /investing company Cash grant contract signing Investing company-MOTIE-local govn’t
2-3 Follow-up Management of Cash Grant
(1) Obligations of Applicants An applicant shall, either directly or indirectly, manage the foreign-invested company concerned and faithfully carry out the obligations stated in the cash grant contract, as well as the investment expenditure plan.
The applicant shall take out an insurance policy against loss, or take equivalent measures to ensure that all assets (including those under construction) such as buildings, facilities, equipment, etc. are restored or replaced to a satisfactory level. Contracts to acquire assets that receive cash grants shall be designed to efficiently use cash grants through public tenders, official appraisals, requests for two or more estimates, etc.
The written consent of the Minister of Trade, Industry & Energy shall be secured in advance to use the assets purchased with a cash grant for purposes other than the stated business; to transfer, exchange, or lend the assets; or to provide the assets as collateral. Also, a cash grant shall not be dealt out as dividends or royalties. Also, the concerned foreign-invested company shall not guarantee liabilities other than for business purposes.
During the contract period, the applicant shall provide sufficient information for the evaluation of the contract’s implementation, and submit a statement of accounts audited externally to the Minister of Trade, Industry & Energy every year. (2) Management of Cash Grant I
Every year during the cash grant contract period, the Minister of Trade, Industry & Energy and the . Investment head of the relevant local government should check whether the cash grant applicant’s investment Guide execution plan has been carried out. After spending the cash grant provided, the applicant should submit a report within two months to the Minister of Trade, Industry & Energy and the head of the relevant local government. The applicant should also return the unspent cash grant amount and interest income generated after the cash grant provision is expired. 61 Land purchased with cash grant provided by the central and local governments should not be disposed of within five years of concluding the sales contract. If the land is disposed of within 10 years of concluding the contract, the proceeds from the sale shall be redeemed in proportion to the ratio of the support provided by the central and local governments to the total land purchase cost.
To be eligible for cash grants for education, training, and employment subsidies, the worker concerned shall be employed for three years or longer. Should the concerned worker be dismissed within three years, the subsidy shall be recovered pro rata up to the period in which the dismissal occurred (excluding interns in the science & engineering fields).
With regard to grant funds for construction, purchase of facilities and equipment, and infrastructure facility installation, if the actual foreign investment amount (in USD currency) is less than the foreign investment amount stated in the cash grant contract, the grant amount shall be reduced pro rata to the difference.
The cash grant applicant should keep a book stating cash grant expenditure details and documents certifying such expenditure until the contract expires, and should submit the book and documents on the request of the minister of the relevant ministry without delay.
3. Industrial Site Support
Under the industrial site support system to facilitate and induce foreign investment, ‘foreign investment zones’ designated by the Foreign Investment Promotion Act, ‘free trade zones’ under the Act on Designation and Management of Free Trade Zones, and ‘free economic zones’ as prescribed by the Special Act on Designation and Management of Free Economic Zones are operated. Foreign investment zones are classified into complex-type, individual-type and service-type.
The locations designated for foreign direct investment may vary in terms of eligibility for occupation, targeted industries, and investment incentives (e.g., rent, taxation, customs duty, and cash grant) depending on their purpose of designation. Therefore, it is advised to carefully examine and analyze the investment sites, even for planned sites where the approval procedures for factory establishment are simpler compared to others.
• Foreign Investment Zone • Industrial Complexes Specializing in Parts and Materials • Free Trade Zone • Free Economic Zone • Foreign Investment Location Incentives
3-1 Foreign Investment Zone
Foreign investment zones are areas designated by mayors and provincial governors under the Foreign Investment Promotion Act to promote foreign investment and attract large-scale foreign investment. Foreign investment zones are categorized into complex-type, individual-type and service-type, which vary in terms of the designation requirements, occupancy requirements and investment incentives. Complex-type foreign investment zones refers to areas designated to provide factory sites for lease to
foreign investors at a low cost, since foreign investors need to lease rather than to purchase land, etc. I . Investment to operate business for a certain period. To be eligible to move into a complex-type foreign investment Guide zone, a company should be registered as a foreign-invested company with foreign investment ratio of 30 percent or higher, and operate a business defined under the basic management plan (mostly manufacturing businesses). The minimum requirements for occupancy (minimum foreign investment amount, plant area) are as follows: foreign direct investment at least equal to the price of the leased plant site should be executed within five years of the date of the occupancy contract; and plant 63 establishment should be completed within five years of the date of the contract. The ratio of the building area to the site area should in general be at least 12 percent.
On the other hand, an individual-type foreign investment zone is a tailored location for large-scale investors and foreign investors can choose and designate the location of the investment zone. The ceiling for the size of an individual-type foreign investment zone shall be the size of land equal to the value of 50 percent of the foreign investment amount invested by the tenant company. The tax reduction period for individual-type foreign investment zones is seven years (tax reduction rate: equal to the foreign investment ratio for the first five years, and 50 percent of the foreign investment ratio for the following two years), which is longer than the reduction period of five years for complex-type foreign investment zones (tax reduction rate: equal to the foreign investment ratio for the first three years, and 50 percent of the foreign investment ratio for the following two years). Service-type foreign investment zones refers to areas leased to foreign-invested companies operating a service business creating high added value such as an R&D business. The minimum investment amount required in service-type foreign investment zones is 100 percent of the value of the leased land or building, and the plant construction area should be 40 percent, which is two times the highest standard factory area ratio. Also, implementation of the business plan should be completed within three years of the date of the occupancy contract.
< Designation Procedure (Article 18 of the Foreign Investment Promotion Act)>
1. Negotiations over attracting foreign investment (KOTRA, city or provincial government ↔ foreign-invested company) 2. Decision on investment (Foreign-invested company → KOTRA, local government) 3. Working-level consultation and establishment of development plan (KOTRA, local government ↔ Ministry of Trade, Industry & Energy) 4. Request for designation as a foreign investment zone (Local government → Ministry of Trade, Industry & Energy) 5. Examination of feasibility of designation as foreign investment zone (Investment Promotion Division of the Ministry of Trade, Industry & Energy) 6. Deliberation by the Foreign Investment Working Committee (Chairperson: Vice Minister of Trade, Industry & Energy) 7. Approval by the Foreign Investment Committee (Chairperson: Minister of Trade, Industry & Energy) 8. Designation and notification (Local government) < Complex-Type vs. Individual-Type > Classification Complex-type foreign investment zone Individual-type foreign investment zone Areas are designated in advance to attract small- Areas are designated upon the request of foreign Overview and medium-sized foreign-invested companies investors planning to make large-scale investment (1994~) (1997~)
Location Industrial complex No restrictions (areas desired by foreign investors) Doing Business In Korea •Designation standards: Designated after Requirement •Requirements for designation: Refer to the 64 deliberation when an amount above the for above required minimum amount by business sector designation •Requirements for occupancy: Foreign is invested (USD 30 million or more in the case (or investment ratio of 30% or higher, foreign of manufacturing, USD 20 million in the case of occupancy) investment amount of KRW 100 million or more tourism, USD10 million in the case of logistics)
•Lease support after purchase of land (on •Lease support after purchase of land request) •Ratio of the central and local government’s Location •Ratio of the central and local government’s expenditures for the purchase of the site: support expenditures for the purchase of the site: * 30:70 (Seoul Metropolitan area), 60:40 (Other * 30:70 (Seoul Metropolitan area), 60:40 (Other regions) regions)
•Qualifications •Additional abatement requirements are identical ––Manufacturing: USD 10 million or more Tax reduction to those for designation. ––Logistics: USD 5 million or more or exemption •Reduction or exemption period: •Reduction or exemption period (Corporate ––National tax reduced for seven years: The tax ––National tax reduced for five years: The tax tax, customs reduction rate applied is equal to the foreign reduction rate applied is equal to the foreign duty, investment ratio for the first five years, and investment ratio for the first three years, and acquisition 50% of the ratio for the following two years. 50% of the ratio for the following two years. tax, etc.) ––Local tax: Reduced or exempted up to 15 ––Local tax: Reduced or exempted up to 15 years years
•Businesses accompanying high technology** investing USD 1 million or more: 100% exemption for 10 years •Manufacturing businesses investing USD 5 million or more: 75% reduction (100% exemption in parts and materials complexes) Reduction or •Manufacturing businesses investing USD 2.5 exemption of million or more and employing 200 workers or Rent is exempted 100% land rent more: 100% exemption •Manufacturing businesses investing USD 2.5 million or more and employing 150 workers or more: 90% reduction •Manufacturing businesses investing USD 2.5 million or more and employing 70 workers or more: 75% reduction
•Investment should be completed within five years of the effective date of the occupancy •Investment should be completed within five contract (and should be maintained). Minimum years of the effective date of the occupancy •The FDI amount should be at least equivalent required contract. to the land price (based on officially assessed investment •The minimum investment requirement by land price). (FDI) industry should be satisfied (at least two times •Factory construction area: The building to land the land price). ratio requirement by industry should be satisfied (12% or higher) *To receive a rent reduction or exemption, a tenant company in a foreign investment zone should file an application to the foreign investment zone management authority and submit the relevant documents of proof. Rent reduction or exemption shall apply I .
starting from the month in which the tax reduction or exemption decision was finalized. Tenant companies should pay the pre- Investment reduction/ exemption rent until plant construction is completed. Guide * *Due to the amendment of related laws currently under way, matters that apply to businesses accompanying high technology and industry supporting service businesses are subject to change. (In the Restriction of Special Taxation Act, ‘businesses accompanying high technology’ and ‘industry supporting service businesses’ were revised to ‘businesses accompanying new growth driver industry technology’.) 65
(1) Complex-Type Foreign Investment Zones – Requirements and Designation Status
Requirements for designation ––New designation: The occupancy demand should cover at least 60 percent of the complex area and measure at least 330,000 m2. * When the occupancy rate of an existing foreign investment zone in the same municipality is below 80 percent, new or modified designation will be restricted. ––Outside the Seoul metropolitan area: A foreign-invested company’s occupancy demand for which foreign investment notification was completed should be at least 30 percent of the complex area and the explicit occupancy demand should be 50 percent or more of the complex area. ––Requirements for expansion of existing zones: The occupancy demand should cover at least 80 percent of the existing designated area, and the occupancy demand for which foreign investment notification was completed should cover at least 60 percent of the entire complex area.
Occupancy requirements ––Eligibility: A joint venture company where a foreign-invested company or a company in which a foreigner is the sole investor holds 30 percent or more of the joint venture’s total number of stocks with voting rights or total capital. The foreign investment amount should be KRW 100 million or more. * However, the foreign investment ratio should be 10 percent or higher in standard factories in the Daebul Industrial Complex, and 50 percent or higher for businesses prescribed by Article 25 (1) 3 (a), (b) of the Enforcement Decree of the Foreign Investment Promotion Act. ––Minimum investment amount: Investment equal to or more than the price of the factory site (the higher between the acquisition price and the officially assessed land price) should be attracted within five years. ––Factory building area: The minimum building to land ratio required by industry shall apply (minimum of 12 percent), and factory construction should be completed within five years.
Site rent A site can be leased for up to 50 years after the signing of an occupancy contract (to be renewed every 10 years). Rent reduction rate Normal rent Market rent 1% of the 5% of the 100% 90% 75% land price land price Businesses accompanying high Foreign- technology*** Manufacturing Manufacturing Manufacturing invested investing USD 1 businesses businesses businesses Foreign- companies Doing Business In Korea million or more investing USD investing USD investing USD invested that have Manufacturing (After a 100% 2.5 million 2.5 million 2.5 million companies yet to fully 66 businesses exemption for 10 or more and or more and or more that have implement investing USD 5 years, the rent hiring 200 hiring 150 and hiring implemented the occupancy million or more reduction rate shall full-time full-time 70 full-time the occupancy contract and be decided based employees or employees or employees or contract domestic on investment more more more companies in amount and scale FIZs (suppliers) of employment.)
***Manufacturing businesses investing USD 5 million or more: 100% exempted for industrial complexes exclusively for parts and materials businesses; 50% reduced for other industrial complexes ***To receive a rent reduction or exemption, a tenant company in a foreign investment zone should file an application to the foreign investment zone management authority and submit the relevant documents of proof. Rent reduction or exemption shall apply starting from the month in which the tax reduction or exemption decision was finalized. Tenant companies should pay the pre-reduction/ exemption rent until plant construction is completed. ***Due to the amendment of related laws currently under way, matters that apply to businesses accompanying high technology and industry supporting service businesses are subject to change. (In the Restriction of Special Taxation Act, ‘businesses accompanying high technology’ and ‘industry supporting service businesses’ were revised to ‘businesses accompanying new growth driver industry technology’.)
Rental deposit A deposit equal to one year’s worth of market rent at the time of entering into the occupancy contract should be deposited. The rental deposit may be replaced with a surety insurance certificate on a tenant company’s request, and the full amount of rental deposit should be paid when the occupancy contract is signed. If the deposit is raised in a renewed contract and the increased deposit exceeds KRW 10 million, 50 percent of the amount in excess may be reduced.
Execution of business plan •The occupancy requirements (minimum FDI amount, minimum building to land ratio) should be fulfilled within five years of signing the occupancy contract. The eligibility and requirements for occupancy (foreign investment ratio of 30 percent or more, foreign investment amount of KRW 100 million or more) should be maintained after the business plan execution period. •In the event that the eligibility criteria for occupancy are not met, the market rental rate shall be imposed. When there are inevitable causes, a grace period of two years may be granted for meeting the eligibility criteria after a negotiation with the Ministry of Trade, Industry & Energy. In this case, the market rent rate shall be applied retroactively from the date of occurrence of the cause of failing to satisfy the requirement. •In the event that the committed foreign investment amount is not fully invested, the market rental rate shall be applied retroactively from the day on which the business fails to satisfy the minimum required foreign investment amount. If inevitable, however, the business may be granted a grace period of up to one year from the date on which the business plan execution period expires after negotiations with the Minister of Trade, Industry & Energy. The market rental rate shall be applied to
the excess area retroactively from the date of occurrence of the cause. I . Investment
•In the event that part or all of the foreign investment amount is executed with long-term loans, the Guide market rental rate shall apply when the foreign investment amount fails to satisfy the minimum required amount for occupancy due to repayment of the loans. •In the event that the minimum required factory floor area is not satisfied, the market rent rate shall be applied to the excess area retroactively from the day on which the business fails to satisfy the minimum required factory floor area. If inevitable, however, the business may be granted a grace 67 period of up to one year from the expiry of the performance period pursuant to consultation with the Minister of Industry, Trade & Energy. The market rent rate shall be applied to the excess area retroactively from the date of occurrence of the cause of failing to satisfy the requirement. • In the event that the industrial site is returned within five years of the contract signing date without fully executing the business plan, the market rent for the period from the contract signing date to the contract termination date should be paid for the portion of the unexecuted business plan, and the reduced rent should be returned as well. •Any purchased industrial site shall not be disposed of within five years of the date of signing the purchase contract. An amount equal to the funds supported by the state or municipal government shall be returned if the land is sold within 10 years. •The construction of a factory building should commence within two years of signing the occupancy contract (Article 42 (1) 1 of the Industrial Cluster Development and Factory Establishment Act) and shall be completed within five years.
Occupancy system for suppliers •Foreign-invested companies that have signed an occupancy contract may request that their suppliers (domestic company with no foreign-held shares) be permitted to occupy 30 percent or less of the factory’s gross floor area for the purpose of process shortening or cost reduction. •Permission will be granted after the evaluation of a review committee and the consent of the Minister of Trade, Industry & Energy. Suppliers’ occupancy contract should be renewed every five years. •The rental rate shall be five percent.
16 Changwon (Parts) Oct. 14, 2010 71.3 32.8 38.5 451 2
17 Mieum (Parts) Nov. 28, 2011 299.6 131.6 210.3 439 7 Cheonan 5 18 Dec. 21, 2012 336.2 232.1 104.1 207 9 (Chungnam) Woljeon 156 (1st complex) 19 May 15, 2013 99.1 59.4 39.7 3 (Gwangju) 250 (2nd complex) Munmak 20 Dec. 10, 2013 99.1 35.2 63.9 249 2 (Gangwon) Jincheon-Sansu 21 Aug. 20, 2014 108.4 108.4 0 145 3 (Chungbuk) Songsan 2 22 Oct. 12, 2015 134.0 100.0 34.0 290 2 (Chungnam) Nat’l food industry 23 Oct. 12, 2015 116.0 0 116.0 - 0 complex (Jeonbuk) Chungju 24 Jul. 18, 2016 335.2 - - - - (Chungbuk) Songsan 25 Dec. 20, 2016 165.3 - 165.3 - - (Chungnam)
(2) Individual-Type Foreign Investment Zones – Requirements and Designation Status •Designation procedure: Individual-type foreign investment zones are locations tailored to large- scale investors designated by the Foreign Investment Working Committee of the Ministry of Trade, Industry & Energy. Based on the designation plan submitted by the mayor or governor or the relevant city or province, the Committee deliberates on factors such as investment feasibility, regional development effects, employment effects, and government financing effects. •Designation criteria: The foreign investment amount prescribed by Article 25 (1) of the Enforcement Decree of the Foreign Investment Promotion Act refers to the amount of foreign investment in Article 2 (1) 4 of the Act. However, in individual-type zones, the amount of foreign investment that was executed before application for designation shall be excluded. Industries Designation requirement I
Manufacturing businesses, businesses accompanying high .
FDI of USD 30 million or more Investment
technology*, industry supporting service business (logistics) Guide Tourism, industry-supporting service business (excluding FDI of USD 20 million or more (e.g., tourist hotel logistics) business, universal amusement facility business) FDI of USD 10 million or more (e.g., integrated freight Logistics, SOC terminal business) R&D facilities for industry-supporting service business and business accompanying high technology* 69 R&D facilities ––FDI of USD 2 million or more (with at least 10 researchers holding a master's degree or higher having research experience of three years or longer)
※Due to the amendment of related laws currently under way, matters that apply to businesses accompanying high technology and industry supporting service businesses are subject to change. (In the Restriction of Special Taxation Act, ‘businesses accompanying high technology’ and ‘industry supporting service businesses’ were revised to ‘businesses accompanying new growth driver industry technology’.)
•Background of introduction: Manufacturing-oriented complex-type foreign investment zones . Investment
that provide low-rent factory sites are not effective enough for attracting R&D or other service Guide businesses that require a building space. Therefore, the service-type foreign investment zone system was introduced for industrial complexes and other regions (buildings included). •Requirements for designation: The land or building to be designated should be available for immediate occupancy and the foreign-invested company’s occupancy demand for which foreign investment notification was completed should be specified. When a certain area in a national or 71 public property (including buildings) has been designated in advance, companies that completed foreign investment notification must account for at least 30 percent of the designated space.
3-2 Industrial Complexes Specializing in Parts and Materials
(1) Background Parts and materials complexes are industrial complexes for high-tech parts and materials manufacturing companies in complex-type foreign investment zones. Such complexes are located in Gumi, Pohang, Iksan and Busan-Jinhae Free Economic Zone, because the areas have convenient living conditions for foreigners and are located near large Korean companies that are in high demand for parts and materials.
* Source: Parts & materials complex website (www.pmcomplex.go.kr) ※Parts and materials businesses as prescribed by the Act on Special Measures for the Promotion of Specialized Enterprises, etc. for Components and Materials are given priority for tenancy in parts and materials complexes. Foreign investment equal to or more than the price of the site area is required for occupancy.
(2) Investment Incentives Doing Business In Korea
72 Investment requirements Incentives •Corporate tax reduction or exemption for five •Manufacturing businesses: Investment of USD years (tax reduction rate: equal to the foreign Tax 10 million or more investment ratio for the first three years, 50% of reduction •Logistics businesses: Investment of USD 5 million the ratio for the following two years) or more •Local tax exemption for up to 15 years •Investment of USD 1 million or more for Rent businesses accompanying high technology* Rent-free reduction •Investment of USD 5 million or more in general manufacturing businesses
※Due to the amendment of related laws currently under way, matters that apply to businesses accompanying high technology and industry supporting service businesses are subject to change. (In the Restriction of Special Taxation Act, ‘businesses accompanying high technology’ and ‘industry supporting service businesses’ were revised to ‘businesses accompanying new growth driver industry technology’.)
3-3 Free Trade Zone
Industrial complexes, airports, seaports, distribution complexes, freight terminals, etc. are designated as free trade zones to attract manufacturing and logistics businesses and to create a synergy effect by clustering such businesses. In a free trade zone, national and local taxes are reduced or exempted depending on the line of business and investment size. Also, customs duties are deferred for foreign goods and certain domestic goods introduced into a free trade zone, and a zero rate of value added tax is applied.
Free trade zones provide the advantage of not having to undergo complicated procedures for refunds, etc. when exporting products manufactured with imported raw materials. In addition, companies may lease land or factories, etc. for an extended period at a low cost, thereby creating favorable business conditions for foreign-invested companies engaged in export-oriented manufacturing business, logistics business such as warehousing, distribution, loading, and packing, etc. as well as wholesale for import and export. In particular, free trade zones are optimal locations for large-scale foreign- invested companies that operate both manufacturing and logistics businesses.
※ Qualifications for occupancy •Domestic and foreign-invested companies in the manufacturing business mainly for export •Companies in the wholesale business mainly for import and export trade •Companies in the logistics business such as warehousing, exhibitions, loading, transportation, etc. •Businesses supporting tenant companies through finance, customs clearance, data processing, etc. ※ Prioritized businesses I
•High-tech businesses designated by the Minister of Trade, Industry & Energy . Investment
•Businesses accompanying high technology and industry-supporting service businesses* under the Restriction of Guide Special Taxation Act •Businesses subject to foreign investment promotion, associated with regional strategic industries •Manufacturing businesses with significant technology transfer and job creation effects
※Due to the amendment of related laws currently under way, matters that apply to businesses accompanying high technology and industry supporting service businesses are subject to change. (In the Restriction of Special Taxation Act, ‘businesses accompanying high technology’ and ‘industry supporting service businesses’ were revised to ‘businesses accompanying new 73 growth driver industry technology’.)
(1) Incentives
Incentive Eligibility Details •Corporate tax reduction or exemption for five years (tax •Businesses accompanying high reduction rate: equal to the foreign investment ratio for technology & industry-supporting the first three years, 50% of the ratio for the following service businesses* Tax reduction two years) •Manufacturing businesses investing or exemption * Reduction for seven years in the Masan Free Trade Zone USD 10 million or more (100% for five years, 50% for the following two years) •Logistics businesses investing USD 5 •Local tax (acquisition tax, registration tax) exemption for million or more 15 years •Customs duties are exempted for construction materials, raw materials and other goods necessary for fulfilling business objectives that are imported from overseas for use and consumption in a Customs duty free trade zone. benefits •Customs duties are exempted or refunded for domestic goods declared as carried into a free trade zone. Zero rate of •For domestic goods declared as carried into a free trade zone VAT •Foreign goods and services supplied or provided among companies in free trade zones •Rent reduction/ exemption is granted in the following cases. The foreign investment ratio should be at least 30% or the largest shareholder should be a foreigner. (The condition should be satisfied for 10 years from the date on which rent reduction or exemption applies.) ––100% exemption: Foreign-invested companies in a business accompanying high technology or Rent reduction an industry supporting service business* with new foreign investment of USD 1 million or more or exemption ––100% exemption: Foreign-invested companies in a parts and materials business with new foreign investment of 5 million or more ––75% reduction: Foreign-invested companies in a manufacturing business with new foreign investment of USD 5 million or more
※Due to the amendment of related laws currently under way, matters that apply to businesses accompanying high technology and industry supporting service businesses are subject to change. (In the Restriction of Special Taxation Act, ‘businesses accompanying high technology’ and ‘industry supporting service businesses’ were revised to ‘businesses accompanying new growth driver industry technology’.)
(2) Designation Status
Free trade zones are divided into industrial complex-type and airport or seaport-type. There are seven industrial complex-type free trade zones in regions such as Masan, Iksan, Gunsan and Daebul and six airport and seaport-type free trade zones in Incheon airport, Busan port, Pohang port, Pyeongtaek- Dangjin Port and Gwangyang Port. Distribution complexes and cargo terminals can also be designated as a free trade zone. < Industrial Complex-Type Free Trade Zones > Category Masan Gunsan Daebul Donghae Yulchon Ulsan Gimje Date of Nov. 21, Dec. 12, Dec. 12, Jan. 1 2007 Oct. 6, 2000 Dec. 8, 2008 Jan. 6, 2009 designation 2002 2005 2002 Area 957 1,256 1,157 248 344 837 991 (1,000 ㎡) Doing Business In Korea
74 < Airport/Seaport-Type Free Trade Zones > Pohang Pyeongtaek and Gwangyan Incheon Category Busan Port Incheon Int’l Airport Port Dangjin Ports Port Port Date of Jan. 1, Dec. 8, Jan. 1, Apr. 6, 2005 (Phase 1) Mar. 30, 2009 Jan. 1, 2002 designation 2002 2008 2003 Dec. 31, 2007 (Phase 2) Area (1,000 ㎡) 9,363 724 1,429 8,880 2,014 3,015
* Source: Ministry of Trade, Industry & Energy website (www.motie.go.kr)
3-4 Free Economic Zone
Free economic zones are special economic zones designed to actively induce foreign direct investment by guaranteeing free business activities and investment incentives to the maximum possible extent, primarily by alleviating various regulations while improving the business and living conditions of foreign-invested businesses.
Also, a wide range of free business activities are guaranteed by providing various tax incentives, deregulation, convenient living conditions and simplified administrative services. In addition, foreign education facilities and hospitals are operated, foreign language services are provided, the use of foreign currency and foreign broadcasting is permitted, and tax cuts and fund support are offered for foreign-invested companies.
Incheon, Busan-Jinhae, Gwangyang Bay area, Yellow Sea, Daegu-Gyeongbuk, Saemangeum- Gunsan (Saemangeum project area), East Coast, and Chungbuk Free Economic Zones are currently designated. They are expected to become a logistics hub of Northeast Asia and a center for high value added service businesses and high tech businesses.
* The Saemangeum-Gunsan Free Economic Zone lost its status as an FEZ (Aug. 2014) and has been incorporated into the Saemangeum Project Region pursuant to the Special Act on the Promotion of the Saemangeum Project Region.
※ Qualifications for occupancy Foreign-invested companies (manufacturing, logistics), medical institutions, education institutions, foreign broadcasting stations, financial institutions, etc. (1) Designation Status I
< Free Economic Zones > . Investment Gwangyang Daegu- Saemangeum- Guide Zone Incheon Busan-Jinhae Yellow East Coast Chungbuk Bay Area Gyeongbuk Gunsan Jeonnam Daegu, Incheon Busan (Gangseo- (Yeosu, Gyeongbuk Gangwon (Yeonsu-gu, gu) Suncheon, Jeonbuk Gyeonggi Cheongwon, Location (Gyeongsan, (Gangneung, Jung-gu, Seo- Gyeongnam Gwangyang), (Gunsan, Buan) (Pyeongtaek) Chungju Yeongcheon, Donghae) gu) (Changwon-si) Gyeongnam 75 Pohang) (Hadong-gun) Area (㎢) 123.97 51.23 77.69 19.73 28.4 4.39 8.95 7.21 Yangyang Airport/ Incheon Airport, Gimhae Airport, Gwangyang Daegu Int’l Gunsan Gunjang Pyeongtaek Airport Cheongju seaport Incheon Port Busan New Port Port Airport New Port Dangjin Port Donghae Airport Port Implemented 2003-2022 2003-2020 2003-2020 2008-2020 2008-2020 2008-2020 2013-2024 2013-2020 period Gwangyang, Daegu, Sinhangman, Songak, Inju, Bukpyeong, Songdo, Yulchon, Yeongcheon, Gunsan, Myeongjin, Poseung, Mangsang, Bio Valley, Project areas Yeongjong, Sindeok, Gyeongsan, Saemangeum, Jisa, Dudong, Hyundeok, Okgye, Airo, Eco Cheongna Hwayang, Pohang, Gogunsan Ungdong Hanjung Gujeong Hadong Gumi Advanced materials, BT, IT, medical logistics, research, Hi-tech parts, medical clinical trial Busan New Port- Logistics, chemicals, auto or marine drugs and Hi-tech International based logistics, manufacturing, parts, energy, tourism, medical transportation Automobiles, business, IT, BT, international steel, MRO, industrial non-ferrous equipment, components, electronics, R&D, aircraft, business, high- machinery, logistics, high- metal, super aviation, Targeted hi-tech parts and logistics, tech parts assembly, tech knowledge- light-weight logistics, businesses medical materials, tourism, finance, and materials metal, new based advanced aircraft business, IT chemicals, leisure, high- business, R&D, and renewable business, R&D, parts and maintenance, convergent logistics tech business resort and leisure energy, tourism, international materials, electric business businesses leisure cooperation, housing, auto parts, culture & tourism education, new and medical renewable and cultural energy facilities
* Source: Free Economic Zone management authority website (www.fez.go.kr) (2) Incentives
Recipient/ Support Tax Incentives Reduction Period & Rate Requirements for Reduction •Manufacturing: USD 30 million The reduction rate is equal or more to the foreign investment •Tourism: USD 20 million or more ratio for the first five years, •Logistics: USD 10 million or and 50% of the ratio for
Doing Business In Korea more the following two years. •R&D: USD 2 million or more Corporate 76 •Manufacturing: USD 10 million tax National The reduction rate is equal or more tax to the foreign investment •Tourism: USD 10 million or more ratio for the first three •Logistics: USD 5 million or more Foreign-invested years, and 50% of the ratio •Medical facilities: USD 5 million businesses in free for the following two years. or more economic zones •R&D: USD 1 million or more Exempted for five years Customs from the import declaration Imported capital goods duty date •Manufacturing: USD 10 million or more Acquisition •Tourism: USD 10 million or more Local 100% exempted for 15 tax, roperty •Logistics: USD 5 million or more tax: years tax •Medical facilities: USD 5 million or more •R&D: USD 1 million or more •To be decided through negotiations, but at least 5% of the FDI amount is provided •Factory and R&D facility installation expense, employment and education and training subsidies Cash grant •Eligibility: Foreign-invested companies with foreign investment ratio of 30% or higher. The recipients are decided through a deliberation on whether high technology is involved*, technology transfer effects, job creation effects, etc. •Roads, railroads, airport, port facilities, sewage system, waste disposal facilities, etc. Infrastructure •Eligibility: 50% of the construction expense is supported; 100% if the Free Economic Financial facilities Zone Committee adopts a resolution support Foreign •Expenses for establishing, operating and constructing a foreign education facility are education supported. facilities and •Eligibility: Investments that meet certain criteria such as reputability and contribution research to national development facilities •State-owned or public land can be leased for up to 50 years. (Contract renewable for Rent another 50 years.) •The rent is set at around 1% of the land price. •Exemption from mandatory employment of the physically disabled. Eased labor •Unpaid holidays for employees are permitted, the scope of businesses permitted to use regulations Other dispatched workers is expanded and the dispatch period is extended. support Free foreign •For current transactions of USD 10,000 or less, direct payment between the involved exchange parties is permitted. transactions
* Source: Free Economic Zone management authority website (www.fez.go.kr) ※Due to the amendment of related laws currently under way, matters that apply to businesses accompanying high technology and industry supporting service businesses are subject to change. (In the Restriction of Special Taxation Act, ‘businesses accompanying high technology’ and ‘industry supporting service businesses’ were revised to ‘businesses accompanying new growth driver industry technology’.) 3-5 Foreign Investment Location Incentives I .
(1) Comparison of FIZ, FTZ and FEZ Investment Guide Foreign investment zone (FIZ) Free trade zone (FTZ) Classification Industrial Airport/seaport Free economic zone (FEZ) Complex-type Individual-type complex-type or logistics-type Special Act on the Act on the Designation & Governing law Foreign Investment Promotion Act Designation & Management Management of Free Trade Zones of Free Economic Zones 77 Foreign capital Foreign capital Foreign capital inducement, inducement, inducement, Purpose of Foreign capital inducement, transfer of advanced international competitiveness trade promotion, development designation technologies, job creation enhancement, and balanced regional of international regional development development logistics base Areas near Airports or airports or seaports, logistics Areas near international Location Inside industrial complexes No limitations seaports, industrial complexes, cargo airports and seaports complexes terminals Comparable to special Individual business administrative zones Characteristics Lease-only complexes establishments are Customs-free zone (cooperatives of municipal designated governments) *Apprx. 65 to 200 million m2 Minister of Trade, Industry & Energy Designating Mayor or provincial governor Minister of Trade, Industry & Energy *Foreign Investment authority * Foreign Investment Committee’s deliberation required Committee’s deliberation required •State industrial complexes: Industrial complex Managing Free Economic Zone management authorities Minister of Trade, Industry & Energy authority management authority •Others: Mayor or provincial governor FDI requirements: •Manufacturing: USD 30 Foreign investment ratio million or more of 30% or higher, foreign •Tourism: USD 20 million investment amount of KRW •Export-oriented domestic or •Foreign-invested businesses or more 100 million or more foreign businesses •Manufacturing, logistics, •Logistics: USD 10 Eligibility for •Manufacturing, logistics, etc. •Foreign-invested business hospitals, education million or more move-in •Foreign investment equal to •Wholesale businesses mainly for facilities, foreign •R&D: USD 2 million or more than the price of import/export broadcasting, financial or more (10 or more the leased land should be •Integrated logistics businesses service institutions, etc. researchers holding executed within five years of a master’s degree or the contract date higher with three or more years’ experience) •Manufacturing, tourism: •Manufacturing: USD 10 Identical to those applicable to Requirements USD 10 million or more million or more complex-type foreign investment for tax Identical to the above •Logistics, medical •Logistics: USD 5 million or zones (Article 121, Restriction of reduction institution: USD 5 million more Special Taxation Act) or more •Corporate tax: For five years •Corporate tax: For five •Corporate tax and (reduction rate: equal to the years (Seven years when •Corporate tax and income income tax: For seven foreign investment ratio for the qualified as an individual- tax: for five years years first three years, 50% of the ratio type foreign investment •Local tax: For up to 15 years •Local tax: For up to 15 for the remaining two years) zone) Taxes reduced years •Local tax: Up to 15 years, •Local tax: Up to 15 years determined by ordinances Corporate tax reduced for seven years (reduction rate: equal to the foreign investment ratio for the first five years, 50% of the ratio for the remaining two years) irrespective of the region in the case of industry supporting service businesses and businesses accompanying high technology* Customs duty Exempted for five years from the day on which imported Customs duty withheld (imported Customs duty on capital goods reduction capital goods have been declared. goods, capital goods). exempted for five years. Foreign investment zone (FIZ) Free trade zone (FTZ) Classification Industrial Airport/seaport Free economic zone (FEZ) Complex-type Individual-type complex-type or logistics-type Approximately 10/1,000 of the site Approximately 10/1,000 of Approximately 10/1,000 of value (Determined by the managing Rent the site value (Specified in the the site value (Determined by authority after consultation with the operation guideline for FIZs) the managing authority) Ministry of Strategy and Finance)
Doing Business In Korea •Businesses accompanying high technology* investing USD 1 million or more: 100% 78 •Rent for factory and factory site exemption exempted for 10 years when certain •General manufacturing requirements are met: businesses investing USD 5 –100% exemption: Foreign- million or more: 75% reduction invested companies in a business (100% exemption in the case of accompanying high technology industrial complexes specializing or an industry supporting service in parts and materials) 100% exempted in the business* with new foreign •Manufacturing businesses case of state-owned investment of USD 1 million or Determined by the managing investing USD 2.5 million or properties Rent reduction more authority based on more and employing 200 full- rate –100% exemption: Foreign- ordinances time workers or more: 100% invested companies in a parts (50-100% reduction) exemption and materials business with new •Manufacturing businesses foreign investment of 5 million or investing USD 2.5 million or more more and employing 150 full- –75% reduction: Foreign-invested time workers or more: 90% companies in a manufacturing reduction business with new foreign •Manufacturing businesses investment of USD 5 million or investing USD 2.5 million or more more and employing 70 full- time workers or more: 75% reduction
※Due to the amendment of related laws currently under way, matters that apply to businesses accompanying high technology and industry supporting service businesses are subject to change. (In the Restriction of Special Taxation Act, ‘businesses accompanying high technology’ and ‘industry supporting service businesses’ were revised to ‘businesses accompanying new growth driver industry technology’.)
(2) Tax Reduction: National tax (corporate tax) and local tax (acquisition tax and property tax) Tax Reduction Method Eligibility Reduced Tax Reduction Period Investment Requirements •Advanced technologies: None •Reduced for seven years: •Industry: •Businesses accompanying ––For five years: The reduction ––Manufacturing: USD 30 million high technology and rate is equal to the foreign or more industry supporting service investment ratio. ––Tourism: USD 20 million or more businesses* National tax ––The following two years: ––Logistics: USD 10 million or more •Companies in individual-type (Corporate The reduction rate is 50% ––R&D: USD 2 million or more, 10 foreign investment zones tax) of the foreign investment or more employees holding a ratio. * Local tax master’s degree or higher (acquisition ––Manufacturing: USD 10 million •Companies in complex-type •Reduced for five years: tax and or more foreign investment zones ––For three years: The property ––Tourism: USD 10 million or •Companies in free economic reduction rate is equal to tax): Up to more zones the foreign investment ratio. 15 years ––Logistics: USD 5 million or more •Companies in free trade ––The following two years: ––R&D: USD 1 million or more zones The reduction rate is 50% •Companies in enterprise city of the foreign investment ※Enterprise cities: USD 10 million development zones ratio. or more Tax Reduction Method Eligibility I
Reduced Tax Reduction Period Investment Requirements . Investment
•Reduced for five years: Guide •Free economic zone ––For three years: The development project entities National tax reduction rate is equal to •Total project amount of USD 500 •Enterprise city development (Corporate the foreign investment ratio. million or more with FDI of USD project entities tax) ––The following two years: 30 million or more and FDI ratio •Jeju Investment Promotion The reduction rate is 50% of 50% or more Zone development project of the foreign investment entities 79 ratio.
※Due to the amendment of related laws currently under way, matters that apply to businesses accompanying high technology and industry supporting service businesses are subject to change. (In the Restriction of Special Taxation Act, ‘businesses accompanying high technology’ and ‘industry supporting service businesses’ were revised to ‘businesses accompanying new growth driver industry technology’.)
(3) Exemption of Customs Duty, etc. (Article 121-3, Restriction of Special Taxation Act)
Tax Exemption Method Eligibility Exempted Tax Exempted Period Eligible Capital Goods • Businesses accompanying high Capital goods imported • technology and industry supporting Customs duty through investment by • Capital goods service businesses* Special excise tax acquisition of new shares. • • for which import Companies in individual-type Value added tax As free trade zones are declaration was foreign investment zones customs-free zones, customs completed within five duties are withheld for •Companies in complex-type foreign years of signing the investment zones imported foreign goods and •Customs duty occupancy contract •Companies in free trade zones customs duties are refunded •Companies in free economic zones for domestic goods.
※Due to the amendment of related laws currently under way, matters that apply to businesses accompanying high technology and industry supporting service businesses are subject to change. (In the Restriction of Special Taxation Act, ‘businesses accompanying high technology’ and ‘industry supporting service businesses’ were revised to ‘businesses accompanying new growth driver industry technology’.)
(4) Financial (Location) Support
•Article 14 of the Foreign Investment Promotion Act Governing law •Article 6 of the guidelines on funding local governments’ foreign investment attraction activities
Eligible •Businesses with foreign investment ratio of 30 percent or higher or businesses whose largest businesses shareholder is a foreigner
•The maximum amount of funds provided for the central or local government’s foreign investment attraction activities is: Support ceiling ––The amount equal to 50 percent of the targeted FDI amount; or ––The amount equal to 25 percent of the sum of the FDI amount and the reinvested earned surplus amount (The foreign investment ratio should remain at 25 percent or higher.) Support Provided Details
•Provision of land for lease through designation and purchase of foreign investment zones, etc. (i) Provision of land •Sharing of land purchase costs: for lease ––Seoul metropolitan area: 30% by the central government, 70% by the local government ① Land purchase ––Areas outside the Seoul metropolitan area: 60% by the central government, 40% by the local government Doing Business In Korea
80 Eligibility Rent reduction rate Individual-type foreign investment zones 100% exempted Businesses accompanying high Complex-type investment zones 100% technology** investing USD 1 million or more Industrial complexes 50% ② Rent reduced (state-owned General manufacturing businesses Complex-type investment zones 75% properties) investing USD 5 million or more Industrial complexes 50% * The lease period can be renewed by Complex-type foreign investment Parts and materials businesses investing up to 50 years zones (specializing in parts or 100% USD 5 million or more materials) ※In the case of land owned by more than one central or local government body, rent reduction guidelines of the relevant government body shall apply in proportion to the ownership ratio (rent reduction rules in government-owned property are determined by municipal ordinance.)
(ii) Subsidy for The difference is subsidized when land owned by the central or local government, difference of sale government-invested agencies or individuals is sold below the land development cost. price - The subsidies vary based on municipal ordinances.
When land owned by the central or local government, government-invested agencies or (iii) Rent subsidized individuals is leased to foreign invested businesses at a reduced rental rate, the difference between the reduced rent and the original rent is subsidized.
※To receive rent reduction or exemption, a tenant company in a foreign investment zone should make an application to the foreign investment zone management authority and submit the relevant documents of proof. The reduced rent shall apply from the month in which the rent reduction decision was made. Tenant companies should pay the pre-reduction rent until factory construction is completed. ※ ※Due to the amendment of related laws currently under way, matters that apply to businesses accompanying high technology and industry supporting service businesses are subject to change. (In the Restriction of Special Taxation Act, ‘businesses accompanying high technology’ and ‘industry supporting service businesses’ were revised to ‘businesses accompanying new growth driver industry technology’.) (5) Other Support I
•Appointment of a Project Manager* . Investment
•Cash subsidy for employment or education/training Guide •Exemption from mandatory employment of people of distinguished service to the State •Exemption from traffic inducement dues for facilities or buildings in foreign investment zones
※ Project Manager •The government operates a Project Manager system to efficiently support foreign investors or foreign-invested 81 companies. The President of KOTRA may designate a Project Manager for each investor or company.
•KOTRA employees, officials from foreign investment related central administrative organizations and local governments, officials or employees belonging to government agencies prescribed by the Act on the Management of Public Institutions are eligible for designation as a Project Manager, and qualification as a Project Manager is awarded upon completion of Project Manager training courses.
•Project Managers provide overall assistance to foreign investors and foreign-invested companies, ranging from collection and provision of information, arrangement of meetings, and settlement support for the employees of foreign-invested companies and their families. ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ 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In Korea 84
1. Visa
In principle, a foreigner should obtain a visa at a diplomatic mission abroad in advance in order to enter South Korea. Korea treats the visa as a consul’s recommendation for a foreigner’s entry request rather than a certificate of permission to enter a country. Usually, a visa is a stamp placed on a passport stating the status of sojourn and sojourn period.
• How to Enter Korea • Business Investment Visa (D-8) • Visa for Dependent Families (F-3)
1-1 How to Enter Korea
A foreigner can enter Korea through one of the following procedures: •A foreigner may enter Korea without a visa and undergo an entry inspection at the port of entry to obtain a status of sojourn and receive the maximum period of sojourn.
Arrival at a Korean airport Immigration inspection at the airport Permission to enter granted without a visa (granting of status of sojourn) Arrival at a Korean airport Immigration inspection at the airport Permission to enter granted without a visa (granting of status of sojourn) •A foreigner may enter Korea by obtaining a visa issued at a diplomatic mission abroad. Acquisition of a visa at a Korean Immigration inspection at the airport Permission to enter granted embassy or consulate (confirmation) Acquisition of a visa at a Korean Immigration inspection at the airport Permission to enter granted Arrivalembassy at a orKorean consulate airport Immigration (confirmation)inspection at the airport Permission to enter granted without a visa (granting of status of sojourn) Certificate of confirmation of visa issuance Visa issuance by Immigration Permission •In orthe visa event issuance that certificate the authority number issued for issuing visasa Korean is not embassy delegated toinspection the head at theof the diplomatic mission Certificate of confirmation of visa issuance Visa issuance by Immigration to enter granted abroad, a byforeign an immigration national office may enter Korea after he/sheor consulate obtains a certificateairport of confirmationPermission of visa issuance Acquisitionor visa issuance of a visa certificate at a Korean number issued Immigrationa inspectionKorean embassy at the airport inspection at the Permission to toenter enter granted granted (or a visaembassy byissuance an or immigration consulate certificate office number) issued(confirmation) byor the consulate immigration office airporthaving jurisdiction over the inviter’s place of sojourn and obtains a visa by presenting the said certificate to the diplomatic mission abroad.
Certificate of confirmation of visa issuance Visa issuance by Immigration Permission or visa issuance certificate number issued a Korean embassy inspection at the to enter granted by an immigration office or consulate airport All foreign nationals who enter the Republic of Korea should obtain a status of sojourn as prescribed Management
by Presidential Decree (Article 10 of the Immigration Control Act). The status of sojourn is classified II . into 36 categories depending on the scope of permitted activities. Foreign investors and indispensable Business professional specialists of foreign companies fall into the category of ‘business investment (D-8)’.
Foreigners’ sojourn in Korea is divided into long-term stay and short-term stay depending on whether the stay is longer or shorter than 90 days. Change from short-term to long-term stay may be permitted or unpermitted depending on the applicant’s status of sojourn. Most short-term visas are issued 85 immediately at a diplomatic mission abroad, since the authority to issue short-term visas is delegated to the head of overseas diplomatic missions. However, the issuance of a long-term visa may take longer, as it is issued at a diplomatic mission abroad after the approval of the Minister of Justice has been obtained. The authority to issue a single-entry visa of one year or shorter for foreigners eligible for a business investment (D-8) visa and their dependent families (F-3) is delegated to the head of the relevant diplomatic mission.
< Procedure for Issuance of a Business Investment (D-8) Visa >
Immigration office Application for issuance of having jurisdiction over confirmation of visa issuance place of sojourn Issue certificate to the applicant (foreigner)
Diplomatic missions Application for visa abroad issuance
Arrival in Korea
Within 90 days Issuance of alien Alien registration registration card Change in applicant's sojourn status
Extension of period of stay Report of the birth of a child (Report within 90 days from Granting of status of sojourn Immigration office the date of birth) having jurisdiction Approval of re-entry over the Investment Report of changes to alien registration place of sojourn Consulting information (Including change, addition of Report within 14 days Center workplace within an affiliated company) (KOTRA)
Report within 14 days Change or addition of workplace
Permission for activities beyond the current status of sojourn
Immigration office having jurisdiction over the place Report change of address Change of place of sojourn and head of within 14 days of sojourn Si/ Gun/ Gu/ Eup/ Myeon/ Dong office
Departure from Immigration inspection Return alien registration card Korea 1-2 Business Investment Visa (D-8)
(1) Persons Eligible for a D-8 Visa A business investment (D-8) visa is issued to indispensable professional specialists engaged in the management, business administration, production, technology, or research of a foreign-invested company, as prescribed by the Foreign Investment Promotion Act. Foreigners hired in Korea, general
Doing Business In Korea administrators or engineers and service providers who can be replaced by domestic human resources 86 are not considered indispensable professional specialists.
※ Indispensable professional specialists •Executives An “executive” refers to a person who has primary control over organizational management and exercises extensive rights in the decision-making process. As one of the highest members of a company, an “executive” is generally directed and supervised exclusively by the Board of Directors and shareholders. (An executive shall not be directly involved in the provision of services or the organization’s service-related business.)
•Senior Manager A “senior manager” refers to a person who is responsible for the establishment and execution of a company’s or a department’s objectives and policies; has the right to set up plans, lead employees and supervise business operations; executes the right to employ, dismiss and recommend employees; decides, supervises or controls the work carried out by employees in supervisory, professional or administrative positions; or has discretionary authority over everyday business. Frontline supervisors (except for professional service providers) or employees directly engaged in the provision of services do not fall into this category.
•Specialist A “specialist” refers to a person who has highly professional and monopolistic experience and knowledge essential for research, design, technology and management concerning the service provided by the company.
(2) Application and Issuance A business investment (D-8) visa can be obtained through the following procedures: •A foreigner may submit the required documents to a diplomatic mission abroad to apply for visa issuance. The head of a diplomatic mission has the authority to issue a business investment (D-8) visa with a period of sojourn of up to one year. •In the event that the authority for issuing visas is not delegated to the head of an overseas diplomatic mission, a foreigner may apply for visa issuance after he/she receives a certificate of confirmation of visa issuance or a certificate number, which an inviting party has obtained from the immigration control office that has jurisdiction over the inviter’s place of sojourn. •In the event that a foreigner has entered Korea without a visa or with a short-term visa due to unavoidable circumstances, he/she may apply for permission to change the status of sojourn at the immigration office that has jurisdiction over his/her place of sojourn or at KOTRA’s Investment Consulting Center. < Documents required for a business investment (D-8-1) visa > Management More or less documents may be required for review. II . •Application form for visa issuance or application form for confirmation of visa issuance Business •Passport (copy of passport in the case of application for visa issuance), color photo for passport, processing fee •In the case of nationals of countries with high incidence of tuberculosis, a certificate of tuberculosis examination is required (issued by the local community health center) •Copy of foreign-invested company registration certificate •Copy of business registration certificate •Corporation registration certificate issued in the past three months 87 •Specification of change in shareholders (original copy) •Dispatch order in the case of employees dispatched to Korea ※A dispatch order should be issued by the company headquarters, even if the employee is dispatched from a branch. The dispatch order should state the dispatch period. •Certificate of employment issued by company headquarters (in the case of employees dispatched to Korea) •Document certifying qualification as indispensable professional specialist (one of the following): technical certifications (for engineers), certificate of career, company organizational chart, diploma •Certificate of payment of tax (stating payment of corporate tax, grade A earned income tax, etc.) •Document certifying place of sojourn (real estate lease contract, etc.) •Document certifying introduction of investment funds •Cash investments ––Document certifying permission to carry out foreign currency issued by the tax office or bank (financial institute) of the investor’s home country (if applicable) ––Specification of introduced investment funds (certificate of remittance, certificate of purchase of foreign currency, customs declaration, etc.) •Investment-in-kind ––Copy of certificate of completion of investment-in-kind (issued by the Commissioner of Korea Customs Service) ––Certificate of completion of import declaration •Additional documents to be submitted by individual investors investing less than KRW 300 million
•Document certifying expenditure of capital ––Receipt for purchase of goods, office interior design expense, etc. ––Withdrawal and deposit records of a domestic bank account, etc. •Withdrawal and deposit records of corporate account •Document certifying existence of a business establishment ––Office lease contract ––Photograph of building, office space, signage, etc. •Document certifying business experience in the relevant industry or field (if necessary)
Processing fee (revenue stamp): Varies by country due to reciprocity principles. Inquire a diplomatic mission for the exact amount. * Processing fee is exempted for application for certificate of confirmation of visa issuance
1-3 Visa for Dependent Families (F-3)
Those eligible for an F-3 visa are the spouse and unmarried underage children accompanying a person eligible for a business investment (D-8) visa. The dependent family (F-3) visa is issued as follows: •A foreign national should submit an application to a Korean diplomatic mission in his/her country after preparing the necessary documents. The head of a Korean diplomatic mission abroad has the right to issue F-3 visas for a period of sojourn of up to one year. •In the event that the authority for issuing visas is not delegated to the head of the diplomatic mission abroad, the certificate of confirmation of visa issuance or the relevant confirmation number issued by the immigration control office having jurisdiction over the inviter’s place of sojourn should be presented to a Korean overseas diplomatic mission for visa issuance. •In the event that a foreigner has entered Korea without a visa or with a short-term visa due to an unavoidable reason, he/she may apply for a change of status at KOTRA’s Investment Consulting Center or the immigration control office having jurisdiction over the place of sojourn.
< Documents required for an F-3 visa > Doing Business In Korea More or less documents may be required for review. 88 •Application form for visa issuance or application form for certificate of confirmation of visa issuance •Passport (copy of passport when applying for certificate of confirmation of visa issuance) •Document certifying family relations (family relation records such as marriage certificate or a copy of the family register, or a birth certificate) •Employment certificate and tax payment certificate of the inviter •A color photo for passport Processing fee (revenue stamp): Varies by country due to reciprocity principles. Inquire a diplomatic mission for the exact amount. * Processing fee is exempted for application for certificate of confirmation of visa issuance.
2. Stay in Korea
A foreigner may stay in Korea within the scope of his/her sojourn status and sojourn period. Foreigners staying in Korea for a period of 91 days or longer are subject to alien registration. To apply for alien registration, the necessary documents should be attached to the alien registration application form and submitted to the head of the immigration office having jurisdiction over the place of sojourn. When a foreigner intends to change or has changed the reported matters of his/her alien registration, status of sojourn, workplace, or place of sojourn, he/she shall report the changes or obtain permission for the change in accordance with the Immigration Control Act.
• Permission of Change of Status of Sojourn • Alien Registration • Extension of Period of Stay • Re-entry Permit • Report of Change of Place of Sojourn • Report of Change of Alien Registration Information • Permission of Activities Beyond the Current Status of Sojourn
2-1 Permission of Change of Status of Sojourn
Foreigners who have entered Korea without a visa (B-1, B-2) or with a short-term visa (C-3) and intend to obtain a business investment (D-8) visa and their accompanying families, and foreigners who intend to establish and operate a foreign-invested company during a long-term stay in Korea and their accompanying families should obtain a permission for change of status of sojourn. An application for permission of change of status of sojourn to D-8 can be submitted to KOTRA’s Investment Consulting Center or the immigration control office having jurisdiction over the place of sojourn within the period of stay permitted under the current visa. Foreigners who have entered Korea with a temporary visit visa (C-3) as a member of a tourist group Management
for the sole purpose of travel (C-3-2) or for medical tourism (C-3-3), an industrial training visa (D-3), non- II . professional employment visa (E-9), vessel crew (E-10), miscellaneous visa (G-1), working holiday visa Business (H-1) or working visit visa (H-2) are not allowed to apply for change of status of sojourn. (In the case of the working holiday (H-1) visa, change of sojourn status is not permitted for nationals of France, Ireland, and the U.K. under bilateral visa agreements.)
< Documents required to apply for permission of change of status of sojourn (D-8-1) > 89 More or less documents may be required for review. •Application form (form no. 34 of the Enforcement Rules of the Immigration Control Act), passport, color photo for passport •In the case of nationals of countries with high incidence of tuberculosis, a certificate of tuberculosis examination is required (issued by the local community health center) •Copy of foreign-invested company registration certificate •Copy of business registration certificate •Certified copy of corporate registration •Corporation registration certificate issued in the past three months •Specification of change in shareholders (original copy) •Dispatch order (in the case of employees dispatched to Korea) ※A dispatch order should be issued by the company headquarters, even if the employee is dispatched from a branch. The dispatch order should state the dispatch period. •Employment certificate issued by company headquarters (in the case of employees dispatched to Korea) •Document certifying qualification as indispensable professional specialist (one of the following): technical certifications (for engineers), certificate of career, company organizational chart, diploma •Certificate of payment of tax (stating payment of corporate tax, grade A earned income tax, etc.) •Document certifying place of sojourn (real estate lease contract, etc.) •Office lease contract •Certificate of introduction of investment funds •Cash investments ––Document certifying permission to carry out foreign currency issued by the tax office or bank (financial institute) of the investor’s home country (if applicable) ––Specification of introduced investment funds (certificate of remittance, certificate of purchase of foreign currency, customs declaration, etc.) •Investment-in-kind ––Copy of certificate of completion of investment-in-kind (issued by the Commissioner of Korea Customs Service), certificate of completion of import declaration •Additional documents to be submitted by individual investors investing less than KRW 300 million
•Document certifying expenditure of capital ––Receipt for purchase of goods, office interior design expense, etc. ––Withdrawal and deposit records of corporate bank account, etc. •Documents certifying existence of a business establishment ––Office lease contract ––Photograph of building, office space, signage, etc. •Document certifying sales records ––Income statement ––Certificate of completion of export declaration (import and export permit) ––Documents certifying collection of payment for export (transaction records of a domestic account) ––Business plan (expenditure of investment funds, future business plans) •Document certifying business experience in the relevant industry or field (if necessary)
* Processing fee is exempted for applications for change to business investment (D-8) visa. 2-2 Alien Registration
A foreigner who intends to stay in Korea for more than 90 days from the date of entering Korea should apply for alien registration at the immigration control office having jurisdiction over the place of sojourn or at KOTRA’s Investment Consulting Center within 90 days of the date of entry. Also, a foreigner who has entered Korea with a short-term visa and obtained permission of change of status of sojourn to
Doing Business In Korea business investment (D-8) should immediately apply for alien registration at an immigration control office having jurisdiction over the place of sojourn or at KOTRA’s Investment Consulting Center. 90 ※Foreign nationals aged 17 or older should visit in person to confirm their identity and register their fingerprints.
Any foreign investor or employee of a foreign-invested company who has completed alien registration should return his/her alien registration card to the departure inspection desk at the port or airport when leaving Korea at the end of his/her sojourn.
< Required documents > More or less documents may be required for review. •Application form (form no. 34 of the Enforcement Rules of the Immigration Control Act), passport, color photo for passport •A copy of certificate of foreign-invested company registration •A copy of business registration certificate •Document certifying the place of sojourn (lease contract, etc.) ※Foreigners who have entered Korea by obtaining a business investment (D-8) visa from a diplomatic mission abroad may submit the documents required for change of sojourn status (excluding the copy of foreign- invested company registration, dispatch order and certificate of employment). However, this shall not apply to those who obtained a visa with a certificate of confirmation of visa issuance. ※ The processing fee is exempted for business investment (D-8) visa holders.
2-3 Extension of Period of Stay
A business investment (D-8) visa holder who intends to stay longer than the permitted period should apply for an extension of the period of stay at an immigration control office having jurisdiction over the place of sojourn place or at KOTRA’s Investment Consulting Center during the four months prior to expiry of the current sojourn period. It is possible to apply earlier if there is a legitimate reason for doing so, such as an overseas business trip.
In such cases, the period of stay can be extended for up to five years depending on the size of the foreign-invested company, the investment amount, or business operation record. A foreign investor who intends to continue with his/her business activities or foreigners who wish to continue working as a dispatched employee may apply for an extended stay a limitless number of times, provided that he/she has never been involved in any illegal activities.
•Document certifying expenditure of capital ––Receipt for purchase of goods, office interior design expense, etc. ––Withdrawal and deposit records of a domestic bank account, etc. •Document certifying existence of a business establishment ––Office lease contract, photograph of building, office space, signage, etc. •Certificate of tax payment certifying there is no unpaid tax •Sales records ––Income statement ––Certificate of export declaration (export and import permit) ––Document certifying collection of payment for export (bank transaction records of a domestic account) ––Business plan (expenditure of investment funds, future business plans, etc.) •Document certifying business experience in the relevant industry or field (if necessary)
* Processing fee is exempted for business investment (D-8) visa holders.
2-4 Re-entry Permit
A foreigner who intends to re-enter Korea after a temporary departure within the current period of stay should apply for a single or multiple re-entry permit at an immigration control office having jurisdiction over the place of sojourn or at KOTRA’s Investment Consulting Center. The application can also be filed at an immigration control office at the airport on the day of departure.
A re-entry permit is issued within the period of validity of the passport, the permitted sojourn period, and the period of the re-entry permit’s validity (one year for a single permit and two years for a multiple permit). ※Exemption from obtaining a re-entry permit (Article 44-2 of the Enforcement Rules of the Immigration Control Act) Those who fall under the following are exempted from the obligation to obtain a re-entry permit, with the exception of foreigners who are banned from entering the country in accordance with Article 11 of the Act and those who fall under the following Items in Article 10 (Amended November 16, 2010). 1. Permanent residence (F-5) holders who intend to re-enter the country within two years of the date of departure 2. Persons who intend to re-enter the country within one year of the date of departure (the remaining sojourn Doing Business In Korea period in the case that the remaining period is shorter than one year) holding the following visa types: from 92 1. Diplomacy (A-1) to 3. Negotiation (A-3), from 10. Culture and arts (D-1) to 28. Accompanying person (F-3), from 28-4. Marriage (F-6) to 31. Employment (H-2).
※ Countries exempted from obtaining a re-entry permit The Republic of Surinam, the Netherlands, Norway, Denmark, Germany, Luxemburg, Belgium, Sweden, Switzerland, Liechtenstein, France, Finland and Chile (C-2, D-7, D-8 and D-9 visa holders)
< Required documents > More or less documents may be required for review. •Passport, alien registration card, application form (unified form) •Processing fee (e-revenue stamp, etc.): KRW 30,000 for single re-entry permit; KRW 50,000 for multiple re-entry permit
* Processing fee is exempted for business investment (D-8) visa holders.
2-5 Report of Change of Place of Sojourn
A business investment (D-8) visa holder who has changed his/her place of sojourn should report the change to KOTRA’s Investment Consulting Center, an immigration control office having jurisdiction over the place of sojourn, or the head of the relevant Si/Gun/Gu/Eup/Myeon/Dong office within 14 days of moving into the new place of sojourn.
Failure to report within the deadline constitutes a violation of Article 36 of the Immigration Control Act and results in a fine.
< Required documents > More or less documents may be required for review. •Passport, alien registration card, application form (form no. 34 of the Enforcement Rules of the Immigration Control Act) •Document certifying the place of sojourn (lease contract, etc.)
2-6 Report of Change of Alien Registration Information
A business investment (D-8) visa holder should report any changes in alien registration information to an immigration control office having jurisdiction over the place of sojourn or to KOTRA’s Investment Consulting Center within 14 days of the date on which any of the following occurs: •A change in the holder’s name, gender, date of birth or nationality •A change in the holder’s passport number, date of issuance and validity •A change in the company name (if the investor is a company)
Failure to report within the deadline constitutes a violation of Article 35 of the Immigration Control Act and results in a fine. < Required documents > Management
More or less documents may be required for review. II .
•Passport, alien registration card, application form (form no. 34 of the Enforcement Rules of the Immigration Business Control Act) •Documents certifying matters concerning the change(s)
In the case of business investment (D-8) visa holders, if the changed or added workplace is an affiliate of the same company to which the visa holder belongs, notification of change of alien registration 93 information is required instead of report of change or addition of workplace.
< Required documents > More or less documents may be required for review. •Passport, alien registration card, application form (form no. 34 of the Enforcement Rules of the Immigration Control Act) •Dispatch order •Document certifying the new workplace’s introduction of business funds •Document certifying the new workplace’s tax payment •The new workplace’s certified copy of corporate registration •The new workplace’s business registration certificate •The new workplace’s foreign-invested company registration certificate •Document verifying that the new workplace is an affiliate of the same company •Processing fee (e-revenue stamp): None
A foreigner who completed alien registration should report any change in alien registration information to the immigration control office within 14 days of the date on which such change occurs. Failure to report within the deadline is a violation of Article 35 of the Immigration Control Act and results in a fine.
2-7 Permission of Activities Beyond the Current Status of Sojourn
A business investment (D-8) visa holder who intends to engage in activities other than those permitted by his/her status of sojourn should obtain an approval from an immigration control office having jurisdiction over the place of sojourn in advance. Application for permission to engage in activities permitted for D-7 (intra-company transfer) visa and indispensable professional specialists’ (e.g., CEOs of foreign-invested companies) application for permission to engage in college lecture activities can be filed at the Investment Consulting Center of KOTRA.
< Required documents > More or less documents may be required for review. •Passport, alien registration card, application form (form no. 34 of the Enforcement Rules of the Immigration Control Act) •Dispatch order (issued by the company headquarters) •Document certifying that the new workplace belongs to an affiliate of the original workplace (such as a certified copy of corporate registration) •Copy of business registration certificate •Document certifying notification (or authorization) of foreign company’s local branch establishment •A letter of recommendation issued by the head of the original workplace •Document certifying business records: Certificate of tax payment, etc. •Processing fee (e-revenue stamp): KRW 120,000 * The above required documents apply only to D-8 visa holders’ request for permission to engage in activities permitted for D-7 (intra-company transfer) visa holders, which can be processed by KOTRA’s Investment Consulting Center. For information on the documents required when requesting permission to engage in activities permitted in other visa types, refer to the Korea Immigration Service website (http:/www.immigration.go.kr). 3. Policies for the Favorable Treatment of Foreign Investors
The Korean government provides foreign investors with a variety of benefits in relation to their arrival, departure, and stay. There are automated immigration checkpoints for foreign investors, and permanent residency is granted provided that certain conditions are met. Also, the Investment Consulting Center of KOTRA provides one-stop service for foreign investors with services ranging Doing Business In Korea from investment consulting to the resolution of grievances during an investor’s stay in Korea. 94
• Change to Permanent Residence (F-5) Status • Hiring of Foreign Housekeepers • Exclusive Immigration Checkpoint for Foreign Investors • Automated Immigration Checkpoint • Exclusive Visa-Related Services for Foreign Investors • Exemption from Processing Fees for the Issuance of Stay Permits • Extension of the Maximum Period of Stay
3-1 Change to Permanent Residence (F-5) Status
Foreign investors, executives of multinational companies operating in Korea, and foreigners engaged in high tech businesses who contribute to promoting foreign investment and strengthening the national competitiveness of Korea are permitted to change their status of sojourn to permanent residence (F-5).
Permanent residence status is granted to foreigners who are not subject to deportation and meet one of the following requirements: •Foreigners who have invested USD 500,000 or more pursuant to the Foreign Investment Promotion Act and have employed five or more Korean nationals as regular workers •Foreigners qualified as adults under the Korean Civil Act who: have the ability to maintain a living for himself/herself and his/her dependent family members; satisfy the conditions prescribed by the Minister of Justice (e.g., must be of good conduct, must have basic knowledge befitting a Korean national); and have lived in Korea for five years or longer with a business investment (D-8) visa. •Foreigners with a sojourn status falling under item 3 of business investment (D-8) under Attached Table 1 of the Enforcement Decree of the Immigration Control Act who have invested in Korea for three years or longer and satisfy the conditions prescribed by the Minister of Justice such as attraction of investment of KRW 300 million or more and employment of two or more Korean nationals •Foreigners with a sojourn status falling under item 1 of business investment (D-8) under Attached Table 1 of the Enforcement Decree of the Immigration Control Act who qualify as indispensable professional personnel of a research and development facility prescribed by Article 25 (1) 4 of the Enforcement Decree of the Foreign Investment Promotion Act and are recognized by the Minister of Justice Foreigners who obtain permanent residence status are entitled to the following benefits:
• Management
Exemption from the obligation to apply for an extension of period of stay II .
•Exemption from restriction on employment activities due to guarantee of economic activities in Business Korea •Exemption from the obligation to obtain a re-entry permit if a visit to a foreign country lasts for less than two years •Exemption from deportation, etc. 95 3-2 Hiring of Foreign Housekeepers
Korea allows large-scale foreign investors to hire a foreign housekeeper to make their stay in Korea more comfortable. A foreigner who intends to hire a foreign housekeeper should meet the following requirements: •A foreign investor (a representative, executive or employee of a foreign-invested company)’s investment amount should be at least USD 500,000 and his/her income should be equal to or greater than three times the amount of the per capita GNI of Korea in the preceding year as announced by the Bank of Korea. •A foreigner whose investment amount is less than USD 500,000 should be engaged in a high-tech information business and hire three or more regular Korean employees.
※ Scope of "executives and employees” Executives and senior managers falling into the category of indispensable professional specialists
※ High-tech information business The following high-tech businesses designated by KOTRA (Contact Korea), an affiliate of the Ministry of Trade, Industry & Energy, qualify for Gold Card issuance: Technological management, nano-technology, digital electronics, bio technology, transportation and machinery, e-Commerce (including information technology), environment, energy, and new materials
A foreign housekeeper should be between the age of 20 and 58 as of the date on which his/her visa application is submitted and shall be a middle school graduate or higher. The number of housekeepers that an inviter may hire is limited to one person. A housekeeper should leave Korea upon termination or cancellation of the employment contract or upon his/her employer being deprived of the business investment (D-8) visa.
Foreign investors and indispensable professional specialists may apply for a visa for a foreign housekeeper as follows: •If the inviter is qualified and he/she has employed the housekeeper outside of Korea for at least one year as of the date of application, the inviter can apply for an F-1 visa with a sojourn period of one year or less by submitting the necessary documents to a Korean diplomatic mission. •If the authority to issue a visa is not delegated to a diplomatic mission, the inviter residing in Korea can obtain a certificate of confirmation of visa issuance (or confirmation number) at an immigration office and submit it to the invitee. The invitee can submit the said certificate (or number) to a Korean diplomatic mission and apply for visa issuance.
Processing fee (revenue stamp): Varies by country due to reciprocity principles, etc. For the exact amount, inquire a diplomatic mission. * No processing fee is charged for applications for certificate of confirmation of visa issuance.
3-3 Exclusive Immigration Checkpoint for Foreign Investors
Korea operates an immigration checkpoint exclusively for foreign investors at Incheon International Airport to enhance the convenience of business investment (D-8) visa holders and their families.
3-4 Automated Immigration Checkpoint
Business investment (D-8) visa holders may use an automated immigration checkpoint after registering their passport information along with their fingerprint and facial features at the immigration control office at Incheon International Airport.
3-5 Exclusive Visa-Related Services for Foreign Investors
KOTRA’s Investment Consulting Center KOTRA’s Investment Consulting Center assists foreign investors with all matters pertaining to their visa and stay permit. Immigration control officials are dispatched from the Ministry of Justice to handle such matters as change of sojourn status, extension of period of stay, issuance of re-entry permit, granting of sojourn status to children born in Korea, alien registration, report of change of alien registration information, report of change of place of sojourn, and change or addition of workplace, regardless of the jurisdiction over the place of sojourn.
The Seoul Immigration Control Office’s Investment Support Center (accessible also from Seoul Nambu Immigration Office) also provides visa related-services exclusively to foreign investors to handle matters concerning stay permits and extension of period of stay. 3-6 Exemption from Processing Fees for the Issuance of Stay Permits Management II
A business investment (D-8) visa holder is granted an exemption from payment of the following . Business processing fees concerning stay permits.
Stay permit Processing fee Issuance and re-issuance of alien registration card KRW 30,000 (cash or a certificate of cash payment) Permit for extension of period of stay KRW 60,000 Permit for change of sojourn status KRW 100,000 97 Permit for change /addition of workplace KRW 120,000 (e-revenue stamp, etc.) KRW 30,000 (e-revenue stamp) for a single-entry permit, Re-entry permit KRW 50,000 for a multiple-entry permit (e-revenue stamp)
The processing fee for application for permission of activities beyond the current status of sojourn (KRW 120,000) and the fee for issuance of certificate of confirmation of alien registration (KRW 2,000) are not exempted. 02 Labor Doing Business In Korea 98
1. Labor Laws
Labor laws refer to the laws and regulations that govern employment, working conditions and labor relations with the aim of ensuring workers’ dignity and equal employer-employee relations.
• Background and Objectives • Labor Law Categories and Application
1-1 Background and Objectives
When employing workers in Korea, the laws regarding recruitment, salary, and dismissal should be observed. Korea’s labor laws have been legislated and enacted in order to provide workers with adequate protection, to protect the basic structure of business activities, and to build a solid and stable economy based on the principles of capitalism.
1-2 Labor Law Categories and Application
Korea’s labor laws are largely divided into four categories: individual employment-related laws, collective labor relations laws, cooperative labor relations laws and employment-related laws. Labor laws set the standards for labor contracts and labor relations, enable the voluntary resolution of disputes between labor and management by guaranteeing workers’ right to organize a union, and ensure mutual benefits to labor and management by promoting the participation and cooperation of employers and workers. Applicable Category Act Note workplaces Management II
•Certain provisions apply to workplaces . Business with four or less employees. 5 or more Labor Standards Act •Where the employer employs 10 or employees more workers, the rules of employment should be prepared.
Minimum Wages Act All workplaces •Minimum hourly wage in 2018: KRW 7,530 •Only some provisions apply to certain 99 General All workplaces businesses and workplaces with less than five employees. Persons in charge 100 or more •50 or more employees for certain of safety and health Individual employees businesses Occupational management labor Safety and Appointment of a 50 or more relations laws Health Act safety manager employees Appointment of a 50 or more health manager employees Establishment of an occupational 100 or more •Also applicable to certain businesses health and safety employees with 50-99 employees committee •Not applicable to certain businesses Industrial Accident Compensation All workplaces such as agriculture, forestry and fishery Insurance Act industries with less than five employees
•Certain provisions do not apply to Equal Employment Opportunity Act All workplaces workplaces with less than five employees. Collective labor- Trade Union & Labor Relations management All workplaces Adjustment Act relations law •Regardless of the existence of a labor union, all businesses or workplaces Cooperative vested with the right to determine labor- Act on the Promotion of Workers' 30 or more working conditions should establish a management Participation and Cooperation employees labor-management council. relations laws •Workplaces with 30 or more employees should appoint a representative to the grievance settlement committee.
•Not applicable to certain businesses Employment Insurance Act All workplaces such as agriculture, forestry and fishery industries with less than five employees
•Businesses should hire disabled persons above the mandatory employment ratio, within the extent of 5/100 of the total Employment Promotion and number of employees. 50 or more Vocational Rehabilitation •Companies should pay contributory employees Employment- of Disabled Persons Act charges in the case of non-compliance, related laws but will receive incentives in cases where they hire disabled persons above the required minimum ratio.
•Efforts should be made so that the Act on the Prohibition of Age percentage of senior citizens among the Discrimination 300 or more total workforce remains at or above a certain in Employment and the Promotion employees level. (2% for the manufacturing industry, of Employment of Senior Citizens 6/% for the transportation and real estate industries, and 3% for other industries) 2. Labor Management
Employees’ working conditions should be agreed upon by free will under equal employer-employee relations. Even if working conditions have been agreed upon by free will, any aspect of the working conditions that fails to meet the standards set by law shall not be legally effective. Doing Business In Korea 100 • Wages • Working Hours • Holidays and Leaves • Dismissal • Retirement Benefits • Labor –Management Council • Social Insurance Policy
2-1 Wages
Wages refer to money or other valuables paid to employees in exchange for their services, regardless of how they are called (wage, salary, bonus, etc.). Wages shall be paid at or above the minimum wage set by the Minister of Employment and Labor every year. The minimum wage for 2018 is set at KRW 7,530 per hour, and KRW 60,240 per day (8 hour workday).
The Labor Standards Act classifies wages into ordinary wage and average wage, and retirement payment and other allowances set by law are to be calculated based on one of these two wage categories. ‘Average wage’ refers to the total amount of wages paid to a worker during the three months prior to the event (e.g. retirement) necessitating the calculation of the average wage, divided by the total number of days during the same period. Average wage is used to calculate retirement payments, business suspension allowances, and industrial accident compensation. ‘Ordinary wage’ refers to wages by hour, day, week, or as otherwise outlined in an employment contract for certain work performed, or for the total number of working hours. Allowances for extended work, nighttime work, holiday work, annual paid leave, and advance notice of dismissal all fall into this category.
2-2 Working Hours
The standard working hours set by the Labor Standards Act are eight hours per day and 40 hours per week. The working hours prescribed by the Act should not be exceeded. If carried out by the order of the employer, work preparation hours, waiting hours, training hours and organizing hours outside the standard working hours shall all be counted as working hours.
Work beyond the standard working hours should be agreed upon by the employer and employee. However, even when agreed upon by both parties, at least 50 percent of the ordinary wage should be paid in addition to the standard wages for extended work, nighttime work (22:00-06:00), or holiday work.
However, when a flexible work hour system is introduced based on the rules of employment (two- week unit) or a written agreement with the employee representative (three-month unit), the company may have employees work in excess of eight hours a day or 40 hours a week within the extent Management
that the average weekly work hours do not exceed 40 hours for a given period (two weeks or three II . months). The company is not required to pay overtime allowance for such work hours in excess of Business the given work hours per day or week. However, the weekly maximum number of work hours should not exceed 48 hours per week under a two week-based flexible work hour system. And, the weekly maximum number of work hours should not exceed 52 hours per week under a three month-based flexible work hour system. The maximum daily number of work hours should not exceed 12 hours. Flexible work hours shall not be imposed upon pregnant women or minors. 101
Standard Working Workers Hours Extended Work Nighttime Work Holiday Work 1 Day 1 Week Male workers 8 hours 40 hours 12 hours per week Allowed Allowed Female As agreed by the person As agreed by the person 8 hours 40 hours 12 hours per week workers concerned concerned •In principle: Not •In principle: Not As agreed between applicable applicable Female workers the parties concerned; •Exception: As agreed by •Exception: As agreed by less than one year 8 hours 40 hours 2 hours per day, the persons concerned the persons concerned after childbirth 6 hours per week, and approved by and approved by 150 hours per year the Minister of the Minister of Employment and Labor Employment and Labor •In principle: Not •In principle: Not applicable applicable •Exception: Upon •Exception: Upon Pregnant 8 hours 40 hours Not applicable an explicit request an explicit request workers approved by approved by the Minister of the Minister of Employment and Labor Employment and Labor •In principle: not •In principle: Not applicable applicable As agreed between •Exception: As agreed by •Exception: As agreed by Minors (under the the parties concerned; 7 hours 40 hours the persons concerned the persons concerned age of 18) 1 hour per day, and approved by and approved by 6 hours per week the Minister of the Minister of Employment and Labor Employment and Labor Workers in hazardous conditions 6 hours 34 hours Not applicable - - (high pressure environment)
2-3 Holidays and Leaves
Generally, there are two types of holidays and leaves: “Legal” holidays and leaves, for which the details, conditions, and effects are decided by law, and “agreed” holidays and leaves, for which such matters are decided autonomously by management and labor. Legal holidays and leaves include weekly holidays, Labor Day, monthly leave, annual leave, menstruation leave, and maternity leave. Agreed holidays and leaves may include public holidays, company foundation anniversaries, summer leave, and congratulatory & condolence leave. Paid Weekly Holidays An employer should give an average of one paid-leave day or more per week if an employee has worked for the prescribed number of consecutive working days. The weekly holiday does not have to be a Sunday. Where an employee works on a weekly holiday, 50/100 of the ordinary wage shall be paid in addition to the standard wages for the work performed on that day. Doing Business In Korea Annual Paid Leave 102 An employer shall provide workers who have come to work for more than 80 percent of one working year with 15 days of paid leave. For workers who have worked for three or more consecutive years, one more day of paid leave shall be provided for every two years of consecutive work after the initial year, up to a total of 25 days. Annual leave shall be granted upon the request of a worker, and the worker shall be paid an ordinary or average wage for the period of leave in accordance with the employment regulations. However, the employer may change the time of leave in cases where granting the leave at the requested time would cause a major disruption to business operations. If the days of leave expire and the worker does not take the leave despite the employer’s encouragement, the employer shall not be obligated to compensate the worker for the unused leave.
Paid Maternity Leave Pregnant workers shall be given 90 days of maternity leave before and after childbirth, with 45 days or more to be allocated after childbirth. Wages for the first 60 days of the period of leave are to be paid by the employer, and wages for the remaining 30 days are covered by employment insurance (the government). In cases where a business is eligible for preferential support (Article 12 of the Enforcement Decree of the Employment Insurance Act), wages for the 90 days shall be covered entirely by employment insurance.
2-4 Dismissal
An employer cannot dismiss, lay off, suspend or transfer a worker, reduce a worker’s wages, or take punitive measures against a worker without justifiable cause. Such punitive measures shall be taken on reasonable grounds that are generally accepted by society at large. In general, the reasons for punitive measures such as dismissal are stipulated in the employment regulations or the collective agreement, and the procedures set forth in the concerned employment regulations or collective agreement shall be followed. When dismissing a worker, the worker shall receive notice of the dismissal at least 30 days prior to actual dismissal. If not, the employer shall be obligated to pay at least 30 days’ worth of advance notice of dismissal pay. Dismissal of an employee is effective only when a written notice stating the cause and date of dismissal is sent to the employee concerned.
2-5 Retirement Benefits
In order to pay retirement benefits to retiring workers, the employer shall choose from either the retirement allowance system or the retirement pension plan. In choosing the retirement benefit scheme or changing the chosen retirement benefit scheme to another type, the employer shall obtain the consent of the majority of the labor union if a labor union consisting of the majority of workers exists, or the majority of workers if a labor union does not exist. Retirement Allowance System Management The employer should pay the average wage for 30 days or more per year of continuous service II . period as retirement allowance when an employee dies or retires. The employer may pay retirement Business allowance prior to an employee’s retirement for the continuous service period by computing the retirement allowance for the served period when the employer requests such early payment of retirement allowance for a cause provided under the Act on the Guarantee of Employee Retirement Payments, including the purchase of a home, recuperation of six or more months from a disease or injury of the employee or his/her dependents, declaration of bankruptcy, and a pay decrease under the 103 peak wage system.
Retirement Pension Plan To guarantee workers’ financial stability after retirement, the employer shall accumulate and invest funds for the retirement allowance into an external financial institution during the workers’ service period. Retirement allowance shall be paid to the workers as a pension or in lump sum.
※ Types of retirement pension policies •Defined Benefit Retirement Pension (DB) The retirement benefit is pre-fixed based on the length of service and average wage. The amount of the employer’s burden (accumulation) changes according to the investment results of the accumulated funds. •Defined Contribution Retirement Pension (DC) The worker determines the investment method of the accumulated funds, and the amount of retirement pension changes according to the investment results of the accumulated funds. The employer shall pay 1/12 of the worker’s wage into the worker’s personal account every year.
2-6 Labor-Management Council
The labor-management council is a consultative committee created for the purpose of promoting the participation and cooperation of all employers and workers to improve the welfare of workers and the sound development of companies. A business or workplace with 30 or more workers should establish a labor-management council that consists of an equal number of representatives from management and labor (3-10 persons from each side). The labor-management council shall handle all matters for discussion, resolution, and reporting depending on the resolution and performance obligations.
2-7 Social Insurance Policy
Employment Insurance Employment insurance is a social insurance policy that has been introduced in order to provide livelihood support for unemployed workers, to prevent layoffs due to industrial restructuring, and to promote re-employment, while providing employers with various types of support to strengthen their corporate competitiveness. Businesses and workplaces with one or more regular workers are obligated to subscribe to employment insurance. ※ Businesses exempted from mandatory subscription to employment insurance •An agricultural business, a forestry business, a fishery business or a hunting business run by any person, other than a juristic person, with not more than four full-time employees •Housekeeping services •A project for which the total construction costs are less than KRW 20 million; a project for construction of a building with a total floor area of 100 2m or less or substantial repair of a building with a total floor area of 200㎡ or less Doing Business In Korea 104 Industrial Accident Compensation Insurance Industrial Accident Compensation Insurance is a social insurance policy that requires the government to take responsibility on behalf of employers for compensating workers for injuries or illnesses acquired at work, in accordance with the Labor Standards Act. Accordingly, employers subject to industrial accident compensation insurance are exempted from the individual compensation responsibilities towards workers by paying a premium. The government shall pay direct compensation to the workers from the funds created by employer-paid premiums. Businesses and workplaces with one or more regular workers are obligated to subscribe to the industrial accident compensation insurance. In the case that an employee of a business subject to industrial accident compensation acquires an injury or illness that requires four or more days of medical care or dies, insurance is paid out on the request of the employee (or his/her surviving family members).
※ Businesses exempted from mandatory subscription to industrial accident compensation insurance •An agricultural business, a forestry business, a fishery business or a hunting business run by any person, other than a juristic person, with less than five full-time employees •Employment activities within households •A project for which the total construction costs are less than KRW 20 million; a project for construction of a building with a total floor area of 100 2m or less or substantial repair of a building with a total floor area of 200㎡ or less •Businesses for which accident compensation is covered under the Public Officials Pension Act and the Military Pension Act •Businesses for which accident compensation is covered under the Seafarers Act, Act on Accident Compensation Insurance for Fishing Vessels and Their Crew Members, Pension for Private School Teachers and Staff Act < Four Key Social Insurance Programs > Management Industrial Accident II Health . Insurance Program Employment Insurance Compensation National Pension Business Insurance Insurance
To prevent To provide relief of To support a To prevent, unemployment, to occupational injuries, pension system for diagnose and Objectives promote employment, illnesses, disabilities or old age, incurable treat diseases to develop workers' job deaths diseases, death, etc. and injuries competency 105
Effective as of July 1995 July 1964 January 1988 July 1977
Applicable At least 1 full-time At least 1 full-time At least 1 full- At least 1 full-time worker businesses worker worker time worker
Persons aged 18 or Workers at Workers at applicable Workers at applicable Eligibility older and less than applicable businesses businesses 60 businesses
Excluded from Subject to subscription (Decision subscription in Subject to Foreigners on D-8 holders is made Subject to subscription principle subscription based on reciprocity (Principle of principles) reciprocity applied)
3.060% of 0.65% of the total wage 4.5% of standard Employee None standard (Unemployment benefit) monthly wage monthly wage
- Unemployment benefit: 7/1,000 (finance and Premium 0.65% insurance) to 340/1,000 (2017) - Employment stabilization 3.060% of (mining) of total 4.5% of standard Employer project + occupational standard salary (The rate varies monthly wage capability development: monthly wage depending on business 0.25-0.85% (depending category) on company size)
Medical treatment Medical Unemployment benefits, benefit, business Old age pension, treatment employment stabilization suspension allowance, disability pension, expense, health Coverage project, occupational disability benefit, bereaved family´s exam expense, capability development bereaved family's pension funeral project, etc. benefit, etc. expense, etc.
Ministry of Ministry of Employment Ministry of Employment Ministry of Health Governing authority Health and and Labor and Labor and Welfare Welfare
The Korea Workers' The Korea Workers' The National The National Managing authority Compensation & Welfare Compensation & Pension Service Pension Service Service Welfare Service 03 Taxation Doing Business In Korea 106
1. Taxation
Taxation is the system by which the central government or local governments impose taxes on people who bear tax obligations without providing an offsetting benefit in order to raise revenues. There are 16 national taxes and 11 local taxes in Korea.
• Taxation System of the Republic of Korea • Tax System of the Republic of Korea
1-1 Taxation System of the Republic of Korea
Korea’s taxation system has supported the fiscal policies for achieving the central or local governments’ economic development plans. As of July 2017, the system largely consists of national tax and local tax as follows.
1-2 Tax System of the Republic of Korea
Internal Tax •Income tax •Corporate tax •Inheritance tax •Gift tax •Gross real estate tax •Value added tax National tax •Special excise tax •Liquor tax •Transportation, energy, and environmental tax •Stamp tax •Securities transaction tax •Education tax •Special tax for agricultural and fishing villages Tax Customs duty •Customs duty
•Acquisition tax •Registration and license tax •Leisure tax •Tobacco consumption tax •Local consumption tax Local tax •Resident tax •Local income tax •Property tax •Automobiles tax •Regional resources facilities tax •Local educational tax 2. National Tax Management II . National taxes are collected by the National Tax Service (tax office) and the Korea Customs Service Business (customs office) to finance the central government. National tax is largely divided into internal taxes and customs duty. There are direct taxes and indirect taxes, depending on how the tax is paid. A direct tax refers to tax collected directly from the taxpayer, while an indirect tax refers to tax collected by an intermediary from the person who bears the ultimate economic burden of the tax. Direct taxes include income tax, corporate tax, inheritance tax, and gift tax. Indirect taxes include value added tax, 107 special excise tax, liquor tax, and securities transaction tax.
※Since the tax base and tax rate of national taxes are subject to frequent change, it is advised to consult the National Tax Service or check the related tax laws and regulations for accurate information.
• Income Tax • Corporate Tax • Value Added Tax • Customs Duty
2-1 Income Tax
The Income Tax Act categorizes taxable income into global income, retirement income, and transfer income. The taxation system is as follows.
Global Income Global income is the sum of interest income, dividend income, business income (including real estate rental income), wage and salary income, pension income, and other income. The tax base for global income is calculated by deducting necessary expenses, income deductions, etc. from global income, and a tax rate of 6-40 percent is applied. Global income tax return filing is exempted for interest income, dividend income, other income separately taxed at the source, and wage and salary income exempt from income tax burden due to year-end tax settlement.
< Basic Tax Rate on Global Income >
Tax Base Tax Rate Not more than KRW 12 million 6% More than KRW 12 million and not more than KRW 720,000 + the amount exceeding KRW 12 million X 15% KRW 46 million More than KRW 46 million and not more than KRW 5,820,000 + the amount exceeding KRW 46 million X 24% KRW 88 million More than KRW 88 million and not more than KRW 15,900,000 + the amount exceeding KRW 88 million X 35% KRW 150 million More than KRW 150 million and not more than KRW 37,600,000 + the amount exceeding KRW 150 million X 38% KRW 500 million More than KRW 500 million KRW 170,600,000 + the amount exceeding KRW 500 million X 40% ※Personal local income tax equivalent to approximately 10 percent of the global income tax is imposed (Refer to ‘3-4. Local Income Tax’). Retirement Income Retirement income refers to the income listed below generated in the year concerned. For retirement income incurred from Jan. 1, 2017 to Dec. 31, 2017, the amount of tax on retirement income shall be calculated as follows: ⓐ×60% + ⓑ×40%. Since the applicable tax rate differs depending on the time of retirement, it is advised to check the accurate tax rate for the year concerned.
Doing Business In Korea ⓐTax on retirement income = (Tax base for retirement income x 1/ serviced years x 5) x basic tax 108 rate x 1/5 x serviced years ⓑ Tax on retirement income = (Tax base for retirement income x basic tax rate) x serviced years/ 12
※ Scope of Retirement Income •Lump sum payments for retirement paid under the laws governing public pension funds •Income received for actual retirement based on employer dues •The following income similar to the above: ––Where payment of all or part of the retirement income is deferred and paid along with interest for the deferment, the interest thereof ––Science & technology development incentives paid pursuant to Article 16 (1) 3 of the Korea Scientists and Engineers Mutual-Aid Association Act ––Mutual benefit fund for retirement received under Article 14 of the Act on the Employment Improvement, etc. of Construction Workers
※ Personal local income tax equivalent to approximately 10 percent of the retirement income tax is imposed (Refer to ‘3-4. Local Income Tax’).
Transfer Income Transfer income refers to income gained by individuals through the transfer of certain assets during the corresponding year. Under the tax law of Korea, ‘transfer’ refers to the practical transfer of assets for money due to sale, exchange, and in-kind investment in corporations, etc. regardless of the registration status of such assets. Land and buildings, real estate rights, other assets, and stocks (excluding listed stocks transferred on exchange by minority shareholders) are subject to transfer income tax. However, transfer income tax is not levied on income from the transfer of one house for one household (excluding high-priced housings), income from the disposal of assets due to bankruptcy, or an exchange, division, or annexation of farmland.
< Basic Tax Rate on Transfer Income >
Category Tax Rate Unregistered assets Unregistered assets 70% Held for less than one year 40-50% (*1) Real estate & right to Held for one year or longer but less than two years Basic tax rate and 40% (*2) real estate Registered assets Held for two or more years Basic tax rate (*3) Land for non-business use Basic tax rate (*4) Shares satisfying certain requirements (shares of corporations holding Basic tax rate (*4) Other excessive real estate, etc.) assets Assets other than those listed above (goodwill transferred along with Basic tax rate (*3) business-purpose fixed assets, right to use given facilities, etc.) Category Tax Rate Management Stocks issued by Majority shareholder’s stocks held for less than 1 II .
30% Business corporates other year General than small and Stocks other than those described above 20% stocks (*5) medium businesses 10% (20% for majority Stocks issued by small and medium businesses shareholder) (*1) 40% in the case of houses (including accompanying land) and the occupancy right of cooperative members, 50% in the 109 case of other assets. (*2) Basic tax rate in the case of houses (including accompanying land) and the occupancy right of cooperative members, 40% in the case of other assets. (*3) Refer to
※The tax rate of real estate-related tax such as transfer income tax are subject to frequent change, so it is advised to contact the National Tax Service (Call the helpline for foreigners at 82-1588-0560), consult a tax expert or check the relevant laws. ※Personal local income tax equivalent to approximately 10 percent of the transfer income tax is imposed (Refer to ‘3-4. Local Income Tax’).
2-2 Corporate Tax
Corporate tax refers to tax imposed on income earned by businesses. Domestic businesses are obligated to pay corporate tax for all income generated domestically and in foreign countries, while foreign businesses are obligated to pay corporate tax for income from domestic sources.
‘Corporate tax for income from the business year’ is levied for the income of businesses in each business year. In the event that land, buildings, housings or adjoining land in specific areas are transferred or land for non-business purposes is transferred, ‘corporate tax for land and other transfer income’ is additionally levied. Where a domestic business is dissolved, ‘corporate tax on liquidated income’ is imposed.
< Basic Tax Rate on Corporate Income > Tax Base Tax Rate KRW 200 million or less 10% More than KRW 200 million but not exceeding KRW 20 million + amount in excess of KRW 200 million X 20% KRW 20 billion Exceeding KRW 20 billion KRW 3,980 million + amount in excess of KRW 20 billion X 22% ※Corporate local income tax equivalent to approximately 10 percent of the corporate tax is imposed (Refer to ‘3-4. Local Income Tax’).
2-3 Value Added Tax
Value added tax (VAT) is a tax levied on added value (profit) acquired in the process of the transaction of products (goods) or the provision of services. Korea imposes VAT on value generated at each step of a transaction, and applies a VAT rate of 10 percent. The VAT imposed on businesses is calculated by subtracting the input tax from the output tax. Value added tax should be reported and paid every six months, and the taxable period of six months is divided into three months for a preliminary report.
Taxable period Period for report Payment deadline Reporting entity Preliminary report Jan.1-Mar.31 Apr.1-25 Businesses 1st period Businesses and sole Jan.1-Jun.30 Finalized report Jan.1-Jun.30 Jul.1-25
Doing Business In Korea proprietors Preliminary report Jul.1-Sep.30 Oct.1-25 Businesses 110 2nd period Jan.1-25 of the Businesses and sole Jul.1-Dec.31 Finalized report Jul.1-Dec.31 following year proprietors
※ Zero Tax Rate & Tax Exemption Policies The zero tax rate is a full tax exemption policy for observing the principle of destination. Under the policy, a zero percent tax rate is applied to certain goods and services to create no output tax and fully refund the input tax on added value created in the previous step in order to eliminate the burden of VAT. On the other hand, the tax exemption policy exempts tax obligations for the supply of certain goods and services under the Value Added Tax Act. In this regard, VAT already imposed in the previous steps remain in the price of the tax exempted goods and services. Hence, the tax exemption policy is a partial tax exemption that does not completely eliminate the burden of VAT.
< Application of the Zero Tax Rate & Tax Exemption > Policy Application •Export of goods •Services provided abroad Zero tax rate •Provision of overseas navigation services •Provision of goods or services for obtaining foreign currency •Goods or services considered daily necessities for the general public: Unprocessed food items, tap water, coal briquettes, passenger transport services, housing, etc. •Goods or services for welfare: Medical or healthcare services, blood donation services, education service, etc. Tax exemption •Culture-related goods and services: Books, artworks, amateur sporting goods, etc. •Goods and services related to production elements: Finance, insurance service, supply of land, etc. •Personal services similar to employed work: Personal services (Entertainers, music composers, etc.) •Import of tax-exempted goods
※For detailed information on how zero tax rates and tax exemptions are actually applied, refer to the Value Added Tax Act and established rules.
2-4 Customs Duty
Customs duty is imposed on imported goods. The tax base of customs duty is the value or amount of imported goods (Article 15 of the Customs Duty Act), and tax rates vary depending on the item (Article 49 of the Customs Duty Act).
Customs Duty = Tax Base Ⅹ Tax Rate * For more information, visit the Korea Customs Service website (www.customs.go.kr). 3. Local Tax Management II . Local tax is collected primarily to finance the expenses required to provide administrative service to Business local residents, but also has the functions of distribution of income, development of the local industry and economy, and contribution to balanced national development. Local tax can be categorized into taxation of property, taxation of income and taxation of consumption. Property taxation includes property tax, aggregate land tax, automobile tax, acquisition tax, and registration and license tax. Income taxation includes local income tax, and consumption taxation includes registration and license 111 tax, leisure tax, tobacco consumption tax, regional resource facilities tax, local consumption tax and local education tax.
※The tax base and tax rate for local taxes may vary by local government and are subject to change. In this regard, refer to the tax authority of the local government concerned or related laws and regulations.
• Acquisition Tax • Registration and License Tax • Resident Tax • Local Income Tax • Property Tax
3-1 Acquisition Tax
Acquisition tax is imposed on persons who acquire certain assets, and is designed to have those whose tax-bearing capacity is exposed in the process of the transfer of ownership of real estate or vehicles bear tax burden.
The tax base of acquisition tax is the value of the asset at the time of acquisition. This refers to all costs that have been paid before the actual date of acquisition or are payable to the seller or to any third party or parties in order to acquire the relevant asset. As a rule, the acquisition price is based on the amount that is declared by the person who acquires the asset. If the price is not declared or the declared price is below the market price, the standard market price is applied. The actual purchase price is treated as the tax base when an asset is acquired from the central or a municipal government, by import, or when the acquisition price is evidenced by corporate books or court sentence, or when the asset is acquired through open sale. In the case of construction or repair of a building (excluding new buildings or remodeling), change in the type of vehicle, machinery or equipment, or change of land category, the value increased from such an occurrence shall be the tax base.
The standard rates for acquisition tax are as follows and the tax rates may be adjusted within 50 percent of the standard rates based on municipal ordinances.
※ Local education tax may be imposed on acquisition tax in certain municipalities. < Acquisition Tax - Tax Base & Tax Rates (Article 11 & 12, Local Tax Act) >
Category Tax rates ① Acquisition by inheritance 2.8% (2.3% for farmland) ② Free acquisition other than acquisition by inheritance 3.5% (2.8% for non-profit businesses) ③ Original acquisition 2.80%
Doing Business In Korea ④ Acquisition by division of public property 2.30% ⑤ Acquisition by division of common property 2.30% 112 Acquisition of ⑥ Acquisition by reasons other than those provided above 4% (3% for farmland) real estate •1% (Housings valued at KRW 600 million or less at the time of acquisition) •2% (Housings valued more than KRW ⑦ Housings acquired for value (Acquisitions on or after 600 million but not more than KRW August 28, 2013) 900 million at the time of acquisition) •3% (Housings valued more than KRW 900 million) ① Acquisition by 2.50% inheritance ② Free acquisition other than acquisition by 3.00% Vessels subject to inheritance registration ③ Original acquisition 2.02% Vessels ④ Acquisition by import 2.02% and shipbuilding order ⑤ Acquisition by reasons 3.00% other than described above Compact vessels, motor-powered water 2.02% leisure equipment Ships other than compact ships 2.00% 7% Non-business passenger vehicles (4% for compact cars) Business vehicles 4.00% 5% Vehicles Other non-business vehicles (4% for compact cars) Two-wheeled vehicles as defined in the Motor 2.00% Vehicle Management Act Other vehicles 2.00% Machinery equipment that requires registration according to the Construction 3.00% Machinery Machinery Management Act. Equipment Machinery equipment that does not require registration according to the Construction 2.00% Machinery Management Act. Aircraft subject to Article 3 of the Aviation Act 2.00% Aircraft whose maximum take-off weight is 2.01% Aircraft more than 5,700 kg Aircraft whose maximum take-off weight is 2.02% less than 5,700 kg Standing trees 2.00% Mining and fishing rights 2.00% Membership of golf clubs, condominiums, riding clubs, 2.00% sports facilities ※ However, a higher tax rate equivalent to two to four times the tax rate is applied in the following cases:
– Management
–Acquisition of taxable goods for business purpose in order to build a new factory or expand II .
an existing one in an industrial complex in an overconcentration control area of the Seoul Business metropolitan area ––Acquisition of real estate that is considered a luxury asset (Villa, golf club, luxury recreation facility, luxury housing or boat) ––Acquisition of real estate for the establishment or expansion of a factory in a large city 113 3-2 Registration and License Tax
Registration and license tax refers to tax imposed on the registration of matters related to the acquisition, transfer, change or termination of property rights and other rights (registration of acquisition is excluded, as acquisition tax is imposed), and tax imposed on administrative licenses acquired for certain sales facilities and acts, including licenses, permits, registrations, designations, inspections and tests prescribed by law.
The tax base of registration and license tax is the value at the time of registration, value of bonds, or the investment amount. The value at the time of registration shall be the reported value. When no report has been made, or when the reported value falls short of the standard market value, the standard market value at the time of registration shall be applied.
※ Local education tax may be imposed on the amount of registration and license tax paid for certain registrations depending on the region.
< Registration and License Tax – Tax Base and Tax Rate (Article 28 of the Local Tax Act) > Category Tax base Tax rate Preservation of ownership Value of real estate 0.8% ① Surface rights Value of real estate Goods without ② Mortgage Value of bond ownership; Value of dominant ③ Easement establishment and tenement Real estate transfer of right of ④ Right to lease on a lump-sum Value of the lump-sum 0.2% registration lease deposit (jeonse) basis deposit (*1) ⑤ Right of lease Monthly rent ① Auction application / provisional Value of claim seizure / provisional disposition Others ② Provisional registration Value of real estate Flat amount of KRW ③ Other registrations Per registration 6,000 ① Incorporation and payment of Paid-in capital Foundation of a capital new corporation ② Increase in capital investment The amount of capital 0.4% or surviving (for-profit corporation) increase (0.2% for non-profit corporation after a ③ Increase of total equity corporations) Corporate The amount of capital merger investment or total assets (non- registration increase profit corporation) (*2) Capitalization of revaluation reserves(excluding The amount of capital 0.1% capitalization within three years of revaluation) increase Relocation of head office Per registration KRW 112,500 Establishment of a branch office Per registration KRW 40,200 Registration other than the above Per registration KRW 40,200 Category Tax base Tax rate Passenger cars for 5% non-business use (2% for compact cars) Vehicles for business 2% Automobile registration use Non-business use 3% vehicles other than the Doing Business In Korea (2% for compact cars) Other above registration 114 Vessel registration 0.02%, etc. Aircraft registration 0.01-0.02% New registration, 1% ownership transfer Construction machinery registration Settlement of 0.2% mortgage (*1) In the case of real estate registration, KRW 6,000 is imposed when the computed tax amount is less than KRW 6,000. (*2) In the case of a newly-founded corporation or a surviving corporation after merger, or in the case of capitalization of revaluation reserves, KRW 112,500 is imposed when the tax amount is less than KRW 112,500.
3-3 Resident Tax
Resident tax is divided into equipartition, pro rata property and employee-based resident tax. The equipartition resident tax is equally imposed on all individuals or corporations residing or located in the territory of a municipal government; whereas the pro rata property resident tax is imposed based on the gross floor area of a business establishment. The employee-based resident tax is imposed based on the employee payroll.
The municipal government head may adjust the equipartition or employee-based resident tax rate to within 50 percent of the standard rate as provided under municipal ordinance. The head of the municipal government concerned may also lower the pro rata property resident tax rate below the standard rate provided under municipal ordinance. Resident tax is not imposed on those protected under the National Basic Living Security Act, the central and municipal governments, local autonomous government cooperatives, foreign government agencies, international organizations in Korea, and foreign aid organizations (excluding those foreign governments or aid organizations that impose a tax of an identical nature on Korean government agencies or aid organizations). The pro rata property resident tax is not imposed on businesses with business establishments with a gross floor area of 330 m2 or less.
The tax base and tax rates for resident tax are as follows: < Resident Tax – Tax Base and Tax Rate (Article 78, Local Tax Act)> Management
Classification Tax base Tax amount Tax rate II . An amount equal to or Business Limited Individuals who have an addresses in Si/Gun less than KRW 10,000 tax rate Individual determined by ordinances Individuals who have business Standard KRW 50,000 establishments in a Si/Gun tax rate More than 100 employees, capital or KRW 500,000 115 investment worth more than KRW 10 billion More than 100 employees, capital or KRW 350,000 investment between five to KRW 10 billion Equipartition Not more than 100 employees, capital or investment worth more than KRW 5 billion KRW 200,000 Standard Corporations More than 100 employees, capital or tax rate investment amount of KRW 3-5 billion Not more than 100 employees, capital or investment amount of KRW 3-5 billion KRW 100,000 More than 100 employees, capital or investment amount of KRW 1-3 billion Others KRW 50,000 The gross floor area of the business Gross floor area of the business establishment as of the date of taxation establishment: KRW 250 per 1m2 Pro rata property (not imposed when the gross floor area is ( Two times for pollutant emitting less than 330m2) business establishments) Total employee payroll paid each Employer who pays salary to employees month x 0.5% (standard tax rate): Employee-based (not imposed when the business to be returned no later than the 10th establishment has 50 or fewer employees) of the following month
3-4 Local Income Tax
Local income tax is divided into personal local income tax that is imposed on general income, retirement income and transfer income, and corporate local income tax that is imposed on the business income of a corporation, or income from the transfer or liquidation of land, etc.
The head of a municipal government may adjust the local income tax rate to within 50 percent of the standard tax rate as provided under municipal ordinance. Local income tax is not imposed on petty income whose tax amount is less than KRW 2,000.
The tax rate and base rate of local income tax are as follows: < Local Income Tax – Tax Base and Tax Rate (Article 92, 103-3, 103-20 of the Local Tax Act) > Taxable income Classification Tax base and tax rate Standard tax rate and taxpayer Global income tax base x standard tax rate 0.6-3.8% (Retirement income tax base x 1 / service years x 5) x Personal local Persons obligated to 0.6-3.8% standard tax rate x 1/5 x service years income tax pay income tax
Doing Business In Korea 10% of transfer Transfer income tax base x standard tax rate income tax rate 116 Corporate income tax base of each year’s income x 1-2.2% standard tax rate Corporate local Entities obligated to Income from the transfer of land, etc. x 3% (4% in income tax pay corporate tax the case of assets not yet registered) Corporate tax base of income from liquidation x 1-2.2% standard tax rate ※With the amendment to the tax law on Jan. 1, 2014, local income tax, which had been a surtax to corporate tax and income tax, became an independent tax. In this regard, local income tax can be imposed on foreign-invested companies regardless of corporate tax incentives.
3-5 Property Tax
Property tax is a Si/Gun tax (or Gu tax) levied on the owners of land, buildings, vessels, and aircraft. The taxable objects for land are divided into three categories: general aggregate taxation objects, separate aggregate taxation objects, and scheduler taxation objects.
The tax base for property tax is the standard market price. The standard tax rate for property tax is shown in the table below. The tax rates can be adjusted by ordinance within the range of 50 percent of the standard tax rate. However, in the case of the establishment or expansion of factories in overconcentration control areas, five times the tax rate of 0.25 percent (the tax rate for other buildings) shall apply for five years from the first date of taxation.
※Local education tax equivalent to approximately 20 percent of the property tax may be imposed in some municipalities.
< Property Tax- Tax Base and Tax Rate (Article 111, Local Income Tax Act) > Category Tax base Tax rate (%) Not more than KRW 50 million 0.2% More than KRW 50 million and not more KRW 100,000 + 0.3% of the amount General than KRW 100 million exceeding KRW 50 million aggregate tax KRW 250,000 + 0.5% of the amount More than KRW 100 million exceeding KRW 100 million Not more than KRW 200 million 0.2% Land More than KRW 200 million and not more KRW 400,000 + 0.3% of the amount Separate than KRW 1 billion exceeding KRW 200 million aggregate tax KRW 2.8 million + 0.4% of the amount More than KRW 1 billion exceeding KRW 1 billion 1. Farmland, orchards, pasture land, forest 0.7% of the tax base Schedular tax 2. Land for golf courses and luxury resorts 4% of the tax base 3. Land other than 1 and 2 0.2% of the tax base Category Tax base Tax rate (%) Management Buildings for golf courses and luxury resorts 4% of the tax base II . Building Factory buildings in residential areas 0.5% of the tax base Business Other buildings 0.25% of the tax base Vacation home 0.40% Not more than KRW 60 million 0.10% More than KRW 60 million and not more KRW 60,000 + 0.15% of the amount 117 than KRW 150 million exceeding KRW 60 million House Other houses More than KRW 150 million and not more KRW 195,000 + 0.25% of the amount than KRW 300 million exceeding KRW 150 million KRW 570,000 + 0.4% of the amount More than KRW 300 million exceeding KRW 300 million Luxury vessels 5% of the tax base Vessel Other vessels 0.3% of the tax base Aircraft 0.3% of the tax base Newly established or expanded factories in overconcentration control areas 1.25% (five times 0.25%)1) 1) In the event of the establishment or expansion of a factory in an overconcentration control area, five times the tax rate shall be applied for five years from the first date of taxation.
Properties falling into the following categories shall not be subject to taxation.
< Non-Taxable Objects for Property Tax (Article 109, Local Income Tax Act) > Category Applicable objects •Land owned by the country, local government, local government associations, foreign Non-taxation on governments & international organizations stationed in Korea the state, etc. •Land used for official or public purposes by the country, local governments and local government associations for one year or more
•Roads, rivers, embankments, conduits, remains, historical relics and graves as prescribed by Presidential Decree •Forest protection zone and other lands having considerable grounds for non-imposition of property tax in the public interest Non-taxation by •Buildings constructed for temporary use, which fall short by one year of the property tax base usage date •Ships used for rescue in times of emergency, or as ferries with no charge, as floating bridges, or as barges belonging to a mother ship •Buildings on which it is improper to levy a property tax, such as buildings subject to removal by an administrative agency 04 Customs Clearance & Tariffs Doing Business In Korea 118
1. Customs Clearance
Customs clearance refers to the import, export or return of goods pursuant to the procedures prescribed by the Customs Act. Customs clearance procedures are governed by the Customs Act and trade related laws. When a foreign investor makes an investment-in-kind with capital goods, he/she should complete the import clearance procedure and obtain a written confirmation of completion of investment-in-kind issued by the Commissioner of Korea Customs Service (KCS).
• Import Clearance • Customs Clearance of a Foreign-Invested Company’s Capital Goods • Bonded Area
1-1 Import Clearance
Import clearance refers to a series of customs processes whereby goods that arrive in Korea from abroad are declared to a customs office. Upon import declaration, the head of the customs office checks the items listed in the import declaration to determine whether they correspond to the actual goods declared and adhere to the various import regulations, etc. before accepting the import declaration, at which time the due tariffs etc. are collected.
Import Declaration An import declaration must be filed in the name of the owner or the customs broker, the customs brokerage firm, or the customs clearance handling firm. In principle, a declaration can only be filed after the ship or plane carrying the loaded goods has entered the port/airport. However, when swift customs clearance is required for imported goods, declaration can be made earlier as determined by the Commissioner of KCS (i.e., before departure from/entry into a port, before entering a bonded area, or following storage in a bonded area). ※ Time of import declaration Management •Before departure from port: Declaring goods imported via a plane or ship from Japan, China, Taiwan, Hong II . Kong, etc. prior to the ship or plane’s departure from the port/airport (Declaration can be filed starting five days Business before a ship’s entry into a port, or one day before a plane’s arrival at an airport in Korea.) •Before entry into port: Declaring imported goods after the ship etc. carrying the goods leaves the port of loading and prior to its arrival (the time of cargo discharging declaration for air freight and sea freight) at the port (Declaration can be filed starting five days before a ship’s entry into a port, or one day before a plane’s arrival at an airport in Korea.) •Before entering a bonded area: Declaring imported goods after the arrival of ships, etc. loaded with imported 119 goods at the port and before entering a bonded area for customs clearance •After storage in a bonded area: Declaring imported goods after storing the imported goods in a bonded area.
Import declaration becomes effective once the customs clearance system receives the declaration documents submitted by the declarer. The taxable goods, applicable laws, foreign exchange rate for taxation, taxpayer, etc. are determined at this point as well.
Required documents •Invoice and price declaration report, packing list (if required) •Copy of Bill of Lading (B/L) or Airway Bill (AWB) •Country of origin certificate (only for required goods) •Confirmation documents on goods subject to confirmation by the head of the customs office as prescribed by the Customs Act •Tariff reduction or exemption (payment in installation) application/usage tariff rate application (only for required goods) •Approval (application) for applying tax rate by agreement •Confirmation of security for tobacco consumption tax payment under Article 71 of the Enforcement Decree of the Local Tax Act •Original copy of Kimberley process certificate (limited to rough diamonds)
※The original copy or a copy certified against the original by the importer can be submitted (the original copy is required for certain documents). In the case of paperless (P/L) declaration, the declarer (e.g., customs broker) should check the declaration documents in advance and submit the details of the declaration in the form of an electronic document. In such case, the declaration form and attachments are not required.
Selection of Goods to be Inspected In order to check that the items listed in the import declaration form match the imported goods, and also to check whether there are any violations of related laws, selective inspections on imported goods (cargo selectivity, C/S) are carried out according to the standards set by the Commissioner of the KCS, and the goods to be inspected and the documents to be submitted are decided. The importer, manufacturer, declarer, etc.’s violation records and credibility are considered in the selection process.
Inspection of Goods In principle, when import declaration is made, customs officers will check the formalities of the declaration form, the legal import requirements, and the documents submitted for declaration to accept the declaration. However, when the various marks, usage, functions, etc. cannot be checked solely through the import declaration and submitted documents, or when there is a need to check whether other goods are concealed and whether the declared goods match the actual goods, the goods are unpackaged and visually inspected. Examination of Customs Clearance Requirements Goods for post-inspection are inspected to verify compliance with the following formalities: •Whether all required documents for declaration have been prepared, and whether the items listed in the declaration form match the actual goods •Whether the items which the head of the customs office checks for compliance with the import requirements are appropriately classified and meet the import requirements Doing Business In Korea •Whether the country of origin has been marked, whether intellectual property rights have been 120 violated, whether a request for analysis is needed, etc.
In principle, examination of taxation of imported goods is carried out after acceptance of the declaration. However, such an examination is conducted before accepting the declaration of certain items as described below. The following items are also examined to verify the appropriateness of classification, tax rate, taxable value, tax amount, and the appropriateness of the application for tax reduction, tax exemption, or installment payment.
•Goods subject to tax reduction or exemption and installment payment •Goods declared by tariff delinquents, or goods subject to imposition notification •Goods designated by the Commissioner of the KCS as requiring tax deliberation prior to declaration acceptance for the purpose of securing duty claims (agricultural products, used cars, etc.)
Payment of Tariffs, etc. For the payment of tariffs and other taxes, a dual system is employed: the payment by report method, by which the declarer reports and pays the self-determined tax amount; and the imposition notice method, by which the head of the customs office determines the tax amount and notifies the relevant party thereof.
The tariff payer must declare the tax base, tax rate and paid tax amount on all imported goods, excluding goods subject to imposition notice, to the head of the customs office. The tariff must be paid within 15 days of acceptance of the import declaration, or prior to acceptance of the declaration. Upon receipt of the tax payment declaration, the head of the customs office examines the items listed on the import declaration and other matters based on the related regulations. When all the conditions are met, the import declaration is accepted and then the reported tax amount is examined.
When the head of the customs office collects tariffs via an imposition notice, the amount of tax to be imposed on the goods concerned is determined and the taxpayer is notified thereof. The taxpayer must pay the tax within 15 days of receiving the notice at a national treasury receipt bank or a post office.
Goods subject to imposition notice are as follows:
•Goods for which tariffs are imposed in accordance with Subparagraphs 1 through 6 and 8 through 11 of Article 16 of the Customs Act •Facilities constructed at bonded construction sites which are operated prior to import declaration •Goods carried into bonded areas and carried out prior to acceptance of the import declaration •Goods subject to disposition of rectification by the head of the customs office (excluding the tax amount declared for tax payment) •Other goods that are subject to notification of installment payment
Load/Depart . Business
Enter Port & Unload
Enter Bonded Area 121 - Before leaving port - Before entering port Import Declaration - Before entering the bonded area - After entering the bonded area Inspect Cargo Selectivity
Skip Inspection Goods Inspection Customs Clearance Requirements Inspection Pre-payment Post-payment Pay All Taxes Accept Import Declaration
Carry Out/ Receive Cargo
1-2 Customs Clearance of a Foreign-Invested Company’s Capital Goods
When foreign investors make an in-kind investment of capital goods, customs clearance of the capital goods should be completed in addition to investment notification and registration.
Confirmation of the Specifications of Imported Goods Foreign investors who have completed the investment notification must apply for a confirmation of imported capital goods at a foreign exchange bank or KOTRA. The following items are to be confirmed: •Capital goods exempted from tariff, individual consumption tax, and value added tax. •Capital goods imported by a foreign investor for investment purposes. •Import of external payment vehicles received by a foreign-invested company from foreign investors as an investment, or internal payment vehicles created in exchange for external payment vehicles, which are capital goods among the goods designated or notified by the Ministry of Trade, Industry & Energy according to Article 17 of the Enforcement Decree of the Foreign Trade Act.
Import Clearance Foreign-invested companies must complete import declaration within five years of the date of notifying investment of the capital goods. However, the deadline may be extended up to one year for unavoidable reasons, such as a delay in factory construction.
If a foreign investor establishes a foreign-invested company through investment in-kind, the goods should clear customs after acquiring the business registration certificate before incorporation in order to benefit from a deduction of value added tax. Also, when foreign-invested companies that are granted tax reduction or exemption by the Ministry of Strategy and Finance import capital goods or make investments in kind within the range of investment funds received in cash for direct use in businesses subject to tax reduction or exemption, tariffs, etc. may be exempted. However, capital goods imported with investment funds in the form of long-term loans do not benefit from tariff exemption. Applications for tariff exemption must be made before acceptance of import declaration. Retroactive applications for exemption, i.e., applications made after the acceptance of import declaration, are not accepted. Doing Business In Korea 122 Confirmation of Completion of In-Kind Investment For capital goods paid as objects of investment, a confirmation of completion of in-kind investment must be obtained from the KCS officer dispatched to KOTRA prior to incorporation registration and foreign-invested company registration.
•Report to: A foreign exchange bank or KOTRA Notification of •Documents to submit: Two copies of the investment notification form (Three copies of the foreign investment application form for tax reduction for businesses subject to tax reduction) Confirmation of •Report to: A foreign exchange bank or KOTRA specifications of •Confirmation item: Capital goods that are objects of investment imported capital •Documents to submit: Three copies of the application form, documentary evidence of price goods (bill of sale, etc.) •Customs clearance after acquiring the business registration certificate issued in the name of the foreign-invested company •Documents to submit for capital goods subject to tariff exemption ––A copy of the application form for tariff exemption ––A copy of the confirmation of specifications of imported capital goods ––A copy of documentary evidence (investment notification form) certifying that the capital Import clearance goods are introduced through investment-in-kind or with cash ––A copy of documents certifying that the business is subject to tax reduction or exemption (A document notifying that tax reduction or exemption has been granted) ––Invoice, price report, B/L or AWB, packing list (only for required items), certificate of country of origin (only for required items), documents requiring proof and confirmation such as permits, approvals, etc. as prescribed by Article 226 of the Customs Act, notification of transport to bonded area (for goods that entered a bonded area), import agent contract Confirmation of •Report to: KCS officer dispatched to KOTRA completion of in- •Required documents : Two copies of the application form, copy of import declaration kind investment certificate •Report to : District courthouse registration department or registry office Registration of •Documents to submit: Application form and required documents. The certificate of incorporation confirmation of completion of in-kind investment should be attached in the case of investment-in-kind. •Report to: A foreign exchange bank or KOTRA Registration of •Documents to submit: Application form and required documents. A copy of the certificate foreign-invested of confirmation of completion of in-kind investment should be attached in the case of company investment-in-kind. Aftercare of Capital Goods Management To transfer or lease capital goods introduced as foreign investment and exempted from tariffs or to II . use such goods for purposes other than those notified before five years have passed from the date Business of import declaration acceptance under the Customs Act, a notification should be filed to a foreign exchange bank or KOTRA. If capital goods are transferred or used for purposes other than those notified, a sentence of up to five years’ imprisonment or a fine of up to KRW 50 million may be imposed on persons who failed to notify the disposal of the capital goods. 123 Also, in the following cases, reduced or exempted tariffs will be collected. •When a foreign-invested company’s registration has been cancelled or business is closed down: The abated or exempted tax amount shall be collected retroactively for three years (individual consumption tax and added value tax: five years) from the date of cancellation or closure. •When the objects of investment are used for purposes other than those notified or are disposed of: The abated or exempted tax on capital goods that are used for purposes other than those notified or are disposed of within three years of acceptance of import declaration under the Customs Act (five years for individual consumption tax and value added tax) shall be collected. •When a foreign investor transfers stocks, etc. within three years of the date of exemption of tariff, etc.: The abated or exempted tax on the value of capital goods exceeding the foreign investor’s investment amount remaining after the transfer of stocks, etc. shall be collected. •Where the requirements on payment for objects of investment, introduction of loans, or number of employees are no longer satisfied within five years of the date on which foreign investment was notified (three years in the case of employment-related requirements): Taxes reduced or exempted for five years retroactively from the date on which the requirements are no longer satisfied (three years in the case of employment related requirements) shall be collected. * When collecting tariff, if the value of the goods has depreciated due to usage, the tax collected shall be reduced proportionate to the reduced value.
However, the collection of tariffs can be exempted as an exception in the following cases:
•When registration of a foreign-invested company is cancelled due to the company’s dissolution by a merger. •When capital goods that have been imported with tariffs exempted cannot be used for their original purposes due to natural disasters and other force majeure, or due to other economic circumstances such as depreciation, technological advancement, etc. and when they are used for other purposes or are disposed of by obtaining the approval of the Minister of Strategy and Finance. •When transferring stocks, etc. of a foreign-invested company to a national or a corporation of the Republic of Korea as part of initial public offering of the foreign-invested company concerned in accordance with the Financial Investment Services and Capital Markets Act. •Where the relevant requirements for tax reduction or exemption have been met by completing payment for objects of investment within the deadline extended by the competent city mayor or provincial governor. •In the following cases which are recognized as having fulfilled the aim of tax reduction or exemption: ––When foreign investors who have invested in an industry-supporting service business or a business accompanying high technology transfer their business subject to tax reduction or exemption or their shareholdings to a national or a corporation of the Republic of Korea, and when the Minister of Strategy and Finance confirms that the products and services produced or provided by the said business can be produced domestically without any problem. ––When foreign investors transfer their stocks, etc. to a Korean national or a corporation of the Republic of Korea in accordance with government policies, and the transfer is confirmed by the Minister of Strategy and Finance.
※ Customs clearance for moving goods Doing Business In Korea ‘Customs clearance for moving goods’ refers to the head of the customs office’s simplification of the procedure 124 for confirming the qualifications of the mover and the required documents, application of the relevant taxation or tax exemption, and other acts and procedures as prescribed by the Customs Act, by taking into consideration the movers’ job, reasons for changing residence, etc. regarding products for daily use included in the individual’s hand baggage and unaccompanied goods that are carried in by those entering Korea to change their residence. In principle, the Customs Act does not tax goods recognized as ‘moving goods’, but the scope of ‘moving goods’ is different depending on whether the owner of the goods is a mover, semi-mover or short-term visitor as categorized according to the period of a Korean national’s stay abroad (excluding Koreans holding permanent residency of a foreign country) and a foreigner’s intended period of stay in Korea (including persons holding citizenship).
For example, in order to have automobiles recognized as moving goods, there is a requirement to register and use the automobile for at least three months at the previous place of residence (an overseas country) prior to the date of entry into Korea (i.e., the loading date when loaded prior to the date of entry, and the cancellation date when cancelled prior to the date of entry). As such, the methods of determining the tariff may differ for individual items. Hence, the customs clearance requirements and the scope of recognition as moving goods must be checked in advance before bringing moving goods into Korea.
Packing and loading of goods > Transport (shipping company) > Domestic arrival (shipping company) > Entry into a bonded warehouse > Fill out import declaration and transmit EDI > Import declaration (customs office) > Goods inspection (taxation or tax exemption decided)/acceptance of import declaration > Delivery from warehouse
1-3 Bonded Area
Bonded areas are designated or licensed by the head of the customs office for the purpose of efficient freight management and customs administration. Activities conducted in bonded areas include the storage of foreign goods for customs clearance such as imports, exports, and returns; production, processing, or other similar activities by using foreign goods or a combination of foreign and domestic goods as raw materials; exhibition of foreign goods; construction using foreign goods; sale of foreign goods; and inspection of import and export goods. Bonded areas are divided into designated, licensed, and general bonded areas.
< Types of Bonded Areas > Type Details Certain public facilities or areas designated by the head of the customs office as bonded areas: these Designated include designated storage places used to temporarily store goods awaiting customs clearance, and bonded area customs inspection places used as sites for the inspection of goods by customs. Private for-profit facilities that have been licensed by the head of the customs office as a bonded Licensed area on the request of the owner. Licensed bonded areas are classified into commercial bonded bonded area areas for storing cargo for import and export and bonded warehouse for private use used by the owner to store his/her cargo (bonded warehouse, bonded factory, etc.). General Areas designated by the Commissioner of KCS where all the functions of the existing licensed bonded bonded area areas (entry, storage, manufacture & processing, exhibition, construction, and sale) can be carried out. 2. Tariff Reduction, Exemption & Refund Management II . ‘Tariff reduction and exemption’ refers to the full or partial waiver of tariff obligations, either Business conditionally or unconditionally depending on the case, for certain goods in order to achieve the specific aims of the country. The refund of customs duties on raw materials that are to be exported constitutes an export support system for the purpose of improving the price competitiveness of exported goods in the global market. 125 • Tariff Reduction and Exemption • Tariff Refund
2-1 Tariff Reduction and Exemption
There are two types of tariff reduction: unconditional reduction of and/or exemption from taxes based on specific facts, and conditional tariff reduction and exemption in which tariffs are reduced or exempted on condition of specific usage. In principle, the Customs Act stipulates tariff reduction and exemption, although tariffs may be reduced or exempted according to the Foreign Investment Promotion Act, the Restriction of Special Taxation Act, the Submarine Mineral Resources Development Act, and multilateral and bilateral agreements.
< Tariff Reduction & Exemption under the Customs Act > Unconditional Reduction & Exemption Conditional Reduction & Exemption
•Exemptions for goods used by diplomats (Article 88) •Reductions or exemptions for correction of unbalanced •Exemptions for goods used by the government tax rates (Article 89) (Article 92) •Reductions or exemptions for goods used for academic •Exemptions for small-sum goods (Article 94) research (Article 90) •Exemptions for travelers' personal effects, etc. •Exemptions for goods for religious use, etc. (Article 91) (Article 96) •Exemptions for specific goods (Article 93) •Exemptions for re-import (Article 99) •Reductions or exemptions for goods used to prevent •Reductions for damage (Article 100) environmental pollution (Article 95) •Reductions for overseas trusted and processed goods •Exemptions for re-export (Article 97) (Article 101) •Reductions or exemptions for re-export (Article 98)
2-2 Tariff Refund
Tariffs paid or to be paid when importing raw materials for export are drawn back to the exporter or the manufacturer of the exported goods upon export, notwithstanding the Customs Act, etc. < Tariff Refund Application Methods & Procedures > Category Details •Exports for which export declarations are accepted under the regulations of the Customs Act. However, in the case of export without exchange, only the exports designated by the Ordinance of the Minister of Strategy and Finance are subject to refund. •Sales or construction, paid for in foreign currency within Korea, designated by the Ordinance Exports subject to of the Minister of Strategy and Finance Doing Business In Korea refund •When supplying to companies in areas designated by the Ordinance of the Minister of 126 Strategy and Finance as bonded areas under the Customs Act, or to companies in free trade zones under the law concerning the designation and operation of a free trade zone •Other exports as designated by the Ordinance of the Minister of Strategy and Finance Materials that fall under any of the following: •Materials that are physically or chemically attached to the goods for export When goods for export are •Materials that are consumed in the process of producing Raw materials produced subject to refund the goods for export (excluding materials indirectly entered into the process of producing goods for export) •Packaging materials for the goods for export When goods are exported in Exported goods their original imported state Either the exporter or the manufacturer who is listed as the Exports refund applicant on the export declaration certificate When payments are received in Applicant Either the seller or the manufacturer of the concerned goods foreign currency within Korea Either the supplier or the manufacturer who is listed as the Entry into bonded areas and free refund applicant on the 'Entry (load) of Export Goods for trade zones, and other exports Refund Certificate' to confirm supply for exports, etc. Exports When goods for export are loaded Application Upon completion of the export, sale, construction, or supply Period Other exports of goods for export •Within two years of the date on which the products manufactured or processed with imported goods subject to refund (raw materials) were supplied for export subject to refund. * Application for refund of tariff on the exported products shall be made collectively for all Application raw materials used to produce the exported products. deadline * Tariffs on raw materials for export which are imported retroactively within two years of the date on which the export declaration is accepted or on which the export, sale, construction or supply thereof is completed shall be refunded. •Documents certifying that the goods have been supplied for exports, etc. (export declaration certificate etc.) Documents to be •Statement of calculation of the used quantity submitted •Documents certifying the amount of tax paid for used raw materials (import declaration certificate, etc.) •Other documents required for the confirmation of refunds 05 Management II . Finance / Accounting Business
127
1. Korea’s Financial System
The Korean financial market consists of a financial market in the traditional sense, in which short- and long-term financial products are traded in relation to the procurement and operation of funds, a foreign exchange market, and a derivatives market.
• Money Market • Capital Market • Financial Derivatives Market • Foreign Exchange Market • Structure of Financial Institutions
Korea’s Financial Structure Call RP Money Market CD CP Traditional Financial Cover Bill Market Currency Stabilization Bond
Bond Market Government Bond Capital Asset-Backed Securities Market Municipal Bond Market Corporate Bond Stock Market Financial Bond Financial Market Foreign Exchange Market Special Bond Securities Related Market Forward Interest Rate Related Market Futures Option Derivatives Market Currency Related Market Swap Credit Derivatives Market
Derivatives Linked Securities Market 1-1 Money Market
The money market is a market in which short-term financial products are traded - generally with a maturity of less than one year - to control short-term fund excesses or deficiencies between economic entities such as businesses, households, governments, financial institutions, and so forth. The money market in Korea consists of the call market, which plays an important role in the operation
Doing Business In Korea of the monetary credit policy of the Bank of Korea, and the markets for RPs, CDs, CPs, cover bills, and currency stabilization bonds. 128 The money market is largely divided into the ‘intercompany’ market, which controls short-term fund excesses or deficiencies between financial institutions, and the ‘customer’ market trading, through which short-term funds are traded between financial institutions and customers. The call market is the most representative of the financial markets among all financial institutions in Korea. The CP and cover bill markets are customer markets frequently used by businesses and financial institutions, respectively, to secure short-term funds. Furthermore, the RP and CD markets combine the features of both markets.
1-2 Capital Market
The capital market is a market in which businesses, governments, or local governments can secure long-term investment funds. In a broad sense, it includes facility loans and other long-term loans from a bank; more specifically, it refers to markets where government bonds and corporate bonds, securities and so forth are issued and distributed. Securities traded in the capital market are largely divided into stocks and bonds.
Foreigners’ Securities Investment Investment by foreigners in domestic securities was promoted step by step in consideration of its effect on macro-economic variables, such as currency, interest rate, exchange rate, etc. Currently, foreigners can acquire all securities in accordance with the Financial Investment Services and Capital Markets Act.
In order for foreign nationals to invest in domestic securities, they should create an ‘external account exclusively for securities investment’ and a ‘non-resident KRW account exclusively for securities investment’ under their own name, register as a foreign investor at the Financial Supervisory Service (FSS), and receive an investor registration number (ID). Foreign investors can purchase domestic securities by designating a permanent agent to place purchasing orders through securities companies, and then have the funds remitted to the external account used exclusively for securities investment. Conversely, in order to sell domestic securities, the funds have to be remitted to the non-resident KRW account used exclusively for securities investment. The same amount will then be transferred to the external account used exclusively for securities investment to recover the invested amount. < Procedures for Foreign Investment in Domestic Securities > Management II .
⑦ Remit funds External account ⑨ Non-resident KRW Business Foreign investor exclusively for account exclusively securities for securities
⑥ Notify ① Place order ⑧ Remit funds ⑧ order conclusion ⑨ Pay funds 129
② Place order Securities ③ Place order Permanent agent Securities exchange company ⑤ Notify order conclusion ④ Conclude order
※ The Financial Investment Services and Capital Markets Act With the implementation of the Financial Investment Services and Capital Markets Act in February 2009, the strictly separated fields within the existing capital market in the finance sector - such as securities companies, asset management companies, merchant banks, futures companies, trust companies, and so forth - were consolidated. This measure is expected to bring changes to the Korean capital market that will encourage financial companies centering on investment banks and private equity funds to become larger and more specialized and to expand derivatives’ underlying assets, which will support Korea’s growth into a major financial hub.
< The Financial Investment Services and Capital Markets Act & Changes to the Financial Law System >
Korea’s Financial Law System 현행 금융법 체계
Securities Exchange Act Futures Trading Act
Non-programmed Indirect Asset Management Act Investment Financial Banking Insurance laws Business Act Merchant Bank Act Trust Act related to Act small loans Derivatives trading Other financial investment laws (over-the-counter derivatives trade, (business setup, real estate, FX margin trade, etc.) vessel investment company, etc.)
Post-Consolidation Financial Law Framework
Investor protection is not legally guaranteed for the boxes highlighted in blue.
Financial Insurance Law on capital market and financial investment laws Banking Business (Capital Markets Consolidation Act) related to Act Act small loans < Key Points of the Financial Investment Services and Capital Markets Act > Category Details Expansion of the scope of •Permits the combined operation of all financial investment businesses (investment work for financial investment dealing, investment agent, consolidated investment, investment entrusts, trusts) companies •Small sum payment function & foreign exchange handling are allowed in principle. Shift to a comprehensive concept •Includes all future new financial investment products to be released
Doing Business In Korea of financial investment products •Strengthens notice obligations: Investment agents to compensate for defective 130 Reinforcement of the investor sales, and companies to bear the burden of compensation. protection system •Introduces a mandatory 'know your client' policy. Expansion of consolidated •Includes all asset-worthy property as investment objects investments (asset management) •Abolishes asset restrictions on investment objects per fund type
1-3 Financial Derivatives Market
Financial derivatives are financial products devised to avoid risks resulting from fluctuations in the value of underlying assets. Depending on the trading method, the instruments used may include forwards, futures, options, swaps, etc. Furthermore, depending on the underlying assets, financial derivatives are divided into currency, interest rate, stocks, credit- related products, etc. Also, trades are categorized into exchange trades and over-the-counter trades depending on the location of the trade. The exchange market is where financial derivatives, the aspects of whose trade other than the price are standardized, are traded. The over-the-counter market is where non-standardized financial derivatives are traded directly, rather than through exchanges.
< Types of Key Financial Derivative Products > Category Exchange trade Over-the-counter trade •Currency futures •Forward exchange Currency •Currency futures options •Currency swaps •Currency options •Currency options •Forward rate agreements •Interest rate futures •Interest rate swaps Interest Rate •Interest rate futures options •Interest rate options •Swaptions •Options on stocks •Index futures •Options on stocks Stocks •Index options •Equity swaps •Index futures options •Credit default swaps Credit •Total return swaps •Credit linked notes < Comparison of Exchange & Over-the-Counter Trades of Financial Derivatives > Management
Category Exchange trade Over-the-counter trade II . Trade Trade unit, settlement conditions, etc. are Decided through discussions between the trading Business conditions standardized. parties concerned Trade Contracts are mostly concluded by phone, etc. Exchanges location through dealers or brokers. Trading Trading is allowed only for exchange members. No limits parties Others trade through the members. Deal Buyers, sellers, and/or their agents involved in the 131 Exchanges counterpart deal Daily settlement. In most cases, only the balance In most cases, goods are delivered or transferred Settlement is settled before maturity through offsetting at maturity. transaction. Dealers and brokers set credit limits per customer Deposit Deposit at exchange or demand deposits.
1-4 Foreign Exchange Market
Depending on the parties to the transaction, the foreign exchange market can be divided into the inter- bank market and the customer market. The inter-bank market refers to the foreign exchange market in the narrow sense, and has some features of the wholesale market. The Korean inter-bank market is characterized by the fact that more transactions go through brokers than direct transactions, unlike the foreign exchange markets of developed nations. The customer market is a form of retail market in which banks deal in foreign exchange transactions with individual and institutional customers.
< Structure of the Foreign Exchange Market >
Customer Market Inter-Bank Market
Government Bank of Korea
Business Foreign Exchange Bank Foreign Exchange Bank
Foreign Exchange Individuals Intermediary Company
Participants in the Korean foreign exchange market include foreign exchange banks, intermediary banks, foreign exchange authorities, and customers including individuals, businesses, and governments. Foreign exchange banks include all commercial banks that handle domestic foreign exchanges. Life insurance companies and securities companies were first allowed to participate in the foreign exchange market in July 2002. So far, securities companies registered as intermediary companies include NH Investment & Securities, Mirae Asset Daewoo Securities, Merrill Lynch International Incorporated Seoul Branch and Yuanta Securities Korea.
An inter-bank market is divided into a direct transaction market where transactions are carried out directly between the dealers of foreign exchange banks; and an exchange stock market where transactions are carried out through brokerage businesses. The majority of foreign exchange banks take part in the latter. Korea’s three representative fund brokerage companies are the Korea Money Brokerage Corporation (established in 1996 as a company specializing in short-term financing between financial institutions), Seoul Money Brokerage Services, Ltd. (established in 2001), and Korea Inter Dealer Broker (established in 2006). Overseas companies include ICAP Foreign Exchange Brokerage, Tullett Prebon Money Brokerage, Nittan Capital Money Brokerage, GFI Korea Money Brokerage, Tradition Korea, and BGC Capital Markets and Foreign Exchange Broker. Doing Business In Korea 132 < Inter-Bank Exchange Transactions > Category KRW/USD Transactions Transaction Type Spot exchange, futures exchange, foreign exchange swap Transaction Unit Over USD 1 million, in units of USD 500,000 Asking Method Ask in units of KRW 0.1 on the KRW price of USD 1 Transaction Conclusion Computer automatically concludes orders placed by phone and e-orders Transaction Time 09:30-12:00, 13:30-16:30
1-5 Structure of Financial Institutions
According to the financial services provided, financial institutions in Korea are categorized into banks, non-bank deposit handling institutions that handle financial products similar to bank deposits, securities companies and asset management companies, insurance companies, and other financial institutions.
< Korea’s Financial Institutions > Category Subcategory 1 Subcategory 2 Commercial banks General banks Local banks Foreign bank branches Korea Development Bank Banks Export-Import Bank of Korea Special banks Industrial Bank of Korea Nonghyup Bank National Federation of Fishery Cooperatives Merchant banks Merchant banks Mutual savings banks Mutual savings banks Non-bank deposit National Credit Union Federation of Korea handling Credit cooperative institutions Korean Federation of Community Credit Cooperatives institutions Mutual Finance Postal Savings and Insurance Services Postal Savings and Insurance Services Securities companies Securities companies Securities companies Asset management companies Asset management companies & asset Futures companies Futures companies management Securities finance companies Securities finance companies companies Investment advisory companies Investment advisory companies Category Subcategory 1 Subcategory 2 Management
Life insurance companies Life insurance companies II .
Non-life insurance companies Business Non-life insurance companies Reinsurance companies Insurance Guarantee insurance companies companies Postal savings and insurance services Postal Savings and Insurance Services Provident institutions Provident institutions Korean Trade Export Insurance Corporation Korean Trade Export Insurance Corporation 133 Leasing companies Credit card companies Credit-specialized financial companies Installment financial companies Other financial New technology business investment Companies institutions Small business investment companies Venture capital companies Corporate restructuring companies Trust companies Trust companies Financial supervisory service Financial Supervisory Service Korea Deposit Insurance Corporation Korea Deposit Insurance Corporation Korea Financial Telecommunications and Korea Financial Telecommunications and Clearings Institute Clearings Institute Credit guarantee companies Korea Credit Guarantee Fund Financial support Korea Technology Finance Corporation institutions Credit rating agencies Credit rating agencies Korea Asset Management Corporation Korea Asset Management Corporation Korea Housing Finance Corporation Korea Housing Finance Corporation Korea Exchange Korea Exchange Financial intermediaries Financial intermediaries
2. Korea’s Accounting System
Korea’s accounting system was overhauled to meet international standards in the aftermath of the Asian financial crisis in 1997. Korean Financial Accounting Standards (KFAS) now comply with International Accounting Standards (IAS), as Korea has announced the adoption of the Korean International Financial Reporting Standards (K-IFRS). Korea’s accounting and auditing system includes an external audit and an internal accounting control system. The external audit system involves an examination of a company’s records and reports by an outside party. Under the internal accounting control system, internal standards are established, so that financial statements are drawn up and disclosed in line with accounting standards. One permanent director is designated to assume responsibility for internal accounting control.
• Business Accounting Standards • Audit Policy 2-1 Business Accounting Standards
Following the 1997 Asian financial crisis, the Financial Services Commission (FSC) of Korea accepted the recommendations of the IMF and the World Bank to fully revise Korean business accounting standards to conform with international standards. This resulted in a shift from the legal provision-like form of the past to the current business accounting standards, which adhere to global standards. Commissioned by
Doing Business In Korea the FSC in July 2000 to set, revise and interpret business accounting standards, the Korean Accounting Institute (KAI) publishes new or revised business accounting standards with a designated serial number 134 through the Statements of Korea Accounting Standards. The Statements of Korea Accounting Standards apply when corporations under the Act on the External Auditing of Stock Companies prepare financial statements for external users, and when external auditors conduct audits.
※ Business Accounting Standards and the Commercial Act and Tax Laws In Korea, laws that regulate financial reports resulting from business activities include the Commercial Act, tax laws, the Financial Investment Services and Capital Markets Act, the Act on the External Auditing of Stock Companies, the Certified Public Accountant Act, business accounting standards, and the accounting auditing standards. Under the Commercial Act, financial statements are listed as the balance sheet, income statement, statement of appropriation of retained earnings and statement of disposition of deficit. However, under the business accounting standards, the statement of cash flow and annotations to financial statements are included as well. The tax laws are based on one major premise, namely the principle of obligation and equal taxation. Therefore, its standards differ from those of the financial reports required under the business accounting standards, which are based on the principles of accrual and realization. The difference between business accounting and tax accounting has been narrowed in recent legislations.
2-2 Audit Policy
External Audit System The external audit system refers to the auditing of a company by external accountants with no vested interests in that company. The system was established to ensure that external auditors conduct audits independently from internal auditors in order to protect interested parties such as shareholders, creditors, employees, etc. and to promote the sound development of companies. According to the Act on the External Auditing of Stock Companies, auditors who are certified public accountants inspect whether the financial statements prepared by businesses when settling their accounts comply with the business accounting standards.
Article 2 of the Enforcement Decree of the Act on the External Auditing of Stock Companies stipulates that companies subject to an external audit are corporations under certain categories as listed below. Thus, limited companies, etc. are not obligated to undergo an external audit, regardless of their size. •A corporation whose total amount of assets at the end of the preceding business year comes to KRW 12 billion or more (as of the establishment of a new firm following the split of a corporation or a merger with another firm, if applicable). •A stock-listed corporation (under the Financial Investment Services and Capital Markets Act) or a corporation planning to be listed in the corresponding or following business year. •A corporation whose total liabilities come to KRW 7 billion or more at the end of the preceding business year and whose total assets come to KRW 7 billion or more (as of the establishment of a new firm following the split of a corporation or a merger with another firm, if applicable). •A corporation whose total number of employees comes to 300 or more and whose total amount of assets comes to KRW 7 billion or more at the end of the preceding business year (as of the establishment of a new firm following the split of a corporation or a merger with another firm if applicable). Companies subject to external audits should elect an auditor within four months of the start of Management
each business year. Stock-listed corporations and association-registered corporations should elect II . the auditor within four months of the start of the first business year, and use the same auditor for Business three consecutive years. If the company prepares consolidated financial statements, then the same auditor must be used for the financial statement, consolidated financial statement, and combined financial statement. In electing an auditor, the company should obtain the approval of an auditor election committee (or an audit committee stipulated by the Commercial Act) endowed with expertise and independence. In particular, stock-listed corporations, association-registered corporations, and 135 subsidiaries of business groups in which a member company has been notified by the Securities and Futures Commission to prepare a combined financial statement in the previous business year should obtain the approval of the auditor election committee. When the company elects an auditor under the said regulations, it should be reported at the first general shareholders’ meeting after the election.
Internal Accounting Control System The internal accounting control system, which is part of the internal control system, is designed and operated to provide rational grounds for determining whether a company’s financial statements have been prepared and disclosed according to the Generally Accepted Accounting Principles (GAAP). The internal control system has three purposes: operation, financial reporting, and compliance. Regarding these purposes, the internal accounting control system has been developed to meet the financial reporting requirements (to secure the reliability of financial statements in particular). Asset protection and corruption prevention programs are included, and when control procedures for operation or compliance are related to securing the reliability of financial statements, the relevant control procedure is included in the scope of the internal accounting control system.
The internal accounting control system provides basic guidelines for companies seeking to streamline their internal accounting management practices, allowing them to improve the reliability of their financial statements and other related materials. The representative of a company is responsible for managing the internal accounting control system, and should designate a full-time director as the internal accounting manager in charge of implementing the system. The internal accounting manager reports the operational status of the internal accounting control system to the board of directors and the auditor (or the audit committee) every six months, and the auditor (or the audit committee) reports its evaluation to the board of directors every year. In addition, review standards for the internal accounting control system is in place to provide clear standards for external auditors to review and report the establishment and operational status of a company’s internal accounting control system.
< Good Practice Guidelines and Review Standards >
Internal Accounting Control System Korean Institute of Certified Operating Committee Public Accountants
Good Practice Guideline for Internal Internal Accounting Control System Accounting Control System Review Standards 06 Foreigners’ Real Estate Acquisition Doing Business In Korea 136
1. Regulations on Foreigners’ Real Estate Acquisition
Real estate acquisition by foreigners in Korea is governed by the Act on Report on Real Estate Transactions, Etc. (“foreigner, etc.” under this Act), the Foreign Investment Promotion Act, the Foreign Exchange Transactions Act, etc. With the exception of certain real estates that require government permission for purchase, a foreigner, etc. may acquire land in Korea by following certain procedures and reporting the acquisition to the appropriate authorities. It should be noted that different acquisition procedures apply to land subject to permission and land subject to reporting. The same regulations and restrictions on the acquisition, use and development of real estate apply to both Koreans and foreigners.
• Act on Report on Real Estate Transactions, Etc. • Foreign Investment Promotion Act • Foreign Exchange Transactions Act • Land-Related Regulations
< Laws Related to Foreigners’ Real Estate Acquisition > Act on Report on Real Foreign Investment Law Foreign Exchange Transactions Act Estate Transactions, Etc. Promotion Act •Foreigner, etc. (individuals, •Foreigners (individuals, foreign foreign corporations, corporations, permanent Applicable domestic corporations with residents, international •Non-residents parties foreign shareholdings of organizations for economic 50% or more) cooperation, etc.) •Real estate acquisition •Property acquisition notification: •Foreign investment notification: For notifying For notifying non-residents’ Key notification: For notifying the acquisition of domestic acquisition of rights related to regulations foreign direct investment as real estate by a foreigner, domestic real estate (right to lease stipulated in the regulations etc. on a deposit basis, mortgage, etc.) Where to •Si/Gun/Gu office having •Foreign exchange bank, •Foreign exchange bank report jurisdiction over the land KOTRA Reporting •Within 60 days of •Prior to bringing in investment •When withdrawing real estate period concluding a contract funds acquisition funds Governing •The Ministry of Land, •The Ministry of Trade, Industry •The Ministry of Strategy and authority •Infrastructure &Transport & Energy Finance 1-1 Act on Report on Real Estate Transactions, Etc. Management II
Under the Act on Report on Real Estate Transactions, Etc., a foreigner, etc. should report or obtain . Business permission for the acquisition of real estate, etc. (i.e., real estate or the right to acquire real estate) in Korea. The Foreign Exchange Transactions Act (foreigners, etc. are referred to as “non-residents” in the Act) also stipulates that where a foreigner, etc. acquires real estate or rights pertaining to real estate in Korea, such acquisition should be reported to the relevant authorities.
Special cases concerning the acquisition of real estate by a foreigner, etc. 137 Where a foreigner, etc. has concluded a contract for acquisition of real estate, etc. in Korea, he/ she/it should report the contract to the mayor (referring to mayors in cities without any Gu(district) s, and mayors of special autonomous cities and special autonomous administrative cities), county (Gun) governor, or head of the relevant Gu office. However, in the case of real estate sales contracts prepared by a practicing licensed real estate agent under Article 2 Subparagraph 4 of the Licensed Real Estate Agents Act, the real estate agent concerned should file a report.
When a foreigner, etc. acquires real estate in Korea by means other than a contract, such as inheritance or auction, he/she/it should report the fact to the mayor, county governor or head of the relevant Gu office within six months of acquiring the said real estate.
Doing Business In Korea < Land Acquisitions Requiring Permission> 138 Category Details •Military facility and protection areas under Article 2 Subparagraph 6 of the Military Facility and Protection Act, and areas where land acquisition by a foreigner, etc. needs to Areas requiring be restricted for national defense purposes permission •Areas in which cultural heritage sites should be protected under the Cultural Property Act •Areas that should be conserved under the Natural Environment Conservation Act •Wild Life Protection Areas under the Wildlife Protection and Management Act Application period Prior to conclusion of the contract Permit institute Si/Gun/Gu office having jurisdiction over the land Required documents Agreement between the contracting parties, personal ID of the contracting parties Handling period Within 15 days of filing an application for permission
Penalty for Non-compliance The Act on Report on Real Estate Transactions, Etc. has penal provisions for non-compliance, including a fine of up to KRW 3 million or KRW 5 million for persons who have signed a contract to acquire real estate, etc. but failed to report the acquisition, and a fine of up to KRW 1 million for persons who have acquired real estate by means other than a contract but failed to report the real estate acquisition or conclusion of a real estate contract. For land subject to permission for acquisition, if an acquisition contract is signed without obtaining permission, the contract shall be considered null and void, and the acquiring party may face imprisonment of up to two years or a fine of up to KRW 20 million.
1-2 Foreign Investment Promotion Act
The Foreign Investment Promotion Act allows exceptions for foreign-invested companies or operators of establishments built to improve the foreign investment environment regarding the sale and lease of government and public-owned properties, and permits lease or sale under negotiated contracts. When land is sold to a foreign-invested company and it is recognized that the purchaser is unable to pay for the land in lump sum, then the payment date may be postponed or the payment may be made in installments.
1-3 Foreign Exchange Transactions Act
When real estate transactions are accompanied by an inflow and outflow of foreign funds, the procedures specified under the Foreign Exchange Transactions Act on such flows shall apply to the transaction concerned. The Foreign Exchange Transactions Act’s provisions on real estate transactions are described in the ‘Transfer of Real Estate Transaction Funds’ section. 1-4 Land-Related Regulations Management II
Land-related regulations can be categorized into regulations on acquisition, usage and development. . Business In principle, such regulations apply indiscriminately to Korean nationals and foreign nationals alike.
Land Acquisition-Related Regulations To conclude a contract on land located within an area subject to permission for acquisition according to the Act on Report on Real Estate Transactions, Etc., permission from the city mayor, county 139 governor or head of the relevant Gu is required.
In principle, the Farmland Act prohibits the possession of farmland by anyone other than those using or planning to use farmland to manage his/her own agriculture. However, owning farmland of less than 1,000 m2 for agricultural hobby or leisure purposes is permitted even if the agricultural land is not used for the owner’s own agricultural management.
Land Usage-Related Regulations All land in Korea is divided into four categories according to its use, i.e., urban, managed, agricultural, and natural environment preservation, according to the National Land Planning and Utilization Act. Depending on the usage, there exist several restrictions on the permitted activities. Also, the Seoul Metropolitan Area Readjustment Planning Act divides the Seoul metropolitan area (Seoul, Incheon and Gyeonggi Province) into three areas (overconcentration control area, growth management area, and nature preservation area) and places restrictions on certain activities in each of the areas to resolve issues caused by the over-concentration of people and industries. Seoul is located within the overconcentration control area, and an overconcentration charge has to be paid to construct buildings for office use or sales, as well as public offices. There are also restrictions on the maximum capacity of any new construction and on the expansion of factories and schools. Details of major regulations can be checked through a confirmed land usage plan issued by the Si/Gun/Gu office having jurisdiction over the land.
※ Overconcentration Control Areas in the Seoul Metropolitan Area Seoul, Incheon (excluding Gangwha and Ongjin counties, Daegok-dong, Bulro-dong, Geumgok-dong, Oryu-dong, Wangil-dong, Dangha-dong, Wondang-dong, Incheon Free Economic Zone and Namdong Industrial Complex), Uijeongbu, Guri, Namyangju (Hopyeong-dong, Pyeongnae-dong, Ilpae-dong, Ipae-dong, Sampae-dong, Gaun- dong, Suseok-dong, Jigeum-dong and Donong-dong), Hanam, Goyang, Suwon, Seongnam, Anyang, Bucheon, Gwangmyeong, Gwacheon, Uiwang, Gunpo, and Siheung (excluding the Banwol Special Area).
※ Overconcentration Charge Policy •The overconcentration charge policy is implemented under the Seoul Metropolitan Area Readjustment Planning Act, which was established to ease overconcentration in the capital region and secure financial resources required for balanced regional development and the expansion of urban infrastructure. Currently, for the construction or expansion of large buildings within Seoul, 10 percent of the construction cost is imposed as overconcentration charge, and the rate can be adjusted to five percent depending on the area. •Buildings subject to the policy: Buildings for business use with a total floor area of 25,000 m2 or more; buildings for sales purposes with a total floor area of 15,000 2m or more; composite buildings with sales facilities covering a total floor area of 15,000 2m or more; and other composite buildings with a total floor area of 25,000 2m or more. 2. Foreigners’ Real Estate Acquisition Procedures
The laws and procedures that apply to foreigners’ acquisition of land in Korea differ depending on the purpose of acquisition, whether the foreigner is a resident or not, and whether the purchaser is an individual or a corporation. Where real estate is acquired for profit-making purposes (e.g., for lease), the foreign investment notification procedure should be completed in addition to real estate Doing Business In Korea acquisition notification. Foreigners who are non-residents should notify real estate acquisition under 140 the Act on Report on Real Estate Transactions, Etc. and complete another notification of real estate acquisition under the Foreign Exchange Transactions Act.
• Foreign-Invested Companies • Resident Foreigners • Non-Resident Foreigners • Permanent Residents
2-1 Foreign-Invested Companies
When a foreigner establishes a domestic corporation (foreign-invested company) pursuant to the Foreign Investment Promotion Act to engage in profit-making activities in Korea and acquires real estate (e.g., purchasing office buildings, acquiring factory sites) under the name of the corporation concerned, the Act on Report on Real Estate Transactions, Etc., the Foreign Investment Promotion Act, and the Registration of Real Estate Act shall apply. However, the Foreign Investment Promotion Act shall not apply to the establishment of domestic branches; hence real estate can be purchased under the branch’s name after notifying the branch’s establishment to a foreign exchange bank and registering the branch.
< Land Acquisition Procedure for Foreign-Invested Companies > Procedure Relevant authority Note Foreign investment Head or branch office of notification & a foreign exchange bank, registration KOTRA Real estate acquisition
contract and payment Si/Gun/Gu office having Notification of land •Report period: Within 60 days of the date of contract conclusion jurisdiction over the real acquisition •Required documents: Real estate acquisition contract estate concerned •Registration period: Within 60 days of concluding the contract (balance payment date) •Required documents: Certified copy of corporate registration (copy of alien registration card for individuals), Real estate registration Competent registry office application for registration, documents certifying reasons for registration (approved contract, etc.), registration certificate, certified copy of real estate registration * Application by an agent requires a letter of attorney signed by the delegating person. 2-2 Resident Foreigners Management II
Notification as specified in the Foreign Exchange Transactions Act is not necessary for real estate . Business acquisition by resident foreigners, such as the purchase of a residential apartment or the acquisition of real estate by domestic branches of foreign corporations. Instead, it is necessary to register a transfer of ownership at the local Si/Gun/Gu office within 60 days of concluding the sales contract. In such cases, the Act on Report on Real Estate Transactions, Etc. and the Registration of Real Estate Act shall apply.
< Land Acquisition Procedure for Resident Foreigners > 141 Procedure Relevant authority Note Real estate acquisition contract and payment Si/Gun/Gu office having Notification of real •Report period: Within 60 days of concluding the contract jurisdiction over the real estate acquisition •Required documents: Real estate acquisition contract estate concerned •Registration period: Within 60 days of concluding the contract (balance payment date) •Required documents: Certified copy of alien registration (certified Real estate Competent registry office copy of branch office registration for branch offices), application registration for registration, documents certifying reasons for registration (approved contract, etc.), registration certificate, certified copy of real estate registration
2-3 Non-Resident Foreigners
In principle, non-resident foreigners must first notify the acquisition of real estate to the head of a foreign exchange bank when bringing in funds for real estate acquisition, in accordance with the Foreign Exchange Transactions Act. Afterwards, real estate acquisition should be notified to the competent Si/Gun/Gu office and the transfer of ownership should be registered, in accordance with the Act on Report on Real Estate Transaction, the Foreign Exchange Transactions Act, and the Registration of Real Estate Act.
< Land Acquisition Procedure for Non-Resident Foreigners > Procedure Relevant authority Note Real estate
acquisition contract •Reporting time: When withdrawing real estate acquisition funds •Required documents: Real estate acquisition contract, real estate appraisal report or publicly notified land price certificate, certified Notification of real copy of real estate registration Head or branch office estate acquisition •Note of a foreign exchange (Foreign Exchange ––The acquisition of rights to real estate (real right, right to lease, bank Transactions Act) etc.) should be notified as well ––To transfer the proceeds from the disposal of real estate overseas, the certificate of notification must be submitted to the remitting bank. Procedure Relevant authority Note Payment Si/Gun/Gu office Notification of real having jurisdiction •Report period: Within 60 days of concluding the contract Doing Business In Korea estate acquisition over the real estate •Required documents: Real estate acquisition contract 142 concerned •Non-resident foreigner: Individuals ––Application institution: Korea Immigration Service, Seoul ––Required documents: Certified copy of land acquisition report, •Individuals: Korea copy of passport Immigration •Non-resident foreigner: Corporations Service, Seoul Application for ––Application institution: Land registration department at the Si/Gun/ branch registration number Gu office having jurisdiction over the land concerned •Corporations: Si/ for real estate ––Required documents: Certification of completion of land acquisition Gun/Gu office registration notification, corporate registration certificate and documents having jurisdiction certifying the company’s representatives and their addresses issued over the real estate by authorities in the home country (including embassies in Korea) concerned * In the case of application by an agent, the personal ID of the agent and a letter of attorney notarized by a notary institution of the home country are required. •Registration period: Within 60 days of concluding the contract (balance payment date) Registration office •Required documents: Certificate of address, registration certificate Real estate having jurisdiction for real estate registration, application for registration, certificate of registration over the real estate registration title, certified copy of real estate registration, documents concerned certifying reasons for registration (approved contract, etc.) * Application by an agent requires a letter of attorney notarized by a notary institution of the home country.
2-4 Permanent Residents
Permanent residents hold the nationality of the Republic of Korea and are treated equally as Korean nationals. In this regard, they are exempted from notifying real estate acquisition under the Foreign Exchange Transactions Act regardless of whether they reside in Korea. Permanent residents’ real estate acquisition is governed by the Act on Report on Real Estate Transactions, Etc. and the Registration of Real Estate Act. < Real Estate Acquisition Notification Procedure for Permanent Residents > Management
Procedure Relevant authority Note II . Real estate acquisition Business
contract and payment Si/Gun/Gu office •Notification period: Within 60 days of the date of contract Notification of real estate having jurisdiction conclusion acquisition over the real estate •Required documents: Real estate acquisition contract 143 concerned Application for registration number for real estate •Required documents: Certificate of address or certificate Seoul Central District registration (when the of Korean residency (or certificate of registration as Korean Court certificate of resident national residing abroad) registration is cancelled) •Registration period: Within 60 days of concluding the contract (balance payment date) •Required documents: Certificate of address or residence, Registration office application for registration, documents certifying reasons for having jurisdiction registration (approved contract, etc.), registration certificate, Real estate registration over the real estate certified copy of real estate registration, etc. concerned * Certificate of address: Certificate of overseas residency issued by a diplomatic mission abroad * Application by an agent requires a letter of attorney signed by the delegating person
3. Transfer of Real Estate Transaction Funds
Under the Foreign Exchange Transactions Act, funds for real estate transactions are largely divided into funds carried in or remitted from abroad, and funds generated domestically. When making a real estate transaction with funds carried in or remitted from abroad, both the carrying in of funds for real estate purchase and the carrying out of funds from real estate sales by either residents or non- residents are guaranteed. However, when carrying out funds from the sales of real estate purchased using funds generated domestically, the Governor of the Bank of Korea should be notified.
• Foreign-Invested Companies & Domestic Branches of Foreign Companies • Resident Foreigners • Non-Resident Foreigners 3-1 Foreign-Invested Companies & Domestic Branches of Foreign Companies
Foreign investors planning to register a foreign-invested company may bring in funds for real estate purchase after notifying foreign investment, and may register the foreign-invested company after all the preparatory procedures such as real estate acquisition have been completed. Domestic branches of foreign companies may bring in funds through a designated foreign exchange bank in the form of
Doing Business In Korea operating funds to purchase real estate.
144 Funds for real estate acquisition are not always remitted from abroad, but are often supplied from the capital of the foreign-invested company or from the operating funds of the domestic branch. Hence, funds generated by real estate transactions frequently take the form of capital reductions or dividends for foreign-invested companies and operating revenue for the domestic branch. The domestic branches of foreign companies are not allowed to reduce their operating capital, except to close a branch and remit the liquidated funds abroad.
3-2 Resident Foreigners
When resident foreigners purchase real estate for residence or non-profit purposes, they may bring in purchasing funds and acquire domestic real estate without going through notification procedures as prescribed by the Foreign Exchange Transactions Act.
Overseas remittance of the proceeds from the sale of real estate acquired with funds carried in or remitted from abroad (including funds deposited in external accounts) requires a notification to the head of a foreign exchange bank with documents certifying payment attached. However, the purchase of real estate from funds generated domestically requires a notification to the governor of the Bank of Korea.
3-3 Non-Resident Foreigners
In principle, non-resident foreigners should notify real estate acquisition to the head of a foreign exchange bank when brining in funds to purchase domestic real estate for non-profit purposes, and the proceeds from the sale of the real estate can be carried out after notifying the head of a foreign exchange bank. However, if real estate acquisition had not been notified, a notification should be made to the governor of the Bank of Korea to carry out the proceeds from sale of the real estate.
4. Real Estate-Related Taxes
The tax rates on real estate vary at the purchasing, holding and sales stages: acquisition tax and value added taxes are imposed at the purchasing stage; property tax or composite real estate tax, which differs by region and property size, is levied at the holding stage; and transfer income tax and value added tax are imposed at the sales stage. Foreign-invested companies are entitled to various tax benefits in accordance with the Restriction of Special Taxation Act, etc. • Purchasing Stage Tax Management II
• Holding Stage Tax . Business • Sales Stage Tax
4-1 Purchasing Stage Tax Taxes levied at the purchasing (acquisition of real estate other than farmland by succession for 145 value) stage of real estate include acquisition tax (4 percent of the acquisition price; 1-3 percent for housings) and value added tax (10 percent of the building acquisition price; entrepreneurs are entitled to deductions and refunds). Surtax on acquisition tax includes the special tax for rural areas and local education tax.
4-2 Holding Stage Tax
At the holding stage, the property tax and local education tax (20 percent of property tax) are levied. However, for newly built or expanded factories in overconcentration control areas in the Seoul metropolitan area, five times the standard property tax is levied for five years.
When real estate held surpasses a certain value (KRW 600 million for houses, KRW 500 million for land subject to general aggregate tax, KRW 8 billion for land subject to special aggregate tax), composite real estate tax (0.5-2.0 percent of the tax base for houses, 0.75-2.0 percent of the general aggregate tax base for land, 0.5-0.7 percent of the special aggregate tax base for land) and the special tax for rural areas (20 percent of comprehensive real estate holding tax) are levied.
4-3 Sales Stage Tax
At the sales stage, individuals pay transfer income tax (6-38 percent when the asset is held for two years or longer after registration) and local income tax (10 percent of the transfer income tax). Corporations are required to pay corporate income tax and local income tax (10 percent of the corporate income tax). However, the tax rate applied for individuals is: 70 percent for assets not yet registered; 40 to 50 percent for assets which have been held for less than one year after registration; and basic tax rate of up to 40 percent for assets which have been held for one year or longer and less than two years after registration. Also, value added tax (10 percent of the building transfer price) is imposed as well.
※ Tax support for foreign-invested companies •Acquisition tax, registration tax and property tax are reduced for real estate acquisition by industry-supporting service businesses and businesses accompanying high technologies under the Foreign Investment Promotion Act, and real estate acquisition within foreign investment zones. •Benefits related to national housing bond purchase are provided for foreign-invested companies registered under the Foreign Investment Promotion Act with regard to permits for the construction of buildings for business purposes and the registration of business real estate. Those receiving tax benefits on foreign investments are granted full exemption, and foreign-invested companies are granted reductions in proportion to their investment ratio. < Real Estate-Related Taxes > Stage Tax items Tax rate •4.0% of the acquisition price (acquisition of real estate Standard other than farmland by succession for value) tax rate ※Houses acquired by succession for value (acquired on or after Aug. 28, 2013): 1 to 3% •Acquisition of real estate for the construction and Doing Business In Korea expansion of factories in overconcentration control areas 146 in the Seoul metropolitan area: 3 times the standard tax rate minus 2 times the heavy tax rate (2%) •Acquisition of real estate for use as the headquarters of Heavy Acquisition tax companies in overconcentration control areas in the Seoul taxation metropolitan area (limited to constructions and expansions): Standard tax rate + 2 times the heavy tax rate (2%) •Luxury assets such as vacation houses, golf clubs, luxury recreation facilities, luxury vessels and mansions: Standard tax rate + 4 times the heavy tax rate (2%) Acquisition •Abated for companies engaging in an industry supporting and service business or a business accompanying high Abated registration technology, companies operating in foreign investment zones or free economic zones •Special tax for rural areas, local education tax, etc. Surtax ※Stamp tax for certificate of real estate ownership transfer: KRW 20,000 to 350,000 •10% of the building acquisition price (deductible as input tax when Value-added tax operating a business) •Exempted when a house of 85m2 or smaller is acquired •For land with a standard market price of KRW 100 million Purchase or higher (5% of the standard market price in special amount cities and metropolitan cities; 4.5% in other regions) National housing bond •Bond purchase is exempted in proportion to the investment ratio when a business-purpose real estate is Abated registered by a foreign-invested business (fully exempted in the case of businesses eligible for tax abatement) •Housings: 0.1-0.4% (4% in the case of vacation houses) •Buildings: 0.25-0.5% (4% in the case of buildings in golf clubs or luxury recreation facilities; 1.25% for five years in the case of factories newly built or expanded in Standard overconcentration control areas) tax rate •Land: 0.2-0.5% in the case of land subject to inclusive Property tax taxation; 0.2-0.4% in the case of land subject to separate taxation; 0.07-0.2% in the case of land subject to separate taxation; and 4.0% in the case of land used for private membership golf clubs and luxury recreational facilities) Ownership or holding Abated •Identical to the abatement of acquisition tax Heavy •When a factory is newly built or expanded in overconcentration taxation control areas: Five times the standard tax rate for five years •Houses (officially assessed land price exceeding KRW 600 million): 0.5-2.0% of the tax base Composite real estate tax •Land (inclusive aggregate price exceeding KRW 500 million or separate aggregate price exceeding KRW 8 billion): 0.75-2.0% of the tax base (inclusive aggregate), 0.5-0.7% of the tax base (separate aggregate) •Local education tax (20% of the property tax) Other surtax •Special tax for rural areas (20% of the composite real estate tax) Stage Tax items Tax rate Management •Unregistered assets: 70% II .
•Less than one year after registration: 50% (40% in the case of houses) Business Transfer •More than one year and less than two years after registration: 40% Individuals income (basic tax rate for houses etc.: 6-38%) tax •More than two years after registration: 6-38% (progressive tax rate applied) •Corporate income tax imposed on gains as included in non-operating Sale income Corporate 147 •An additional 10% corporate income tax (40% if not yet registered) Corporations income is charged on the transfer income from the sale of houses (excluding tax rental housings, certain company-owned houses provided by employers) or non-business use land Local income tax •10% of transfer income tax or corporate income tax Value-added tax •10% of the transfer price of buildings (collected from the transferee)
※Since the tax base and tax rates are subject to change, it is advised to contact the National Tax Service (Call 82- 126) or check related laws such as the Local Tax Act or Value Added Tax Act.
07 Factory Establishment Doing Business In Korea 148
1. Definition of Factory
• Definition of Factories Under the Industrial Cluster Development and Factory EstablishmentAct • Urban Factories • Knowledge Industry Centers
1-1 Definition of Factories Under the Industrial Cluster Development and Factory Establishment Act (Article 2 (1), (2) of the Enforcement Decree of the Act, hereinafter “Industrial Cluster Act”)
Factories are defined as business establishments under Presidential Decree (the Korea Standard Industry Classification announced by the Commissioner of Statistics Korea) for operating manufacturing businesses prescribed by Presidential Decree, among those equipped with manufacturing facilities such as facilities and incidental facilities - including machines and devices - that constitute a building, structure, or manufacturing processes (hereinafter “manufacturing facilities”).
Manufacturing businesses prescribed by Presidential Decree refers to manufacturing businesses (Section “C”, Divisions 10 to 33) under the Korean Standard Industry Classification (10th revision published in January 2017) promulgated by the Commissioner of Statistics Korea, and the scope of business establishments prescribed by Presidential Decree (scope of factories) is as follows: •Manufacturing facilities (including facilities for processing, assembling or repairing goods) and pilot manufacturing facilities •Incidental facilities installed within a factory site to manage and support manufacturing facilities or for employee welfare or benefits •Mandatory facilities and factory sites required under relevant laws
Manufacturing business refers to industrial activities involving the conversion of raw materials into new products by applying physical or chemical processes to their substances or components. Therefore, simple processing activities are not treated as manufacturing activities when the inherent nature of the goods remains unchanged, such as the simple selection, sorting, separation, packing or repacking of goods. The professional repair of industrial machinery and equipment used as capital goods (fixed capital formation) is also classified as manufacturing business. However, the repair of computers and peripheral equipment, personal goods and household goods and automobiles is classified as repair business (KSIC Code: 95). ※ Major revisions to the manufacturing business category (Korea Standard Industrial Classification, Management
Statistics Korea, 2017) II . Business ‘Manufacture of spectacles and spectacle lenses’ was moved from the ‘manufacture of photographic equipment and other optical instruments’ category to the ‘Manufacture of medical and surgical equipment’ category, and ‘Manufacture of upholstered seats for transport vehicles’ was moved from the ‘Manufacture of furniture’ category to the applicable category under ‘Manufacture of transportation equipment’ classified by vehicles, aircraft, rail, etc. ‘Repair of industrial machinery and equipment’ under the ‘Maintenance and Repair Services’ Sector was moved to a new Division (34) created under the ‘Manufacturing’ Sector. ‘Processing of furskins’ under ‘Manufacture of wearing apparel, clothing accessories and fur articles’ was moved to ‘Tanning and dressing of leather, manufacture 149 of luggage and footwear’. ‘Manufacture of mounted arts’ under ‘Other manufacturing’ was moved to ‘Printing and reproduction of recorded media’, and ‘Asphalt related products produced in the oil refining process’ under ‘Manufacture of non-metallic mineral products’ was moved to ‘Manufacture of coke, hard-coal and lignite fuel briquettes and refined petroleum products’. In the lower-level categories, categories were newly created, sub- classified or merged, based on statistical data by industrial category such as growth rate, manufacturing output, number of businesses and employees, level of concentration in a particular product group, portion of businesses in a particular industrial category that manufacture a particular product group among all businesses that manufacture the product group, etc. The newly created categories include biofuels and biofuel blends, carbon fiber, energy storage device, digital additive manufacturing machinery, vehicle tuning, manufacturing of unmanned aircraft and unmanned aerial vehicle. The categories including slaughtering of livestock and poultry, processing of packaged or frozen meat and meat products, manufacture of kimchi, manufacture of packaged meals (lunchboxes), manufacture of compound feeds, feed ingredients and other feeds, manufacture of hygienic paper, offset printing, manufacture of rubber packing, manufacture of plastic films and sheets, manufacture of molded polystyrene foam, manufacture of safety glass, manufacture of glasses for display devices, manufacture of memory and non-memory semiconductor, manufacture of steel pipes, processed steel pipe products and pipe fittings, manufacture of coated rods and cored wire, manufacture of organic light emitting diodes display components, manufacture of laminated plates for printed circuit boards, manufacture of rigid and flexible printed circuit boards, manufacture of electronic perception sensors, manufacture or steering and suspension devices and damping devices for motor vehicles were sub-classified. Also, the merged categories include manufacture of refined rice wines, stemming and redrying of tobacco, weaving of silk fabrics, manufacture of fabric products, manufacture of articles of fur, manufacture of wooden tools and wooden kitchen tableware, manufacture of articles of cork, straw and plaiting materials, manufacture of printing ink and artists’ colors, manufacture of sanitary and industrial ceramic ware, manufacture of safes, manufacture of electronic valves and tubes, manufacture of electronic interface cards, manufacture of automatic vending machines and money-changing machines, manufacture of containers for carriage, manufacture of non-ferrous metal ships, manufacture of watches, clocks and its parts, manufacture of wooden furniture lacquered or incorporated mother of pearl, manufacture of musical instruments, manufacture of artificial flowers and imitative ornamental articles, and manufacture of umbrellas and walking sticks.
* Definition of manufacturing business (Korean Standard Industry Classification published by Statistics Korea)
1. Distribution of raw materials or finished products Raw materials used by a manufacturing business include not only agricultural, forestry, fishery or mining products but also products (intermediary or semi-finished products) produced by another manufacturing business. 2. Relationship with other industries •The assembly of machine parts purchased from third parties is classified as a manufacturing business, while industrial activities such as the assembly or installation of standard parts and components of buildings or structures at a construction worksite are classified as a construction business. •Industrial activities involving the specialized assembly or installation of industrial machines or equipment at business establishments are classified as businesses specializing in the manufacturing of such machines or equipment. •Industrial activities such as the remodeling, improvement or recycling of various goods of an essential nature are classified as a manufacturing business. •In principle, a manufacturing business establishment that mainly assembles dedicated elements, components, accessories or parts of machines or items of equipment is classified into the category of manufacturing industry responsible for manufacturing machines or equipment for which such elements, components or parts are used. However, if such elements or parts are manufactured by metal casting, forging, pressing or powder metallurgy, or by the compression molding or extrusion of rubber or plastic materials, they are classified according to the Doing Business In Korea materials or method or processing of forming. 150 •If general (general-purpose) components or parts of machinery equipment such as engines, pistons, electric motors, assembled electric equipment, valves, gears, rolling bearings are produced, the corresponding business is classified according to the type of the components or parts, irrespective of the type of machines or equipment to which the products are applied. •Publishing, printing, or printing-related service businesses are classified as manufacturing business. •When ordered specific products are manufactured and delivered to an individual or business entity for fees or under a contract using manufacturing factory equipment, the corresponding business is classified into the appropriate manufacturing industry category based on the type of products produced, unless they are classified into one of the following: Dyeing and finishing of textiles and wearing apparel (1340), Printing and service activities related to printing (181), Treatment and coating and other processing of metals (2592). •Where an individual or business consigns manufacturing of a particular product to another manufacturer and procures the manufactured products for its own sales, it shall be classified as a manufacturing business if all the following four conditions are satisfied: ––Direct planning of products to be produced (e.g., function, conception and design, design of raw materials, manufacture of samples) ––Provision of raw materials purchased with one’s own account to contractors (including the provision of specification of raw materials and paying for the expenses with one’s own account) ––Manufacture of products under one’s own name ––Direct selling of the products in the market under one’s own responsibility
※ Types of population-concentration facilities under Article 3 of the Enforcement Decree of the Seoul Metropolitan Area Readjustment Planning Act Factories pursuant to the Industrial Cluster Development and Factory Establishment Act, in which the total floor area of the buildings (referring to the total floor area of each floor of the buildings to install machinery and equipment used as manufacturing facilities and to the total floor area of each floor of places of business) equals or exceeds 500m2
※ Article 3-5 (Kinds of buildings by use) of the Enforcement Decree of the Building Act A factory refers to: buildings that are continuously used for manufacturing and processing (including dying, painting, bleaching, sewing, drying, and printing) goods and are not classified as Class 1 neighborhood living facilities, Class 2 neighborhood living facilities, facilities for storing or processing hazardous materials, automobile- related facilities, or feces or garbage treatment facilities; and buildings in which the total floor space used for manufacturing, repair, laundry and other similar establishments classified as Class 2 neighborhood living facilities is less than 500 m2 and do not require a permit for (notification of) the establishment of discharge facilities under the Clean Air Conservation Act, Water Quality and Aquatic Ecosystem Conservation Act and the Noise and Vibration Control Act.
※ Article 7, Enforcement Rule of the Local Tax Act The scope of factory is defined as factories falling under Attached Table 2 (excluding urban factories pursuant to Article 28 of the Industrial Cluster Act) where the total floor area of buildings equipped with manufacturing facilities measure 500 m2 or wider. In this case, the total floor area of the buildings shall include the incidental facilities (excluding facilities provided for enhancing the welfare and benefits of employees, including cafeterias, rest rooms, baths, laundries, infirmaries, outdoor gyms and dormitories, and shelters, arms storage facilities, ammunition depots and educational facilities) established inside the factory area for supporting the factory’s manufacturing facilities. 1-2 Urban Factories (Article 28, Industrial Cluster Act) Management II
The Minister of Trade, Industry and Energy may designate high-tech industry factories, factories with . Business low pollution emission, and factories closely connected with urbanite life, etc. as urban factories.
Urban factories are factories with low pollution emission or discharge that are closely connected with urbanite life and engage in a high-tech business*. The factories should not fall under certain categories and are subject to environmental impact assessment** pursuant to Article 4 of the Environmental Impact Assessment Act. 151
(1) Factories other than those falling under any of the below: ① Factories with facilities for discharging certain air pollutants under Article 2 Subparagraph 9 of the Clean Air Conservation Act ② Factories equipped with facilities for discharging air pollutants under Article 2 Subparagraph 11 of the Clean Air Conservation Act, which fall under business establishments classified as classes 1 through 3 of Attached Table 10 of the Enforcement Decree of the same Act. However, factories that do not burn fuel directly are excluded. ③ Factories with facilities discharging certain water contaminants under Article 2 Subparagraph 8 of the Water Quality and Aquatic Ecosystem Conservation Act. However, factories consigning all of its wastewater treatment to a third party under Article 33, Subparagraph 2 of the Enforcement Decree of the said Act are excluded. ④ Factories with wastewater discharge facilities pursuant to Article 2, Subparagraph 10 of the Water Quality and Aquatic Ecosystem Conservation Act, which fall under business establishments classified as class 1 through 4 under Attached Table 13 of the Enforcement Decree of the said Act. (2) Factories that engage in a business listed in the table below, which do not fall under any of the factories listed in the above (1) (limited to factories subject to environmental impact assessment pursuant to Article 22 of the Environmental Impact Assessment Act.).
* Urban Factories’ Line of Business (subject to change with the 10th revision of Korea Standard Industrial Classification) KSIC Code Category of Business 26110 Manufacturing of integrated circuits 26120 Manufacturing of diodes, transistors or similar semiconductor elements 26211 Manufacturing of LCD or LED displays 26294 Manufacturing of digital cards 26296 Manufacturing of digital access cards 26322 Manufacturing of monitors 26323 Manufacturing of computer printers 26329 Manufacturing of other peripheral appliances 26410 Manufacturing of wired communication equipment 26421 Manufacturing of broadcasting equipment 26422 Manufacturing of mobile phone sets 26429 Manufacturing of other wireless communication equipment 26511 Manufacturing of television sets 26519 Manufacturing of video and other image appliances 26521 Manufacturing of radios, recorders, and players 26529 Manufacturing of other acoustic appliances 27329 Manufacturing of other optic appliances 31310 Manufacturing of aircraft, spaceship and auxiliary devices ** Environmental impact assessment (Article 2 Subparagraph 2 of the Environment Impact Assessment Act) Assessment of environmental impact means devising a plan for avoidance or reduction of harmful impacts on the environment by investigating, forecasting and assessing environmental impacts from the execution of projects that have the potential to have an impact on the environment when approving, authorizing, permitting, licensing or deciding such projects. Doing Business In Korea 152 1-3 Knowledge Industry Centers (Article 2 Subparagraph 13 and Article 28-5 of the Industrial Cluster Act)
Definition of knowledge industry centers Knowledge industry centers refer to collective multi-story buildings meeting all of the conditions below where individuals engaged in a manufacturing business, knowledge industry business or ICT business can move in and supporting facilities can be installed.
① The buildings are collective buildings of three stories above ground or higher ② A total of six or more factories, business establishments in a knowledge industry pursuant to Article 6 (2) of the Industrial Cluster Act, or business establishments in an ICT business pursuant to Article 6 (3) of the Act can move in. ③ The total floor area of each above ground floor is at least 300 percent of the total building floor area or meets the maximum ratio permitted by other laws as follows: a. Where the floor area ratio is determined by an ordinance of the relevant city, province or county, in accordance with Article 78 of the National Land Planning and Utilization Act. b. Where the area regulations prescribed by Article 8 of the Act on Special Cases Concerning Support for Technoparks apply.
Facilities that can move into a knowledge industry center (refer to Article 36-4 of the Enforcement Decree of the Industrial Cluster Act): ① Businesses that are recognized by the city mayor, the head of a county or district, or an administration agency as having the need to move into a knowledge business center for the clusterization of manufacturing, knowledge, ICT and other specific businesses, and for the development of the local economy. ② Facilities for operating a venture business under the Act on Special Measures for the Promotion of Venture Businesses ③ Other facilities for supporting the production activities of tenant businesses*, excluding facilities recognized by the city mayor, head of a county or district, or administration agency as having the potential to interrupt the production activities of tenant businesses (amended on May 26, 2005)
※ Other facilities for supporting the production activities of tenant businesses: •Facilities for operating finance, insurance, education, medical, trade or sales businesses (limited to those selling products produced by a tenant business housed in the relevant knowledge industry center) •Logistics facilities, facilities for supporting the business of tenant businesses or facilities for enhancing the welfare of employees, including childcare centers and dormitories •Neighborhood living facilities under Subparagraphs 3 and 4 of Attached Table 1 of the Enforcement Decree of the Building Act Additional information on tenancy in a knowledge information center Management •The size of facilities for supporting tenant businesses’ production activities should be 50 percent II . or less of the total building floor area of the knowledge industry center concerned (30 percent in Business the case of the Seoul metropolitan area, or 20 percent in the case of knowledge industry centers located in industrial complexes). •Only urban factory facilities (excluding urban factories under Article 34 Subparagraph 2) can be installed in cases where the knowledge industry center is located outside an industrial complex or an industrial zone. 153 •Offices or warehouses among the auxiliary facilities of a tenant business operating a manufacturing business inside a knowledge industry center can be installed in a separate area of the center’s building.
Laws Related to Factory Establishment The purpose of this Act is to contribute to the sound development of the national Framework Act on National land and the improvement of national welfare by providing for fundamental matters Land concerning the formulation and implementation of plans for and policies on the national land. (Entered into effect on Jan. 1, 2003) The purpose of this Act is to promote public welfare and to enhance the quality National Land Planning of people's life by providing for matters necessary for the formulation and and Utilization Act implementation, etc. of plans to utilize, develop and preserve the national land. (Entered into effect on Jan. 1, 2003) The purpose of this Act is to contribute to the sound development of the national Industrial Cluster economy through continued industrial development and balanced regional development, Development and Factory by developing industrial clusters, supporting the establishment of factories, and realizing Establishment Act the systematic management of industrial sites and industrial complexes. The purpose of this Act is to promote the balanced development of national land Industrial Sites and and sustained industrial progress through the efficient supply of industrial locations Development Act and the appropriate placement of industry, thereby contributing to the sound development of the national economy. The purpose of this Act is to contribute to the establishment of a solid industrial Support for Small and structure through the sound development of small and medium enterprises by Medium Enterprise facilitating the establishment of small and medium businesses and developing a firm Establishment Act basis for their growth. Act on Special Measures The purpose of this Act is to strive for harmonious corporate activities and contribute to for the Deregulation of the sound development of the national economy by providing for matters concerning Corporate Activities the easing of administrative regulations on corporate activities and special cases. The purpose of this Act is to contribute to the facilitation of the industrial Act on Special Measures for restructuring and the enhancement of the competitiveness thereof by promoting the the Promotion of Venture conversion of existing enterprises into venture businesses and the establishment of Businesses venture businesses. The purpose of this Act is to promote foreign investment in Korea by providing the Foreign Investment necessary support and convenience to foreign investors to contribute to the sound Promotion Act development of the nation's economy. The purpose of this Act is to contribute to the balanced development of the national Act on Special Measures for economy by promoting the free business activities of small enterprises and micro the Development of Small enterprises, and by ensuring the restructuring of their business and the stabilization and Micro Enterprises of their management. Seoul Metropolitan Area Readjustment Planning Act, Farmland Act, Creation and Acts on land use and Management of Forest Resources Act, Management of Mountainous Districts Act, buildings Building Act, Grassland Act, River Act, Private Road Act, Act on Funeral Services, etc., Restriction of Special Taxation Act, Industrial Development Act 2. Factory Establishment and Registration
Factory establishment covers all procedures encompassing the building of factories to changes in their registration. Approval (authorization and permission) of factory establishment includes the installation and approval not only of factories but also of incidental facilities and manufacturing facilities. Application for approval is required before building a factory. When construction is completed, a Doing Business In Korea written notification of factory establishment completion should be submitted to the approval authority 154 within two months of the installation of the relevant machines and equipment.
• Factory Establishment • Approval (Authorization and Permission) of Factory Establishment • Notification of Completion of Factory Establishment and Factory Registration • Time Required for Factory Establishment and Types of Approval
2-1 Factory Establishment
Factory establishment includes all of the following processes: approval of factory establishment, expansion, relocation, change of business category, and installation of manufacturing facilities; application for the registration of a new factory (of a size below the established criteria); and revision of registration.
Classification Definition Installation of manufacturing facilities by constructing new buildings (including structures) Establishment or by changing the use of an existing building to that of a factory Increasing the building or site area of a registered factory •The addition of manufacturing facilities without any increase in the corresponding building area does not fall under the category of factory expansion •The addition of ancillary facilities is not considered factory expansion Expansion * Excluded are those cases where large enterprises increase their office or warehouse areas in the nature preservation zone of the Seoul metropolitan area or areas falling under items c and d of Subparagraph 3 (other zones in growth management zones) of Attached Table 2 of the Enforcement Decree of the Industrial Cluster Act Closure of an existing factory registered in the Seoul metropolitan area (overconcentration Relocation control areas, growth management zones, nature conservation zones) and establishment of a new factory in the same business category in another location Cases involving a change of the business category of a factory whose establishment Change of business has been approved or a registered factory to another category, or the addition of other category business categories to that of an existing factory Installation of Installation of manufacturing facilities to the whole or part of a factory building whose manufacturing facilities establishment has been approved or whose registration has been cancelled Owners or occupants of factories with a construction area of less than 500m2 can register New registration a factory through application for factory registration If changes occur to the registered details, an application for registration of change should Registration of change be made to the head of the relevant Si/Gun/Gu within two months. 2-2 Approval (Authorization and Permission) of Factory Establishment Management II
Application for Approval of Factory Establishment . Business ––When a person intends to establish, expand or relocate a factory or install manufacturing facilities in a factory and the construction area of such factories is 500 m2 or wider, and when a person intends to change the business category (including the addition of business categories) of a factory, an approval from the head of the Si/Gun/Gu should be obtained, and the same shall apply when the approved details are changed. However, minor changes in approved matters can be 155 notified. ––The owner or tenant of a factory which is exempt from such approval (construction area of less than 500 m2) may apply for factory registration.
Factory Construction Area The composite of the area of each floor of a building for installation of machinery or equipment used as manufacturing facilities, and the horizontally projected area of outdoor structures used as manufacturing facilities
※ Factory construction area subject to approval The composite of the area of each floor of a building for installation of machinery or equipment used as manufacturing facilities, and the horizontally projected area of outdoor structures used as manufacturing facilities
※ Factory construction area for computing the standard factory area ratio* The composite of the area of each floor of all buildings (manufacturing facilities and ancillary facilities) inside a factory site and the horizontally projected area of machinery, equipment and other structures installed outside the building * Standard factory area ratio = Factory construction area ÷ factory site area x 100
Expansion of Ancillary Facilities •In the case that an ancillary facility of a registered factory has been expanded, an application for change in factory registration should be filed. •Approval of factory expansion is not required if the expansion only concerns ancillary facilities. However, expansion in nature conservation areas in the Seoul metropolitan area and large companies’ expansion of office and warehouse in accordance with Items c, d of Subparagraph 3 of Annex Table 2 of the Enforcement Decree of the Industrial Cluster Act are excluded. •Scope of ancillary facilities (Article 2 of the Enforcement Rules of the Industrial Cluster Act): 1. Offices, warehouses, security posts, observatories, parking lots, toilets and bicycle storage facilities 2. Water or oil tanks, silos or other outdoor storage structures (including underground storage facilities) 3. Oil pipelines, outdoor gas filing facilities, water service or drainage facilities, power distribution facilities, machine or pump rooms 4. The following facilities: a. Waste treatment facilities as prescribed by Article 2, Subparagraph 8 of the Waste Controls Act (including facilities jointly installed and operated by two or more businesses pursuant to Article 18 (5) of the same Act) b. Water pollution prevention facilities as prescribed by Article 2 Subparagraph 12 of the Water Quality and Aquatic Ecosystem Conservation Act (including facilities jointly installed and operated by two or more businesses pursuant to Article 35 (4) of the same Act) c. Air pollution prevention facilities as prescribed by Article 2 Subparagraph 12 of the Clean Air Conservation Act (including facilities jointly installed and operated by two or more businesses pursuant to Article 29 (1) of the same Act) d. Noise and vibration emission facilities as prescribed by Article 2 Subparagraph 4 of the Noise and Vibration Control Act (including facilities jointly installed and operated by two or more businesses pursuant to Article 12 (1) of the same Act)
Doing Business In Korea 5. Test and research facilities and facilities designed to enhance energy efficiency 156 6. Common workplace safety facilities and health management facilities 7. Childcare facilities and dormitories (including childcare facilities and dormitories jointly used by two or more tenant businesses) 8. Cafeterias, lounges, shower rooms, laundry rooms, medical office, outdoor gym facilities, dormitories and other employee welfare facilities 9. The following facilities: a. Product exhibition facility (limited to facilities that exhibit products manufactured in the factory or semi-finished or finished goods produced using parts manufactured in the factory) b. Product sales facility (limited to facilities that sell products manufactured in the factory) c. Hoists for the loading or unloading of raw materials and finished products 10. In the case of national industrial complexes whose administrative authority has been entrusted to the head of a central government agency pursuant to Article 59 (4) of the Enforcement Decree of the Industrial Cluster Act, facilities that are recognized by the head of the relevant central government agency under consultations with the Minister of Trade, Industry & Energy as facilities necessary for the management and support of manufacturing facilities and the welfare of employees 11. Other facilities that are deemed necessary for the management or support of production facilities or for employee welfare by the Minister of Trade, Industry & Energy
Change in Approved Factory Establishment Matters •Change in factory site area (excluding decreases in site area, or increase in site area by 20 percent or less) •Change in factory construction area (excluding increase by 20 percent or less or decrease within the standard factory building area ratio) •Change in ancillary facility areas (excluding changes within the standard factory building area ratio)
Notification of Change in Approved Factory Establishment Matters •Change in company name or CEO (Change in CEO shall be notified if requested by the company) •Change in specific business categories (Change in business category within the industry classification under the official notice of standards for factory sites)
Revocation of Factory Establishment Approval The government may revoke its approval for factory establishment or order restoration of the land concerned to its original state when it is considered that the entity that has obtained factory establishment approval is unable to implement the project. Article 42 of the Farmland Act and Article 39 of the Management of Mountainous Districts Act apply to cases requiring the restoration of land. However, in such cases as prescribed by Article 19-4 of the Enforcement Decree of the Industrial Cluster Act where it is recognized that the effective period of approval should be in excess of four years, exceptions shall apply. (For businesses in an industrial complex, refer to Article 42 of the Industrial Cluster Act.) •When the business fails to commence the construction of a factory building without justifiable Management
cause until three years have elapsed from the day on which establishment of the factory is approved II .
(two years for industrial complexes) Business •When factory establishment has become unfeasible because the land transformation approval has been revoked •When the completion of factory establishment or the installation of manufacturing facilities is not notified by the day on which four years have elapsed from the date of approval or when the construction work is stopped for one year or longer after its commencement. However, exceptions 157 are permitted when there are reasons deemed inevitable in light of regional economic conditions or factory size. •When a factory site or factory building is used for other purposes without justifiable cause •When a factory no longer satisfies the criteria for factory establishment approval
Approval of Installation of Manufacturing Facilities Those who intend to operate a manufacturing business by installing manufacturing facilities, etc. in the whole or part of a factory building with a floor area of 500 2m or wider should obtain approval from the government. Those who intend to change 20 percent or more of the construction area of their existing factory should also obtain approval for such change. However, those who intend to make minor changes to the approved matters can make a notification.
•Factory buildings built after obtaining an approval for factory establishment without specifying the business category in advance •A registered factory building whose registration has been revoked pursuant to the pertinent provisions
Reasons for Revocation of Approval of the Installation of Manufacturing Facilities •When an approval of the installation of manufacturing facilities has been obtained through fraud or other unlawful means •When the construction of a factory building is not commenced within one year of the day on which the installation of factory facilities is approved without justifiable cause •When it becomes impossible to install the manufacturing facilities due to such causes as the destruction of the factory building, any change in its previously specified use, or other similar causes
2-3 Notification of Completion of Factory Establishment and Factory Registration
Notification of Completion of Factory Establishment Those who have obtained approval for the use of a finalized building of his/her factory and completed the installation of machinery and equipment should submit a notification of completion of factory establishment to the factory establishment approval authority (the relevant industrial complex management authority in the case of industrial complexes) within two months of the date of obtaining the approval (the date of completing installation of machinery and equipment in the case of installation of manufacturing facilities). Application for Partial Registration of a Factory Those who have obtained factory establishment approval intending to operate a part of the factory before its construction is completed should submit an application for partial registration of a factory. On receiving such application, an inspection is conducted to confirm whether the factory building has been completed and machinery and equipment have been installed. Within seven days of receiving the application (20 days in the case of legal fiction), a document stating the necessary matters Doing Business In Korea concerning the period of validity of the registered factory and notification of completion should be 158 sent to the applicant. When those who have completed partial registration obtain approval for the use of the finalized building of a factory and complete installation of machinery and equipment, completion of factory establishment, etc. should be notified within two months.
Registration of Factory Building Those who have obtained permission to use a factory building may submit an application for registration of the factory building before installing manufacturing facilities.
Registration of Factory The person authorized to approve factory establishment should, on receiving a notification of completion of factory establishment, register the factory on the factory establishment ledger pursuant to relevant laws.
The owner or tenant of a factory other than those subject to approval for factory establishment may apply for factory registration. If the factory meets the standards provided under the Building Act, the National Land Planning and Utilization Act, other pertinent statutes, and the standard factory area ratio, the factory shall be registered and the applicant shall be notified of such registration within seven days (20 days in the case of legal fiction) of the date of application.
Change of Registered Matters •Change in company name or CEO (Change in CEO shall be notified if requested by the company) •Factory site area (limited to when the factory site area has been reduced) •Factory building area (limited to when the factory building area has been reduced and the factory is constructed in compliance with the standard factory area ratio) •Ancillary facility area (limited to factories constructed in compliance with the standard factory area ratio) •Change in business category: ––Business category ––Factory expansion (when the factory building area remains at less than 500 m2 after the expansion)
Revocation of Factory Registration Factory registration can be revoked in the following cases: •When a factory building is destroyed or its use is changed •When the operation of a factory is discontinued or its manufacturing facilities are destroyed or removed (i.e., when its manufacturing facilities are removed due to discontinuation of the manufacturing business or some other reason or cause) •When the lease contract of a tenant business of an industrial complex is terminated •When a factory is used for a purpose other than a factory. However, exceptions shall not apply when part of the factory is used for the pertinent industrial use or for a use necessary for factory operations, and when part of the factory is used for a different purpose within the scope of not Management
inducing significant disruptions to manufacturing activities. II .
•When the factory owner fails to comply with the requirements that applied when the factory had Business been registered •When orders or dispositions given pursuant to the law are violated
※ Registration can be partially revoked. 159 2-4 Time Required for Factory Establishment and Types of Approval
3. Factory Sites and Factory Establishment Approval Procedure
There are two types of factory sites: planned sites for establishing and promoting clusters of factories, and individual sites where permits or approvals for factory establishment must be separately obtained. Companies may apply for permission to establish a factory by submitting an application once the factory site has been selected. The relevant authorities will grant approval after consultations and feasibility studies.
• Types of Factory Sites • Documents Required for Application for Factory Establishment Approval • Factory Establishment Process • Factory Establishment Approval Procedure 3-1 Types of Factory Sites
Types of Factory Sites Type Definition Factory sites selected and developed under a specific plan by the central or municipal Planned sites government or private company to establish and develop clusters of factories
Doing Business In Korea Factory sites intended for the establishment of factories that have obtained permit or Individual sites approval in areas outside planned sites 160 * Refer to the Invest KOREA website (http://www.investkorea.org) for detailed information on factory sites.
Types of Factory Sites
Sites that obtained factory establishment approval Individual sites (Factory establishment approval) Sites that obtained start-up business plan approval
Types of factory sites National industrial complexes
General industrial complexes Planned sites (Industrial complex occupancy contract) Urban hi-tech industrial complexes
Agro-industrial complexes
3-2 Documents Required for Application for Factory Establishment Approval
•Application form for approval of factory establishment or application form for approval of start-up business plan •Factory establishment plan (start-up business plan) •Land use plan confirmation, cadastral (forest) map, land (forest) register •Certified copy of land and building register •Land sale contract, approval of land (building) use •Documents for application for legal fiction (e.g., application for approval of the use of farmland for non-agriculture purposes, or the use of forest land for other purposes) •Civil engineering blueprint ––Cadastral map or surveyed map ––Building floor plan, disaster prevention plan, etc. 3-3 Factory Establishment Process Management II . Approval, authorization, Factory construction and notification Business Factory site selection permission of factory establishment of completion of construction
Decide type of factory site Draw up factory establishment plan Completion of civil engineering work (individual sites) Site inspection (regional analysis) Prepare required documents Construction design Site analysis (individual analysis) Civil engineering and design 161 (individual sites) Application for permission of construction Select site Application for factory establishment Usage test and notification of completion approval (including legal fiction) of factory establishment (within 2 months from the installment of machinery) Approval of factory establishment (individual sites) Issuance of factory registration certification (notification)
| Required documents | | Required document | - Application form for factory establishment approval - Certificate of notification of completion of factory - Application form for industrial complex occupancy contract establishment - Start-up business plan - Documents for application for legal fiction
3-4 Factory Establishment Approval Procedure
Applicant Mayor/ Applicant Applicant Mayor/ Entity (company) County Governor (company) (company) County Governor
Consultation with Application for Notification of relevant authorities Civil engineering factory completion of Factory Proce and approval of establishment factory registration -dure construction approval Issuance of factory establishment establishment approval certificate
Select factory site Deliberation of Application Installation of Notification of candidates civil petitions for construction manufacturing completion of (deliberation of permit facilities for factory Prepare application applicable laws) factory operation establishment form, business plan Notification of and confirmation *Feasibility of the and other required commencement Within 2 months on whether the site documents of construction of completion notification *Environment- of machinery matches the related matters Submit documents Inspection for installation approved matters Details *Feasibility of to the department approval of construction responsible for building use Notification permission factory within 3 days establishment of acceptance at the relevant Departments of factory Si/Gun office responsible for establishment authorization and completion permission of notification factory establishment 08 Intellectual Property Rights Doing Business In Korea 162
1. Intellectual Property Rights System
Intellectual Property Rights are defined as the legal rights bestowed upon a person’s intellectual creation that is considered worthy of receiving legal protection. Intellectual property rights include industrial property rights and copyrights. With cultural and technological advancements, new intellectual property rights such as trade secret rights and semiconductor layout rights are increasing. In Korea, industrial property rights and copyrights are governed by the Korean Intellectual Property Office and the Ministry of Culture, Sports and Tourism, respectively.
• Types of Intellectual Property Rights • Intellectual Property Rights Application and Registration Process • Copyright • New Intellectual Rights
1-1 Types of Intellectual Property Rights Definition of Intellectual Property Rights Intellectual Property Rights are defined as the legal rights bestowed upon a person’s intellectual creation that is considered worthy of receiving legal protection. The owners of real estate such as buildings and land and moveable assets like machinery may use them or lend them to others in return for compensation, since their ownership is equivalent to property rights. As such, the owners of intellectual property rights may also use or lend their rights to others.
Types of Intellectual Property Rights Patent rights Source/core technology (major invention) Industrial Utility model rights Peripheral/remedial technology (minor invention) property rights Design rights Design of product Trademark rights Distinguishable symbol / character, figure Intellectual Copyright Creative work in the field of art and literature property rights Right of performers, phonogram producers, Copyright Neighboring right broadcasting organizations Database Producers of databases New intellectual Newly emerging industry Industrial copyright, information property rights property rights property rights 1-2 Intellectual Property Rights Application and Registration Process Management II
(1) Patent . Business Subject of Protection •The highly advanced creation of technical ideas that exploit natural laws
Requirements to Obtain a Patent An invention for which an application for patent has been made should satisfy the following 163 requirements to obtain a patent: •The invention should be able to be used for industry (industrial applicability). •The invention should not be a technology (existing technology) known prior to the application for a patent (novelty). •The invention, although different from an existing technology, should not be easily conceivable as having originated from an existing technology (inventiveness).
Process Overview •Formality Examination ––Formality assessment is to check whether there are defects in the process (e.g., missing information on submitted documents, observation of period, attachment of required certificates, payment of fees) •Request for Examination ––An application for a patent is examined only when an applicant requests an examination. If a request for an examination is not filed within five years of the application, the application will be deemed invalid (Three years in the case of utility models). * Defensive patent application: Application to prevent other parties from obtaining a patent. •Disclosure of Application ––The Korean Intellectual Property Office discloses the patent application 18 months after the application date to prevent delays in the public disclosure of technologies for which an application has been submitted. •Substantive Examination ––Substantive examination reviews the invention’s industrial applicability, novelty and inventiveness. A patent is granted on condition of disclosure, so a review is conducted on whether the specification is appropriate for use by the public. •Decision on Patent ––The applicant will be notified of the decision to grant a patent when the examination result shows no reason for rejection. •Registration and Publication of Registration ––The applicant shall pay a registration fee to register the patent immediately upon receiving notification of the decision to award a patent. The patent right enters into effect upon establishment of registration. The registered application for a patent will then be published and disclosed to the public. •Decision to Refuse Registration ––A patent will not be granted when the reason for refusal remains unchanged after the applicant’s submittal of a written opinion and complementary statement. •Appeal against Examiner’s Decision to Refuse Registration ––An applicant who has received a rejection decision may file a claim to assert that the decision is incorrect and to request that the decision be reversed. •Invalidation Trial ––An examiner or an interested party (anyone from the date when the establishment of patent right is registered to the date on which three months have passed since public notification of the
Doing Business In Korea registration) may request the invalidation of a patent right, citing the grounds for such invalidation 164 (requirements for patentability, improper description, misappropriated application, etc.). * The patent right will be rendered null and void in the event of a trial decision of invalidation.
< Patent Application and Examination Process Flowchart >
Within 5 years (※ The Articles refer to the Trademark Act) Application (Article 42)
Formality examination 15 months after application Publication of application (Article 64)
No Request for examination Application deemed withdrawn (Article 59) Yes Substantive examination
Notice of grounds for rejection Yes Reason for rejection (Article 62) (Article 63) Written opinion/ No complementary statement
Yes Resolution of reason for rejection Decision to grant patent No (Article 66) Decision of rejection Registration of patent right Request for establishment and publication of registration (Article 62) re-examination (Article 87) Request for invalidation trial Trial against decision to reject patent application (Article 133) (Article 132-3)
Revoke Maintain Decision to Decision to (Article 162) maintain refusal revoke refusal (Article 176) Patent Court (Article 186) Supreme Court
(2) Utility Model Right Management Subject of Protection II . •The shape or structure of an article, or a combination of articles that is industrially feasible. Business
Fast-Track Registration of Utility Model (applicable to applications filed from July 1, 1999 to September 30, 2006) •The fast-track registration system was introduced to protect utility model technologies whose lifecycle is comparatively short and which are easily imitated, and to encourage small and mid-sized 165 start-ups to develop and commercialize their technologies. •Since rights are granted without any substantive examination of the registration conditions, there is a possibility that the rights will be defective. Thus, the technology evaluation system was introduced to prevent any cases of defective rights arising from quick registration.
Current System (registration after examination, applicable to applications filed on or after October 1, 2006) •The advantages of the fast-track registration system have been weakened by a significant reduction of the examination process period. Also, certain drawbacks with the fast-track registration system, such as the abuse of rights registered without examination, the burden on applicants stemming from the complicated nature of the examination process, and the low efficiency of examination, have surfaced. Against such a background, the registration system has been changed to registration after examination. •The examination processes for utility models and patents are now the same, thus improving the convenience of applicants.
(3) Trademark Right Concept of Trademark •Definition of Trademark under the Trademark Act ––The scope of a trademark was previously limited to a sign, letter, figure, three-dimensional shape, color or combination thereof. On July 1, 2007, however, the definition of trademark was expanded to include all marks that can be visually recognized such as a combination of colors, a hologram, and motion marks. In a broader sense, a trademark may include a service mark, collective mark or business emblem, and serves to distinguish the goods related to a person’s business from those of other entities. •Service Mark ––Service mark refers to a mark used by a person who conducts a service business (advertisement business, telecommunication business, banks, restaurants, etc.) for the purpose of distinguishing his/her service business from other such businesses. •Collective Mark ––Collective mark refers to a mark intended to be used directly by a corporation established by joint producers/sellers of goods, or by the corporation’s members for the goods or services for sale. •Business Emblem ––Business emblem refers to a mark which is used by a person who conducts a nonprofit business for the purpose of indicating his/her business (YMCA, Boy Scouts, etc.). Examination Process •Publication of Application ––The trademark application is published before the establishment of the right is registered in order to collect opinions and allow requests for opposition, with the aim of making the examination fair. An applicant may request compensation when other persons use the trademark for which he/she has filed an application without obtaining due authorization and subsequently cause losses to his/ Doing Business In Korea her business. 166 •Objection ––Anyone can raise an objection to a trademark for which an application has been published within two months of the publication date (the period cannot be extended). A specified form should be filled out to apply for objection, and the reasons for objection and the necessary evidence should be stated.
< Trademark Examination Process Flowchart >
Trademark registration application
Examination [Substantive examination]
Notice of grounds for rejection
Publication of application Written opinion/ [Reason for rejection is resolved] complementary statement
Public examination: 2 months [Reason for rejection is not resolved]
Filing of opposition Notice of filing of opposition
Notice of response to opposition Decision of opposition
No Reason Reason Decision of rejection
[Appeal] Appeal unacceptable
Decision of registration Intellectual Property Trial and Appeal Board [Appeal]
Registration Patent Court
Supreme Court
[Invalidation of original decision] (4) Design Right Management Application and Examination Process II . •There are two types of application for design registration: Application for examined design Business registration and application for unexamined design registration •Designs for goods sensitive to trends and with a short lifecycle, such as foods (A1), clothes (B1), bedding (C1), papers and printouts (F3), containers (F4), fabrics (M1), miscellaneous goods (B2), shoes (B5), teaching materials (F1), and office supplies (F2), are registered without examination, while designs for other goods are registered after examination. 167
< Application for Design Registration Flowchart >
Issuance of Examination of Notice of submission applicant code qualification for of opinion registration
Written opinion/ Submission of Unresolved complementary Rejection decision application statement
Trial against Issuance of Cancellation decision to Registration decision application number reject application
Payment of Digitalization of registration fee Opposition application document against Public notice of registration Decision to cancel Filing of lawsuit registration registration for cancellation of trial decision Formality examination of application Issuance of registration certificate
Unique Systems under the Design Protection Act •Similar Design 등록출원 ––All owners of a design right or applicants for design registration may register designs that changed the shape, pattern or color of their registered출원공개 design or(공개디자인공보발간) their design for which an application for registration has been filed (basic design) as similar designs in order to prevent imitations or 방식심사 appropriations of the design. •Design of One Set of Articles 보정통지 ––Where two or more goods are used together as a single set of goods, and where the design of the set of goods shows unity as a whole, an application for registration of the goods as one single design may be filed (tea set, smoking set, etc.). 무심사 ※디자인 무심사 등록제도는 심사(실체내용심사) 98.3부터 시행 •Secret Design (등록요건불비) ––If an applicant requests confidentiality, the Korean Intellectual Property Office will not announce (등록요건구비) 등록결정 the registration of the design for three years거절예고 from the registration date.
등록 (거절사유해소) 의견서 보정서 (거절이유가 해소된경우) 이의신청 (거절이유가 해소 (설정등록일로부터 되지 못한 경우) 등록 공고후 3월 이내)
거절결정 이의신청통지 이의답변통지 (불복)
등록결정 특허심판원 이의결정
(불복) 이유있음 이유없음 (불복불가) 특허법원
등록취소 등록유지
등록 대법원 1-3 Copyright
The Copyright Act is composed of three rights: copyright granted to a person who has created a creative work that expresses human thoughts and emotions; neighboring right granted to a person who gives a stage performance, music record producer and broadcasting service provider; and database rights granted to producers of database. Doing Business In Korea 168 •Copyright works refers to creative works that express human thoughts and emotions (Article 2, Subparagraph 1 of the Copyright Act) and are not limited exclusively to literature and the arts. •A creative database is protected as a copyright work. With the amendment of the Copyright Act in 2003, provisions on the right of copyright producers have been added, providing a legal ground for protection of database without creativity.
(1) Copyright Act Definition •Copyright is divided into moral right and economic right. •Moral right exists to protect the honor of the author, whereas economic right aims to protect the economic benefit of the author.
Types •Moral right: right of publicity, right of paternity, right of integrity •Economic right: right of reproduction, right of performance, right of broadcast transmission, right of exhibition, right of distribution, right of rental, and right of derivative work
Legal Characteristics of Copyright •Generation of copyright: A copyright is generated with the creation of a work, and does not require specific procedures or methods. It differs from industrial property right in that industrial property rights are not generated without application and registration at the Korea Intellectual Property Office. •Legal characteristics of copyright: Copyright is an exclusive right. Therefore, a person using a creative work must obtain permission from a copyright holder before using it. Economic right can be transferred to another person, whereas moral right cannot be transferred or inherited.
Limitation of Economic Right •Economic right is the right to use a work exclusively. Considering that a work is created with direct or indirect support from society, recognizing the monopoly of a work’s creator without limit is not beneficial to the public good and also hinders cultural development. Therefore, certain limitations are imposed on copyrights.
Copyright Protection Period •Principle: During the lifetime of the copyright holder and up to 70 years from the death of the copyright holder. •Work of an unknown author, work for business objectives, video works, and program works: Within 70 years of the date of declaration •Joint works: Within 70 years of the death of the last surviving copyright holder •Initial date of the protection period: January 1 of the year that follows the year in which the copyright holder has died or the creative work has been declared. •On Jul. 1, 2013, the copyright protection period was extended from 50 years to 70 years from Management
the date of death or announcement of death of the copyright holder. In this regard, in the case of II .
creative works for which the copyright protection period expired before Jul. 1, 2013, it is considered Business that the copyright protection period of 50 years is expired.
Registration of Copyright •A copyright can be legally protected without registration, but registration generates the following legal benefits: 169 ––Estimation: Estimation by registered author, economic right holder, and date of creation and declaration. However, when the date of creation is registered after one year has passed since creating the work, it is not estimated that the work was created on the registered date. When the right of the registered work is infringed, it is estimated that the infringement occurred by error. ––Resistance: In the case that transfer of economic right or establishment of right of publication is registered after the transfer or establishment, those that have made the registration shall have resistance to a third party claim in the event of double transfer or establishment of rights.
(2) Neighboring Right Definition •Neighboring right is bestowed upon persons who contribute to distributing copyright works to the public through financial support or creative means.
Neighboring Right Holders •Performers: A person who gives a stage performance by expressing works through acting, dancing, playing, singing, orally narrating, reciting or other artistic methods or by expressing things other than works in a similar way, including a person who conducts, directs or supervises a stage performance •Record producers: A person who makes an overall plan and takes charge of fixing sound into music records •Broadcasting service provider: A person who engages in broadcasting business
The Right of Neighboring Right Holders •Like the right of copyright holders, the right of neighboring right holders is limited for the benefit of the public in using creative works, and protection of neighboring right does not affect copyright. Therefore, when broadcasting and performing a creative work, permission must be obtained not only from the neighboring right holders but also from the copyright holders.
Neighboring Right Protection Period •Performance: 70 years from the performance thereof •Record: 70 years from the release of recordings thereof •Broadcasting: 70 years from the broadcasting thereof
(3) Right of Database Producers The Copyright Act protects the right of database producers. Databases without creativity are also protected as well. Definition of Database •Database means the compiled matters whose subject matters are systematically arranged or composed, so that they may be individually approached or retrieved (Article 2-19 of the Copyright Act).
Right of Database Producers •Database producers shall hold the rights to reproduce, distribute, broadcast, or transmit (hereafter Doing Business In Korea referred to as the “reproduction, etc.” in this Article) the whole or considerable parts of relevant 170 database (Article 93 (1) of the Copyright Act).
Protection Period •The rights of database producers shall originate from the time of completing a production of database, and shall continue to exist for five years reckoning from the year thereafter (Article 95 (1) of the Copyright Act). Where a considerable investment has been humanly or physically made for the renewal, etc. of database, the rights of database producers for the relevant parts shall originate from the time of making relevant renewal, etc., and shall continue to exist for five years reckoning from the year thereafter (Article 95 (2) of the Copyright Act).
(4) Infringement Remedy Principle •Copyright holders may apply for corrective action concerning the infringement of their rights.
Civil Lawsuit •Victims may file a lawsuit against a copyright infringer file a claim for damages. •The right to claim damages should be filed within 10 years of the date of the infringement or within three years of becoming aware of the infringement or the identity of the infringing party; otherwise, the right to such will expire.
Criminal Charge •A copyright holder may ask the investigation authority to bring charges against copyright infringers. •Infringement of copyrights is a crime indictable upon complaint, and the victim should file a lawsuit within six months of becoming aware of the infringement. Therefore, a third party may report an infringement to the copyright holder, but may not directly sue the infringing party. •A fine of less than KRW 50 million or imprisonment of five years or less may be imposed on persons who infringe the copyright law.
•A fine of up to KRW 30 million or imprisonment of up to three years may be imposed on persons who infringe the moral right, neighboring right or database producer right. (Article 136 (2) of the Copyright Act)
1-4 New Intellectual Property Rights
With the advancement of science and technology, there has a growing awareness on the value of intellectual properties in new domains (new intellectual properties) other than traditional intellectual properties. Also, there are active international discussions on how to establish a system to protect intellectual rights that cannot be protected under the existing system, such as traditional knowledge, new plant species, geographical indications. New intellectual property rights include high-technology Management
copyright, industrial copyright, information property right, geographical indications, internet domain II . names, and trademarks for tastes, sounds and smells, and each are governed by the relevant Business government authority.
The government established the National Intellectual Property Commission in May 2011 based on the Framework Act on Intellectual Property to strengthen support for and management of national intellectual properties. 171
2. Efforts to Protect Intellectual Property Rights
Korea has carried out administrative innovation on various fronts related to intellectual property rights in a bid to become an intellectual property powerhouse. The Korean government has streamlined the administrative procedures concerning intellectual property rights and improved the relevant systems at the Korean Intellectual Property Office to aggressively deal with changes in the global trade environment. Furthermore, Korea has developed close cooperative relationships with a number of international organizations in the domain of intellectual property rights and has strengthened global cooperation in the field as an increasing number of countries are actively pursuing FTAs with other countries.
• Reinforcement of the Protection of Intellectual Property Rights • Intensification of International Cooperation
2-1 Reinforcement of the Protection of Intellectual Property Rights
The Korean government has set a long-term goal of becoming an intellectual property rights powerhouse by strengthening the creation, protection and utilization of intellectual property rights, and is seeking continuous innovation of the administrative systems of IPR-related organizations. The Korean Intellectual Property Office (KIPO) has been improving its efficiency and productivity as Korea’s intellectual property rights authority to better deal with the changes in the international trade environment.
Establishment of a World-class Intellectual Property Service System KIPO has been making efforts to establish a world-class intellectual property service system by increasing cooperation with major advanced nations, sharing knowledge with developing countries, and streamlining the examination and ruling process.
As a result of its efforts to enhance the competitiveness of its patent application examination period, KIPO could shorten the period to 18.5 months in 2010, which is shorter than that of the U.S. (25.8 months as of 2009) and Japan (29.1 months as of 2009). Also, KIPO provides a customized 3-track examination system that enables patent applicants to choose the timing of examination.
KIPO has also strengthened cooperation with advanced countries by establishing a cooperation system with the intellectual property offices of G5 advanced countries in the IP fields* and jointly implementing 10 key projects to effectively respond to the global surge in patent applications and reduce the time and expense for obtaining an intellectual property right overseas. Moreover, KIPO has expanded the project for sharing its intellectual property with developing nations and the world’s poorest countries and shared its experience in successfully becoming a recipient-turned-donor nation with the international community, which greatly contributed to improving Korea’s image abroad and securing friendly relations with developing nations.
* G5: The patent offices of the five countries (China, the U.S., Japan, Korea and Europe) that together
Doing Business In Korea account for about 80 percent of the world’s patent applications. 172 Related Laws and System Improvements As the importance of trademarks has been increasing with the continuous growth of the trademark design market, the protection of intellectual property rights for trademarks has been broadened to include hologram marks and motion marks. Also, the relevant laws are being revised in order to apply certain details of the FTA agreement between Korea and the U.S. to the Korean domestic market. Furthermore, the many different formats of civil affairs documents have been integrated into a single format to meet civil needs. The newly-integrated format is designed to improve the convenience of civil petitioners and enhance administrative efficiency regarding patents.
Prevention of Counterfeit Products Distribution KIPO is strengthening coordination with the prosecutor’s office, the police, and local governments in order to prevent the piracy of patented products more effectively, as well as educating government officials to distinguish counterfeit products from originals.
The government has also enacted a regulation to reward those who report counterfeit products (Enacted on February 25, 2010).
Efforts to Educate the Public about Intellectual Property Rights Protection Public awareness of the importance of protecting intellectual property rights is essential to prevent violations of intellectual property rights. Patentees must be fully acquainted with follow-up measures when their intellectual property rights are being infringed. In addition, the general public must acknowledge the damage caused by purchasing counterfeit products. The Korean government has strongly advocated the protection of intellectual property rights, producing and distributing educational videos on the subject.
Information on Intellectual Property Rights and Counseling Services Anyone can report or receive counseling about counterfeit products or business confidentiality infringements online by accessing the Brand Police website under the Korean Intellectual Property Office (http://www.brandpolice.co.kr). Also, small and medium-sized enterprises may receive public patent attorneys’ counseling services for general IPR-related concerns, including application submission and conflict countermeasures.
2-2 Intensification of International Cooperation
Intensification of Multinational Cooperation With the strengthening of mutual cooperation among the intellectual property offices of Korea, the U.S., Japan, China and the EU since 2009, the countries have been making efforts to secure mutual trust in their respective inspection results and coordinate their inspection criteria. Intensification of Bilateral Cooperation Management To effectively respond to the global expansion of FTAs, Korea effectuated FTAs with Singapore, EFTA, II . ASEAN, India, EU, Peru, the U.S., Turkey, Australia and Canada. Korea is also having FTA talks with Business Indonesia, RCEP, etc. As such, Korea is making various efforts to expand international cooperation in the field of intellectual property rights.
International Patent Application System According to the Patent Cooperation Treaty (PCT) The Patent Cooperation Treaty (PCT) is a multilateral agreement concluded in 1970 and entered into 173 force in 1978 (As of Aug. 2014, 148 countries are members to the treaty).
Koreans can file applications for international patents with WIPO or KIPO as Korea has been admitted to Section I (1984) and Section II (1990) of the PCT.
It is strongly recommended that special attention be focused on ensuring that South Korea (the Republic of Korea) is designated in the application and NOT North Korea (DPRK), as incorrect designation can cause significant problems in the application process. There have been incidences where the correction deadline for country designation has expired, or the wrong designation has been discovered in the process of integrating an application into the Korean system, even though one can confirm the preliminary designated country within 15 months of the application under Rule 4.9(b) of the PCT. Such mistakes can cause fatal problems since it is impossible to obtain a patent for a new invention in Korea if the invention already exists in WIPO.
Protection of Internationally Recognized Trademarks According to the Trademark Act of Korea, a well-known and widely recognized trademark cannot be registered as a trademark irrespective of whether the trademark concerned is registered or not. Registration of a trademark by an individual who is not the authentic owner of the trademark will be rejected, and will be subject to a trademark registration cancellation trial even if such registration has already occurred.
Also, an application for a trademark which could cause errors or confusion concerning production or service sources will be rejected even if the products or services associated with the new trademark are dissimilar to famous ones. Even if registration has already been completed, the authentic owner of the trademark may lodge an appeal for a trademark registration revocation trial.
Internationally recognized trademarks are protected under the Unfair Competition Prevention and Trade Secret Protection Act and the Trademark Act. If an owner has been damaged or is likely to be damaged by unfair competition by others, using signs that include a registered name, firm name or famous trademark which could cause confusion with the products or operational facilities of other business entities, the individual may claim infringement prevention, compensation for damage and/or recovery of the business credit, and charge the infringer with a crime.
•Contact for inquiries concerning industrial property rights (patents, trademarks and designs): Korea Intellectual Property Office Call Center (+82-1544-8080) •Contacts for inquiries concerning copyrights: Korea Copyright Committee (+82-2-2660-0000) •Ministry of Culture, Sports and Tourism (+82-44-203-2000) (Division in charge: Copyright Policy Division under the Cultural Contents Project Office) ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ 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USA KOTRA New York Address 460 Park Avenue, 14th floor, New York, NY 10022, U.S.A. New York Tel (1-212)826-0900 Fax (1-212)888-4930 Homepage www.kotra.or.kr/KBC/newyork KOTRA Los Angeles Address 4801 Wilshire Blvd., Suite. 104, Los Angeles, CA 90010, U.S.A. Los Angeles Tel (1-323)954-9500 Fax (1-323)954-1707 Homepage www.kotra.or.kr/KBC/losangeles KOTRA Chicago Address 111 East Wacker Drive, Suite 2229, Chicago, Illinois 60601, U.S.A. Chicago Tel (1-312)644-4323 Fax (1-312)644-4879 Homepage www.kotra.or.kr/KBC/chicago KOTRA Dallas Address 3030 LBJ Freeway # 1200, Dallas, Texas 75234, U.S.A. Dallas Tel (1-972)243-9300 Fax (1-972)243-9301 Homepage www.kotra.or.kr/KBC/dallas KOTRA Silicon Valley Address 3003 North First Street, San Jose CA 95134, U.S.A. Silicon Valley Tel (1-408)432-5000 Fax (1-408)432-5056 Homepage www.kotra.or.kr/KBC/siliconvalley KOTRA Washington D.C. Address 1660 L street NW, Ste 301, Washington DC, 20036, U.S.A. Washington Tel (1-202)857-7919 D.C. Fax (1-202)525-2769 Homepage www.kotra.or.kr/KBC/washingtond KOTRA Detroit Address Columbia Center II, Suite 545, 101 W. Big Beaver Road, Troy, MI 48084, U.S.A. Detroit Tel (1-248)619-1601 Fax (1-248)619-1615 Homepage www.kotra.or.kr/KBC/detroit Australia
KOTRA Sydney Appencices Address Suite04, Level24, 1 Market St., Sydney, NSW 2000, Australia Sydney Tel (61-2)9264-5199 Fax (61-2)9264-5299 Homepage www.kotra.or.kr/KBC/sydney KOTRA Melbourne Address Level 12, 468 St. Kilda Road, Melbourne, VIC 3004, Australia 177 Melbourne Tel (61-3)9860-0500 Fax (61-3)9860-0599 Homepage www.kotra.or.kr/KBC/melbourne
Canada KOTRA Vancouver Address 780-999 Canada Place, Vancouver, BC, Canada V6C 3E1 Vancouver Tel (1-604)683-1820 Fax (1-604)687-6249 Homepage www.kotra.or.kr/KBC/vancouver KOTRA Toronto Address 2 St. Clair Avenue West, Suite 800, Toronto, Ontario, M4V 1L5 Canada Toronto Tel (1-416)368-3399 Fax (1-416)368-2893 Homepage www.kotra.or.kr/KBC/toronto
Europe KOTRA Hamburg Address Axel-Springer-Platz 3, Haus B, 20355 Hamburg, Germany Hamburg Tel (49-40)3405-740 Fax (49-40)3405-7474 Homepage www.kotra.or.kr/KBC/hamburg KOTRA Munich Address Tal 12, 80331 München, Germany Munich Tel (49-89)2424-2630 Fax (49-89)2424-2639 Homepage www.kotra.or.kr/KBC/munich KOTRA Frankfurt Address MesseTurm 33. OG, Friedrich-Ebert-Anlage 49, 60308 Frankfurt/M, Germany Frankfurt Tel (49-69)2429-920 Fax (49-69)2535-89 Homepage www.kotra.or.kr/KBC/frankfurt KOTRA Paris Address 19, Avenue de l’Opera 75001 Paris, France Paris Tel (33-1)5535-8888 Fax (33-1)5535-8889 Homepage www.kotra.or.kr/KBC/paris KOTRA London Address 1st Flr, Brettenham House North, Lancaster Place, London WC2E 7EN, United Kingdom London Tel (44-20)7520-5300 Fax (44-20)7240-2367 Homepage www.kotra.or.kr/KBC/london KOTRA Stockholm Doing Business In Korea Address Svärdvägen 11C Box 625, SE-182 16 Danderyd, Sweden 178 Stockholm Tel (46-8)30-80-90 Fax (46-8)30-61-90 Homepage www.kotra.or.kr/KBC/stockholm KOTRA Copenhagen Address Holbergsgade 14, 3rd Floor DK-1057, Copenhagen, Denmark Copenhagen Tel (45)3312-6658 Fax (45)3332-6654 Homepage www.kotra.or.kr/KBC/copenhagen KOTRA Amsterdam Address Strawinskylaan 1253, 1077 XX Amsterdam, the Netherlands Amsterdam Tel (31-20)673-0555 Fax (31-20)673-6918 Homepage www.kotra.or.kr/KBC/amsterdam KOTRA Brussels Address World Trade Center 1, Boulevard du Roi Albert II 30 Bte 14, 1000 Brussels, Belgium Brussels Tel (32-2)203-2142 Fax (32-2)203-0751 Homepage www.kotra.or.kr/KBC/brussels KOTRA Milan Address Via Larga 2, Milano 20122, Italy Milan Tel (39-02)795813 Fax (39-02)798235 Homepage www.kotra.or.kr/KBC/milano KOTRA Zurich Address Claridenstrasse 22, CH-8002 Zurich, Switzerland Zurich Tel (41-44)202-1232 Fax (41-44)202-4318 Homepage www.kotra.or.kr/KBC/zurich OFICINA COMERCIAL DE LA EMBAJDA DE COREA Address Torre Europa, P. CasTellana, 95-10, 28046 Madrid, Spain Madrid Tel (34-91)556-6241 Fax (34-91)556-6868 Homepage www.kotra.or.kr/KBC/madrid KOTRA Vienna Address Mariahilferstrasse 77-79/1/3 (Generali Center, 3rd Floor), A-1060, Vienna, Austria Vienna Tel (43-1)586-3876 Fax (43-1)586-3979 Homepage www.kotra.or.kr/KBC/vienna Japan
KOTRA Tokyo Appencices Address 9th Floor Shinkokusai Bldg. 4-1, Marunouchi 3-Chome, Chiyoda-Ku, Tokyo, Japan(100-0005) Tokyo Tel (81-3)3214-6951 Fax (81-3)3214-6950 Homepage www.kotra.or.kr/KBC/tokyo KOTRA Osaka Address 20th Floor, Osaka Kokusai Bldg., 3-13, Azuchimachi 2-Chome, Chuo-Ku, Osaka, Japan 179 Osaka Tel (81-6)6262-3831 Fax (81-6)6262-4607 Homepage www.kotra.or.kr/KBC/osaka KOTRA Fukuoka Address 11th Floor, Nihonseimei hakataekimae Bldg., 3-2-1, Hakataekimae, Hakata-Ku, Fukuoka, Japan Fukuoka Tel (81-92)473-2005~6 Fax (81-92)473-2007 Homepage www.kotra.or.kr/KBC/fukuoka KOTRA Nagoya 23rd Floor, Nagoya International Center Bldg., 47-1, Nagono 1-Chome, Nakamura-Ku, Address Nagoya, Japan Nagoya Tel (81-52)561-3936 Fax (81-52)561-3945 Homepage www.kotra.or.kr/KBC/nagoya
Greater China KOTRA Beijing Address Suite 2201, Hyundai Motor Tower, 38 Xiaoyun Road, Chaoyang District, Beijing, China (100027) Beijing Tel (86-10)6410-6162 Fax (86-10)6505-2310 Homepage www.kotra.or.kr/KBC/beijing KOTRA Shanghai Address Room 3110, Shanghai Maxdo Center, No. 8, Xing Yi Road, Shanghai, China(200336) Shanghai Tel (86-21)5108-8771~2, 6219-7592 Fax (86-21)6219-6015, 6236-8211 Homepage www.kotra.or.kr/KBC/shanghai KOTRA Guangzhou Address Unit 2904-07A, Teem Tower No.208 Tianhe Rd. Tianhe District, Guangzhou, China(510620) Guangzhou Tel (86-20)2208-1600 Fax (86-20)2208-1636 Homepage www.kotra.or.kr/KBC/guangzhou KOTRA Qingdao Address Room 905, Capland Center Office Building, No.10 Yanerdao Road, Qingdao, China(266071) Qingdao Tel (86-532)8388-7931 Fax (86-532)8388-7935 Homepage www.kotra.or.kr/KBC/qingdao KOTRA Hong Kong Address Room 3102, 31/F, Central Plaza, 18 Harbour Road, Wanchai, Hong Kong, China Hong Kong Tel (852)2545-9500 Fax (852)2815-0487 Homepage www.kotra.or.kr/KBC/hongkong KOTRA Taipei Doing Business In Korea Address Room.2214, 22Floor, TWTC Int’l Trade Bldg., 333 Keelung Rd., Sec.1, Taipei 110, Taiwan, R.O.C 180 Taipei Tel (886-2)2725-2324 Fax (886-2)2757-7240 Homepage www.kotra.or.kr/KBC/taipei
Asia KOTRA Singapore Address 7 Temasek Boulevard, #13-02 Suntec Tower One, Singapore(038987) Singapore Tel (65)6426-7200 Fax (65)6223-5850 Homepage www.kotra.or.kr/KBC/singapore
Middle East KOTRA Dubai Address Room No. 202, Level 102, Arenco Tower Dubai Media City, Dubai, U.A.E.* P.O.Box : 12859 Dubai Tel (971-4)450-4360 Fax (971-4)450-4350 Homepage www.kotra.or.kr/KBC/dubai 02 Appencices Delegated Agencies
181
Custodian Bank Department Phono No. Zip Code Address International (KB Kookmin Bank, International Customer Dept.) KB Kookmin Bank 82-2-2073-8954 [04534] Customer Dept. 5F, 84, Namdaemun-ro, Jung-gu, Seoul (Kyongnam Bank, International Business Dept.) International Kyongnam Bank 82-55-290-8495 [51316] 642, 3·15-daero, Masanhoewon-gu, Changwon-si, Business Dept. Gyeongsangnam-do International Trade (Kwangju Bank, International Trade Business Office) Kwangju Bank 82-62-239-6555 [61470] Business Office 225, Jebong-ro, Dong-gu, Gwangju Global Customer (Industrial Bank of Korea, Global Customer Team) Industrial Bank of Korea 82-2-729-7285 [04538] Team 82, Eulji-ro, Jung-gu, Seoul Remittance Service (NH Bank, Remittance Service Team) NH Bank 82-2-2131-1611 [03142] Team 14F, A-dong, 6, Yulgok-ro, Jongno-gu, Seoul International (Daegu Bank,International Business Dept.) Daegu Bank 82-53-740-2946 [42123] Business Dept. 2310, Dalgubeol-daero, Suseong-gu, Daegu International (Busan Bank Headquaters, International Business Dept.) Busan Bank 82-51-661-4665 [48400] Business Dept. 15F, 30, Munhyeongeumyung-ro, Nam-gu, Busan (Korea Development Bank, Trade Finance Dept.) Korea Development Bank Trade Finance Dept. 82-2-787-7536 [07242] 14, Eunhaeng-ro, Yeongdeungpo-gu, Seoul Department of (Suhyup Bank, Dept. of International Trade) Suhyup Bank 82-2-2240-2605 [05510] International Trade 62, Ogeum-ro, Songpa-gu, Seoul, Corporate & (Standard Chartered Bank, Corporate & Institutional Standard Chartered Bank 82-2-3702-3894 [03160] Institutional Banking Banking) 47, Jong-ro, Jongno-gu, Seoul Foreign Customer (Shinhan Bank, Foreign Customer Dept.) Shinhan Bank 82-2-2151-2872 [04513] Dept. 20, Sejong-daero 9-gil, Seoul Jungang City Service (Citibank Korea) Citibank Korea 82-2-3455-2606 [04521] Center 24, Cheonggyecheon-ro, Jung-gu, Seoul Foreign Investment (KEB Hana Bank Global, Foreign Investment & Client Dept.) KEB Hana Bank Global 82-2-729-0452 [04538] & Client Dept. 66, Eulji-ro, Jung-gu, Seoul Seoul Global 82-2-3789-1899 (Woori Bank, Seoul Global Investment Center) 2F, Gangnam Woori Bank [06611] Investment Center (330) Kyobo Tower, 465, Gangnam-daero, Seocho-gu, Seoul International Banking 3F, JB Financial Group Bldg., 77, Yeouinaru-ro, Jeonbuk Bank 82-2-751-2489 [07327] Team Yeongdeungpo-gu, Seoul Jeju Bank Treasury Office 82-64-720-0236 [63192] 90, Ohyeon-gil, Jeju-si, Jeju-do The Bank of New York (The Bank of New York Mellon Corporation) 29F, One IFC, Corporate Trust 82-2-6137-0360 [07326] Mellon Corporation 10, Gukjegeumyung-ro, Yeongdeungpo-gu, Seoul Custodian Bank Department Phono No. Zip Code Address Global Cash (Deutsche Bank) 18F, Youngpoong Bldg., (Seorin-dong) Deutsche Bank 82-2-724-4281 [03180] Operations 41, Cheonggyecheon-ro, Jongno-gu, Seoul Customer Service (DBS Bank.) 18F, Seoul Finance Center, 136, DBS Bank 82-2-6322-2661 [04520] Dept. Taepyeongno 1(il)-ga, Jung-gu, Seoul (The Bank of Tokyo-Mitsubishi UFJ, Ltd., Seoul Branch.) The Bank of Tokyo- Doing Business In Korea Remittance Dept. 82-2-399-6413 [03188] 4F, Youngpoong Bldg, 41, Cheonggyecheono-ro, Jongno-gu, Mitsubishi UFJ, Ltd. Seoul 182 Sumitomo Mitsui Banking Overseas Remittance (Sumitomo Mitsui Banking Corporation) 12F, Mirae Asset 82-2-6364-7262 [04539] Corporation Group Center 1, West Tower, 26, Eulji-ro 5-gil, Jung-gu, Seoul (Mizuho Corporate Bank Seoul Branch) Mizuho Corporate Bank GCBS Team 82-2-3782-8564 [04520] 19F, 136, Sejong-daero, Jung-gu, Seoul Landesbank Baden- (Landesbank Baden-Württemberg) Operation 82-2-6730-0142 [04520] Württemberg, LBBW) 14F, 136, Sejong-daero, Jung-gu, Seoul (Barclays Bank PLC) Barclays Bank PLC Operations 82-2-2126-2700 [04539] 23F, Ferrum Tower, 19, Eulji-ro 5-gil, Jung-gu, Seoul (Bank of America) Corporate Support Bank of America (BOA) 82-2-788-1760 [04520] 27F, Seoul Finance Center, 136, Sejong-daero, Jung-gu, Dept. Seoul (BNP Paribas) BNP Paribas Cash and Loan 82-2-317-1776 [04631] 24F, State Tower Namsan, 100, Toegye-ro, Jung-gu, Seoul (Societe Generale) Societe Generale (SG) Operations 82-2-2195-7820 [03155] 23F, D Tower D1, 17, Jongro 3-gil, Jongno-gu, Seoul (ING Bank) 11F, Seoul Finance Center, 136, ING Bank Settlements Dept. 82-2-317-1851 [04520] Sejong-daero, Jungno-gu, Seoul The Royal Bank of Scotland (The Royal Bank of Scotland plc, Seoul Branch) 7F, Seoul IB Operations 82-2-2131-6343 [04520] plc, Seoul Branch Finance Center, 136, Sejong-daero, Jung-gu, Seoul Yamaguchi Bank ltd Pusan (Yamaguchi Bank ltd Pusan Branch) Operation Team 82-51-462-3281 [48931] Branch 4F, 63, Jungang-daero, Jung-gu, Busan (JP Morgan Chase, Seoul Branch) JP Morgan Chase Operations 82-2-758-5331 [04516] J.P. Morgan Plaza, 35, Seosomun-ro 11-gil, Jung-gu, Seoul (China Construction Bank) China Construction Bank Operation 82-2-6730-3611 [04538] 24, Myeong-dong 11-gil, Jung-gu, Seoul Industrial and Commercial (Industrial and Commercial Bank of China Limited) Banking Dept. 82-2-3788-6617 [04514] Bank of China Limited 1F, Taepyeongno Bldg., 73, Sejong-daero, Jung-gu, Seoul Accounting & (Bank of Communications, Seoul Branch) Bank of Communications 82-2-2022-6837 [04523] Operating 29, Eulji-ro, Jung-gu, Seoul (Bank of China) 1F, 41, Cheonggyecheon-ro, Jongno-gu, Bank of China Banking Dept. 82-2-399-5925 [03188] Seoul Credit Agricole Corporate & (Credit Agricole Corporate & Investment Bank) Domestic Operations 82-2-3700-9632 [03154] Investment Bank 21F, Kyobo Bldg., 1, Jong-ro, Jongno-gu, Seoul Australia and New Zealand (Australia and New Zealand Banking Group) Operation 82-2-3700-3143 [03154] Banking Group 22F, Kyobo Bldg., 1, Jong-ro, Jongno-gu, Seoul The Hongkong and Shanghai (The Hongkong and Shanghai Banking Corporation) SD Operation 82-2-2004-0336 [04511] Banking Corporation 37, Chilpae-ro, Jung-gu, Seoul 03 Appencices Useful Business Contacts - Law Firms and Accounting Firms 183
Law Firms
Name of No. of Attorneys by Available Representative Address Areas of Practice Contact Company Attorneys Practice Language Lee Keung-hwan Civil law, criminal law Legal consulting, other Kim Jee-su 102-604, 211, judicial affairs Law Firm Lee Keung- Hangang-daero, 3 English 82-2-3453-0291 Kawoo hwan e-commerce, fintech, data Yongsa-gu, Seoul protection, operation of Je Jeong-seok startups and SMEs and new business launch
4F, OSB Chung Ik-woo Chinese 82-2-6010-7025 Gang Nam Legal consulting, Myoung Roh- Building, 203, English, Law Firm 80 Jang Hye-jin investment and corporate 82-2-6010-7016 Seung Seochojungang-ro Chinese (Ltd.) establishment, litigation Seocho-gu, Seoul Lee Kyung-min English 82-2-6494-2104 Immigration, civil Cha Gyu-geun case, criminal case, administrative litigation English Lee Chang-hwan Trading company, labor Cha Gyu-geun, 8F & 9F, Korea IBS Jeon, Cha & Lee Chang- Building, 272, Technology transfer, 11 Lee Dong-Hyung 82-2-532-6464 Lee hwan, Jeon Seocho-daero, intellectual property Jong-min Seocho-gu, Seoul Kang Seong-Sik Investment consulting, corporate establishment, English, branch establishment, Chinese Shin Eun-Young opening of liaison office, visa matters Ha Yoon-hong English Corporate establishment, 3F, 12-6, Park, Se-chae English Law Firm investment processes, Ha, Yoon-hong Banpo-daero 30-gil, 20 82-2-3474-9966 KeumSeong Kim Yu-cheol English company-related Seocho-gu, Seoul English, consulting and lawsuits Chung, ahaelin French Corporate establishment, 5F, 259, document registration, Kim, Sang- Urinuri Seocho-daero, 1 Kim Sang-kyoon English opening of corporate 82-70-7633-6720 kyoon Seocho-gu, Seoul accounts for foreign investment corporations Corporate, finance, Chung Mi-hwa construction, international Lim, Chung & 17F, 97, Toegye-ro, Chung Mi-hwa 17 English arbitration 82-2-777-0550 Suh Jung-gu, Seoul Yang Dong- Corporate, finance, woon construction, ships Name of No. of Attorneys by Available Representative Address Areas of Practice Contact Company Attorneys Practice Language Bhang Jeong- English, Corporate, finance, yeul Japanese construction Kim Hyung-jin English Corporate, finance, ships Lim, Chung & 17F, 97, Toegye-ro, Chung Mi-hwa 17 English, 82-2-777-0550 Suh Jung-gu, Seoul Kim Kyung-jin Japanese, Corporate, finance Doing Business In Korea French Corporate, ships, 184 Yoon Hee-kyong English international arbitration
5F, 115, Chung Jun-mo Japanese, Law Firm Investment, finance, 82-2-774-1650 Chung Jun-mo Seosomun-ro, 4 Ha Il-ho English DAVINCH others Jung-gu, Seoul Lee Seok-woo Chinese 82-2-525-1490 CHUNG Jin- Jeong Kyeong-rok English All legal areas DAE-RYOOK 12F, 317, gyoo, Yeo & AJU Teheran-ro, Sang-jo, Nam 120 82-2-563-2900 International Gangnam-gu, Young-chan, Ryu Seung-ho Chinese China-related Law Firm Seoul Kim Jin-han Seok Dong- English, Consulting related to visa hyeon Chinese obtainment, immigration Subsidiary companies, branches, JV establishment, foreign Shin Dong-wook English exchange trade Seok Dong- regulations consulting, 6F, 119, Teheran-ro, Daeho hyeon, Choi 20 tax consulting (e.g. tax 82-2-568-5200 Gangnam-gu, Seoul Soo-han privileges for foreign invested businesses), M&A-related consulting (e.g. positive sale Im Dong-bun Japanese of stocks), business support service, foreign investment business management consulting Kim Shin-ho Chinese Law Firm West 416, 15, English, Law, investment THE EAST Kim Shin-ho Beobwon-ro 9 Lee Kyung-jae Japanese, 82-2-596-8111 consulting ASIA Seocho-gu, Seoul Chinese Chang Yoon-seok English Korea-China mutual Lee Soo-chul Chinese investment, finance, culture & entertainment Intra and offshore Jeong In-kyeong investment, business 5F, 154, WINASIA Choi, Gwang- M&A, capital market 82-2-593-8500, Seochojungang-ro, 7 LAW FIRM seok 82-2-532-6837 Seocho-gu, Seoul Medical, bio & health, Ju Ji-hyun English inbound and outbound Investment Intra and offshore Jeong Seung-mi investment, M&A, real estate
Kim Jae-hoon Judicial affairs of Law Office 21F, 147 Teheran-ro Kim Jae-hoon 30 Yu Hyung-jun English business (e.g., M&A), 82-2-533-7979 Landmark Gangnam-gu, Seoul Park Hyo-sun business investment, tax Name of No. of Attorneys by Available Representative Address Areas of Practice Contact Company Attorneys Practice Language Appencices Judicial affairs of Chae Jun- Japanese business, tax, civil case, byoung criminal case Choi Justin Judicial affairs of Law Office 21F, 147 Teheran-ro Kim Jae-hoon 30 Choi Won-woo English business, tax, civil case, 82-2-533-7979 Landmark Gangnam-gu, Seoul Cho Hoon-hee criminal case, labor Lee Soh-hyun Judicial affairs of 185 Ahn Wan-jin Chinese business, M&A, business Choo Geon-hwa investment, tax #102, 15, Jang Dae-geun Roots Law Business law, Jang, Dae-geun Beobwon-ro 3-gil, 7 English 82-2-594-9898 Firm construction management Seocho-gu, Seoul Lee Shin-hee Regus Center, 22F, International transaction, Seoul City Tower, Park Su-yung English, bankruptcy, intellectual MIU Law Park Su-yung 4 82-2-6010-8888 110, Huam-ro, Japanese property Jung-gu, Seoul Son Hi-young Finance, insurance Park Ki-tai 82-2-3479-7515 Moon Seong- Barun Law Building, Business consulting, Barun Law Oh Jae-wook 82-2-3479-5746 woo, Kim Jae- 7, Teheran-ro 92-gil, 180 English foreign/ overseas LLC ho Gangnam-gu, Seoul Roh Seok-jun investment, M&A 82-2-3479-7578 Kim Dae-uk 82-2-3476-5599 Foreign direct investment, capital market law-related Kim Bong-jik 82-2-6124-5875 consulting/ international transaction #204, JNK Foreign investment- Kim Dong-hyun, Digital Tower, 111, related consulting (e.g., Merits 4 Kim Hyun-woo English 82-2-6124-5872 Kim Hyun-woo Digital-ro 26-gil, establishment of finance Guro-gu, Seoul & investment company) Foreign investment in Kim Dong-hyun 82-2-6124-5870 startups, IT Jeong Dong- Foreign investment in 82-2-6124-5874 geun construction, real estate #1407, 60, Centum English, KNL Lee Soo-jung Corporate establishment, Kim In-jung, buk-daero, Japanese Accounting & 4 finance, dispute 82-51-782-9226 Lee Soo-jung Haeundae-gu, Law resolution Busan Kim Jee-young English Investment consulting, Kim Chul-sik English foreign investment notification, business operation, finance, foreign exchange transactions, Bom 11F, 340 Yang Kyu-eung Japanese examination and drawing Song Young- ATTORNEYS Gangnam-daero, 7 up contracts, litigations 82-2-3477-2103 kon AT LAW Gangnam-gu, Seoul Foreign investment notification, business operation, finance, foreign Choi Seo-hyeon English exchange transactions, examination and drawing up contracts, litigations Lee Seok-hyung Business 4F, 283, Seocho- Kim Seon-jong Litigation, consulting, law firm Lee Seok-hyung daero, Seocho-gu, 9 Heo Ik-beom English 82-2-595-0001 contracts SanGyung Seoul Lee So-jeong Kang Seung-beom Name of No. of Attorneys by Available Representative Address Areas of Practice Contact Company Attorneys Practice Language Lawfirm 287, Seocho-daero, Corporate Law, Labor Seo Sang-soo 7 Jo Tae-jin English 82-2-3476-3000 Seolaw Seocho-gu, Seoul Law, Medical Law, etc. Gwon Gu-chul Corporate, finance, taxes #201, 38, Park Gyu-taek Labor, civil execution Law Firm Gwon Gu-chul, Beobwon-ro, 4 Jeong Pil-seung English Real estate development 82-51-507-9886 Doing Business In Korea SEJIN Park Gyu-taek Yeonje-gu, Busan Foreign investment, Park Mun-hak 186 transportation, trade Lee Yong-jun English Foreign-invested 19F, Kwang-il Bldg., company establishment, 331, Gangnam- investment contracts, SIHUN LAW Joo Sung-hoon 10 82-2-598-3200 daero, Seocho-gu, Cho Yoon-sang Chinese foreign exchange trade Seoul reports, foreign-invested company registration Lee Sung-whan International transactions, 5F, Donghwa Bldg., foreign investment, AHNSE Lee Sung-whan 106, Seosomun-ro, 4 Ji Hyun-chul English 82-2-743-0400 construction, taxation, Jung-gu, Seoul Shim In-bo litigation and arbitration M&A, intellectual Shin Jong-kyun 82-2-397-9800 property, tax Head office: 22F, Foreign investment, 55, Sejong-daero, international transaction, Kang Kyong- Jung-gu, Seoul business restructuring and Kim Eui-jae, kook Kim, Chang M&A, business structure Kim Soo-chang, 64 English & Lee Gangbuk improvement Choi Kyung-joon 82-2-3782-5500 office: 4F, 13, Foreign investment, Changdeokgung-gil, international transaction, Jongno-gu, Seoul Shin Min FTA in public areas and energy businesses, antidumping #403 (Hwapyeong Bldg., English, LEESUNSIN Kim Pyoung-ho Seocho-dong), 154 1 Kim Pyoung-ho Company law, etc. 82-2-537-2370 Vietnamese Seochojungang-ro, Seocho-gu, Seoul Company law, securities law, joint venture, 12F, Korea Park Joun-oh business M&A, Young Jin Park Hyeong-su, Intellectual Property management structure, LLC Park Joun-oh, Service Center, 131, 30 English SOC, real estate 82-2-553-9300 (Kim&Jung) Song Si-heon Teheran-ro Gangnam-gu, Seoul Government authorization Lee Gwang-min of energy & resources business, SOC, etc. Foreign investment, Chae Jeong-suk criminal lawsuits, sports/ entertainment English Foreign investment, Annex to Eunsung Choi Chul criminal lawsuits, Law Firm Chae Jeong- Bldg., 741, 8 intellectual property 82-2-553-3000 Ungbin suk Yeongdong-daero, English, International business Gangnam-gu, Seoul Choi Joon-young German trade, arbitration Civil and criminal Lee Dong-geun English litigation, intellectual property Name of No. of Attorneys by Available Representative Address Areas of Practice Contact Company Attorneys Practice Language Appencices Judicial affairs of businesses (M&A, bankruptcy, recovery), Lee Kwang-soo English finance, securities 82-2-3019-2893 (issuance of securities, opening a business), international legal affairs 187 JV, M&A, commerce, English, Kim Seong-soo project finance and 82-2-3019-5454 Japanese development
International legal affairs (international Hong Yong-ho legal affairs, foreign 82-2-3019-5454 investment, international Yoon Ki-won, 11F, 308, One Law arbitration) Lee Tae-woon, Gangnam-daero, 50 Partners, LLC Park Jong-mun Gangnam-gu, Seoul Corporate legal affairs Cheon Chang- (M&A, bankruptcy, hyun recovery), international legal affairs
English Construction, real estate 82-2-3019-2893 (real estate financing project), finance, Choi Hyun-oh securities (structured finance derivatives), international legal affairs
Corporate legal affairs (company establishment, Lee Young-ju investment consulting, 82-2-3019-5457 contract examination), international legal affairs
M&A, entertainment, Yim Young-hwan distribution Yeondu (Formerly 5F, 54-1, Export contract review, Law Firm Lim Seong-taek Maeheon-ro, 2 Lim Seong-taek English foreign investment, real 82-2-6403-6000 For the Seocho-gu, Seoul estate People) Patents, copyrights, Sohn Bo-in intellectual property
Corporate legal affairs 12F, 518 Teheran-ro, Chinese, and finance, China, Yulchon LLC Woo Chang-rok 421 Byun Ung-jae 82-2-528-5797 Gangnam-gu, Seoul English environment & energy, North Korea
Overseas investment, Vietnam/Southeast Asia, real estate construction, development and construction/ plant work English, Baek Min-woo of overseas real estate, 82-2-528-5070 Indonesian corporate legal affairs and finance, M&A, litigation, international litigation and arbitration, labor disputes Name of No. of Attorneys by Available Representative Address Areas of Practice Contact Company Attorneys Practice Language Fair trade, broadcasting, medical and pharmaceutical affairs, English, Lee Seung-min administrative disputes, 82-2-528-5705 French construction, real estate disputes, environment & Doing Business In Korea energy 188 English, Lee Ja-young Tax, international tax 82-2-528-5017 German Intellectual property, patents/ utility model, design, trademarks, design, copyright (including computer programs), trade English, secrets, unfair competition, Joh Sung-jin 82-2-528-5359 Japanese entertainment (celebrities, sports, film, etc.), personal information protection, international litigation and arbitration, internal corporate investigation, Japan Fair trade, medical and English, Bae Ki-choul pharmaceutical affairs, 82-2-528-5844 Japanese broadcasting, Japan Litigation, civil disputes, labor disputes, corporate English, Ryu Ji-wan legal affairs and 82-2-528-5085 Japanese 12F, 518 Teheran-ro, finance, labor, overseas Yulchon LLC Woo Chang-rok 421 Gangnam-gu, Seoul investment, Japan Intellectual property, unfair trade, trademarks, trade secrets, copyright (including computer programs), patent/utility models, Lee Seung-mok English IP risk management (IP 82-2-528-5942 (Samuel Lee) compliance), intellectual property, intellectual property license/ trade, overseas dispute management IP risk management (IP compliance), entertainment and media content licensing and trade, overseas Yoo Woo-rim English dispute management, trade 82-2-528-5914 secret, copyright (including computer programs), intellectual property rights, patent, utility model rights IPO, M&A, overseas Japanese, Kim Joong-bu investment (Indonesia, 82-2-528-5043 Chinese etc.), finance, fund, PE Corporate legal affairs and finance, M&A, overseas Lee Tae-hyuk English 82-2-528-5512 investment (Indonesia, etc.), finance, fund, PE Name of No. of Attorneys by Available Representative Address Areas of Practice Contact Company Attorneys Practice Language Appencices Indonesia, Southeast Asia, Middle East, overseas 12F, 518 Teheran-ro, English, real estate development, Yulchon LLC Woo Chang-rok 421 Lim Min-taek 82-528-5406 Gangnam-gu, Seoul Arabic construction and plant business, corporate legal affairs and finance, M&A Contract examination and legal risk management 189 for international transactions, legal consulting, investment Kang Doo- consulting and M&A woong law, Foreign Investment Promotion Act, Foreign Exchange-related matters (registration, licensing, etc.), establishment of local subsidiaries Legal consulting for Yi-Gong 3F, 98, Banpo-daero, Heo Jin-min 8 English examination and 82-2-2038-3620 Lawyers Seocho-gu, Seoul management of legal risk Heo Jin-min of international transaction contracts, investment consulting and M&A law Investment consulting and Park Jin-seok M&A law Establishment of local Yang Hong-seok Subsidiaries Foreign Investment Promotion Act, foreign Kim So-ri exchange-related matters (notification, licensing, etc.) Foreign direct investment, foreign inbound investment, M&A, English, international transactions, Lee Jong-kun Chinese collective investment (e.g., private equity funds), Korea-China-U.S. corporate legal affairs Due diligence, intellectual 20F, Aju property rights, copyrights, Bldg., 201, Ehoo Law Ryu, Kwon- collective investment Lee Jong-gun Teheran-ro, 10 82-2-567-3071 Group young (e.g. private equity funds), Gangnam-gu, Korea-China-U.S. corporate Seoul legal affairs
English Foreign direct investment, foreign inbound investment, M&A, international transactions, Baik Eun-sung collective investment (e.g., private equity funds), Korea-China-U.S. corporate legal affairs Name of No. of Attorneys by Available Representative Address Areas of Practice Contact Company Attorneys Practice Language Medical affairs, pharmaceutical affairs, BT, Rhim, Young-yik English IT, patents, trademarks, entertainment, investment, general corporate affairs
Doing Business In Korea 5F, 554, Medical affairs, Intellicon Rhim, Young-yik Nonhyeon-ro, 6 pharmaceutical 82-2-6284-0195 Lawfirm Gangnam-gu, Seoul English, affairs, BT, IT, patents, 190 Yang Seok-yong Japanese trademarks, investment, general corporate affairs, incorporation registration Copyrights, general Jo Ji-young English corporate affairs 2F, 6, Hwang Ju-hwan Civil and criminal Hwang and Beobwonnam-ro Hwang Ju-hwan 4 Lee Min-joo English litigation, contracts, 051-503-0037 Partners 15beon-gil, investment consulting Yeonje-gu, Busan Lee Jeong-min Criminal law, atomic Cha Cheol-soon energy law, corporate law Anti-trust and fair Ko Seung-woo commercial law, consumer protection law M&A, FDI, arbitration, Kim Jong-hwan criminal law 17F, Daegak Bldg., Civil and criminal cases, Jeong Hyang 5, Seocho-daero Nho, Seung-hyu real estate, international Law Cha Cheol-soon 26 English 82-2-535-8004 78-gil, Seocho-gu, transactions Corporation Seoul PE fund, real estate fund, Oh In-chul FDI Pharmaceutical affairs, medicinal affairs law, Yoo Jin-young food law, real estate law, construction law Commercial law, family Chin Hye-won law, civil cases 17F., 124, Kim Tae-woo Chong Kyong- JC Partners Teheran-ro, 6 English Legal advice, consulting 82-2-585-5253 sok Gangnam-gu, Seoul Huh Seong-hoon #403-404, 269, Consulting on overall Seo Jeong- Chun Go LLP Seocho-daero, 6 Seo Jeong-chan English home laws (e.g., foreign 82-2-597-6300 chan Seocho-gu, Seoul investment, litigations) #407, 286, Law Firm Lee Hyung-woo Secho-daero, 3 Lee Hyung-woo English Contracts and tax 82-2-583-7203 TIME Seocho-gu, Seoul Corporate law, tax law, 4F, 58, Banpo-dearo contract law, intellectual TAEYANG Joo Hyun-Jung 26-gil, Seocho-gu, 1 Joo Hyun-Jung English property law, real estate 82-2-6959-6189 LAW OFFICE Seoul law, criminal law, family law, civil law Consulting on commercial law, capital market law, 3F, Samwoo Bldg., Law Firm Jo Dae-je, English, financial transaction law, 251, Seocho-daero, 6 Kim Ji-ye 82-2-6959-6720 Taeyul Kim Sang-gyun Chinese tax law, administrational Seocho-gu, Seoul law, litigation, corporate establishment Name of No. of Attorneys by Available Representative Address Areas of Practice Contact Company Attorneys Practice Language Appencices Patents, trademarks, 3F, Samwoo Bldg., Law Firm Jo Dae-je, English, copyright, unfair 251, Seocho-daero, 6 Im Yoo-jung 82-2-6959-6720 Taeyul Kim Sang-gyun Chinese competition prevention Seocho-gu, Seoul law, litigation, contracts Kim Jun-hwan English Moon Hyung-chan English Foreign Investment Promotion Act, FDI, 11F, Samsung Bldg., English, 191 Kim Yun-hee negotiation between Polaris & 623, Teheran-ro, Chinse Kim Jun-hwan 20 foreign investor and 82-2-556-0110 Partners Gangnam-gu, Jeon In-kyu English investment recipient Seoul English, company, English and Joo Hyo-jung Chinese Chinese contracts Lee In-ae English Corporate law, tax law Kim Hak-min English M&A and related lawsuits Philos #701, Seocho Plaza, Kim Han Corporate law, tax law (KIM & Kim Hak-min 286, Seocho-daero, 4 82-2-3478-5400 PARTNERS) Seacho-gu, Seoul Han Beom-seok Chinese Tax law Civil law, commercial law, Lee Young-seop English criminal cases Intellectual property rights 82-2-3434-8100, Choi In-ho law 82-2-3434-8183 English, HANSUNG 4F, 23, Gangnam- Corporate legal affairs, Yoon Kwang- Japanese 82-2-3434-8100, Attorneys at Choi In-ho daero 84-gil 4 intellectual property rights hoon 82-2-3434-8181 Law Gangnam-gu, Seoul law Corporate legal affairs, 82-2-3434-8100, Bang Min-joo English real estate 82-2-3434-8182 #205, 30 Lawfirm Jungdong 1-ro Kim Joon-ki 1 Kim Joon-ki English Litigation, consulting 82-51-746-8850 Haeundae 19beon-gil, Haeundae-gu, Busan Lewis McDonald Energy & Infrastructure 82-2-6321-5711 Corporate legal affairs, Lee Dong-ho 82-2-6321-5715 M&A Michael John Dispute arbitration 82-2-6321-5701 McClure
22F, West Center, Cho Han-jin Energy & Infrastructure 82-2-6321-5713 Herbert Mirae Asset Center Corporate legal affairs, Michael John Charles Kim 82-2-6321-5716 Smith 1 Building, 26, 9 English M&A McClure Freehills LLP Euljiro 5-gil, Nam Kyeong- Energy & Infrastructure 82-2-6321-5714 Jung-gu, Seoul gon (Ken Nam) Kim Da-won 82-2-6321-5702 (Dana Kim) Lauren Lee Dispute arbitration 82-2-6321-5703 Kim Do-youn 82-2-6321-5704 (Philip Kim) Choi Jae-cheon Legislation support, lease #1910, 92, Heritage Law Private equity funds, M&A, Choi Jae-cheon Saemunan-ro, 3 English corporate management 82-2-736-3008 Firm Jeong Jae-hoon Jongno-gu, Seoul structure, tax litigations, tax consulting Name of No. of Attorneys by Available Representative Address Areas of Practice Contact Company Attorneys Practice Language #1910, 92, FDI, management rights Heritage Law Choi Jae-cheon Saemunan-ro, 3 Park Sun-young English dispute, corporate 82-2-736-3008 Firm Jongno-gu, Seoul management structure International investment, Kim Kwon-hoe English 82-2-6003-7566 M&A, antitrust
Doing Business In Korea Korea-China Investment, Nah Seung-bok Chinese 82-2-6003-7137 IPO, M&A 192 ASEM Tower, 517, Lee Soong-ki Energy, M&A 82-2-6003-7519 Yoon & Yang Im Seung-soon Yeongdong-daero, 370 Finance, arbitration, Korea- Lee Joon-woo 82-2-6003-7527 Gangnam-gu, Seoul English Vietnam investment M&A, corporate affairs, Kim Won-hyung 82-2-6003-7531 domestic investment Korea-Japan investment, Jeong Hae-wang Japanese 82-2-6003-7567 JV, commercial litigation Dispute arbitration James K. Lee English 82-2-6138-8811 31F, ONE IFC, 10, (commercial litigation White & James Gukjegeumyung-ro, 3 English Dispute arbitration Case LLP K. Lee Yeongdeungpo-gu, Mark Goodrich 82-2-6138-8813 Japanese (international dispute) Seoul Kyung seok Kim English M&A, PE 82-2-6138-8812 FDI notification and 15F, 207, consulting, foreign-invested Teheran-ro, company establishment, KLA Kim Min-jo 5 Kim Min-jo English 82-2-564-7877 Gangnam-gu, translation, labor, visa Seoul application, application for trademarks, etc. 3F, 165, Bomun-ro, Civil, family, SB Im Min-soon 2 Jang Ji-hyun Japanese 82-2-928-7085 Seongbuk-gu, Seoul administrative litigation
Accounting Firms
Name of No. of Language Representative Address Accountants Expertise/ Services Contact Company accountants Available (Cheonan Industry Equipment Distribution Establishment of branches Complex, Sinbang- and local subsidiaries; dong) Ba-3083, 24, Roh Mun-seop 10 Kang Kyung-sook English consulting; payment, 82-70-4451-9067 Sinchon-ro, registration and reporting of Dongnam-gu, tax affairs, audit Cheonan-si, Chungcheongnam-do Business accounting (bookkeeping, accounting statements, group report packages, IFRS transitions and consulting), HR (payment, #805, Sambi Bldg., Sohn Joo-min 4 major insurances), tax NamKyung 869-28, agency report and consulting, Accounting Yang Han-Soo 16 English 82-51-665-2012 Beomcheon-dong, internal control consulting, Corporation Busanjin-gu, Busan internal audit, external audit, translation of financial and tax documents M&A consulting, financial Kim Han-woong audit (financial and tax audits, value evaluation) Name of No. of Language Representative Address Accountants Expertise/ Services Contact Company accountants Available Appencices Yoo Kyung-sun Bookkeeping, tax reports, audit, establishment of #902, Hanam Bldg., Dahan liaison buildings, branches Hwang Joong- 44-23, Uido-dong, English, Accounting 12 and local subsidiaries, 82-31-701-8886 Soon Yeongdeungpo-gu, Japanese Corporation Han Seong-je bankruptcy and settlement Seoul affairs, M&A and finance audit Audit, financial statement 193 Cho Joon-hyung audit, international tax, 82-2-2056-3711 other financial consulting Daemyung Accounting 2913 Audit, other financial Jeon Gwang- Lee Young-jae 82-2-2056-3743 Corporation Nambusumhwan-ro, 22 English consulting Seok (Grant Gangnam-gu, Seoul Audit, financial statement Thornton) Shin Hyun-hong audit, international tax, 82-2-2056-3705 other financial consulting Ryu Ho-yeon Financial consulting 82-2-2056-3714 Daesung 333, M&A consulting, financial Accounting Kim Soon-Tae Yeongdong-daero, 49 Ahn Jeong-hwan English audit, other financial 82-2-501-4561 Corporation Gangnam-gu, Seoul consulting Audit, other financial Cho Jeong-seop 82-2-2056-3741 consulting Establishment of liaison offices/branches and local subsidiaries, settlement, accounting tax consulting and agency business, 303 business accounting (writing Choi Hae-kyung of group report package), 82-2-569-5651 financial audit, payment and agency management of 4 major insurances, fund management (management of expenses and payment, etc.) International tax consulting Daejoo (fixed establishment, transfer Accounting 3F, Dongha Bldg., prices, withholding tax, Corporation Kwon Jang-Shi 629, Daechi-dong, English expatriates, tax convention (Grant Gangnam-gu, Seoul benefits), domestic law Thornton) consulting, compliance, Seo Jae-dong bookkeeping, payment and 82-2-563-5936 social security tax, fund management, agency tax audit, tax law interpretation HR, FX-related consulting, corporate establishment support M&A consulting, investment Han Seung-hoon consulting, other financial 82-2-2052-9012 consulting Establishment of foreign- invested companies and Lee Sang-yeop branches in Korea, tax and 82-2-3452-1946 KICPA accounting consulting, financial audit Name of No. of Language Representative Address Accountants Expertise/ Services Contact Company accountants Available Jung Lae-jin AICPA 82-2-565-4456 Daejoo Accounting 3F, Dongha Bldg., Kim Young-baek M&A consulting, financial 82-2-564-6191 Corporation Kwon Jang-Shi 629, Daechi-dong, 303 Roh Chang-hwan English audit, other financial 82-2-569-9955 (Grant Gangnam-gu, Seoul Shin Mun-cheol consulting 82-43-276-5005 Thornton)
Doing Business In Korea Lee Sang-jin 82-2-568-7683 Establishment of liaison 194 offices, branches and local subsidiaries and settlement; business accounting (bookkeeping and finance #502, Hanjin Bldg., Dehyun reports to head office), 169-11, Samseong Accounting Song Jae-Hyun 44 Woo Pil-gu English HR outsourcing (payment, 82-2-558-8737 1-dong, Corporation 4 major insurances), tax Gangnam-gu, Seoul agency reports (surtax, corporate tax) and tax consulting (international tax e.g. other transfer prices), M&A consulting Agency establishment of liaison offices, branches and local subsidiaries; consulting; consulting on (Dongseong Bldg., Doone foreign investment in Korea Samseong-dong) 7F, English, Accounting Kim Young-Gul 50 Ahn Seop (strategic affiliation or 82-2-3453-3691 21, Teheran-ro 87-gil, Japanese Corporation M&A), business accounting Gangnam-gu, Seoul (bookkeeping), tax agency report, agency registration of special taxation reduction business Yoon Seong-il English Establishment of liaison 82-2-501-0024 offices, branches and 4F & 5F, KL-Net Bldg., Yoon Sang-su Chinese 82-2-557-7530 Dongnam foreign-invested companies; 748-14, Accounting Kim Sang-Rok 23 consulting; bookkeeping, tax Yeoksam-dong, Corporation consulting, finance reports Gangnam-gu, Seoul Kim Dae-woo English 82-2-562-1152 and accounting consulting, internal audit Na Yong-ju Japanese Establishment of liaison 82-51-463-7110 English, offices, branches and Yoon Sang-ho 82-51-465-7722 Chinese domestic JV; consulting, tax agency report, business Dongwon 4F, Haejeong Bldg., accounting (writing of Accounting Joo Ang-Bok 233 Jungang-daero, 16 group report packages), Corporation Dong-gu, Busan Kang Myeong- audit (statutory and special- English 82-51-469-0091 geun purpose audit), writing and audit of financial statements, consulting on business takeovers (M&A) Bookkeeping, reports and (#608, #609, eXcon consulting regarding taxes Venture Tower, (e.g. corporate tax/income Mac & Yeouido-dong) tax/surtax); establishment/ Lee Dong-Sun 7 Lee Dong-sun English 82-2-780-6500 Partners 3, Eunhaeng-ro, dissolution/liquidation of Yeongdeungpo-gu, corporations, other finance Seoul and management-related consulting Name of No. of Language Representative Address Accountants Expertise/ Services Contact Company accountants Available Appencices 9F, Shinwon Bldg., Establishment of U.S. Milib 210-1, Hangang-ro branches, taxation of U.S. Accounting Choi Jin-Min 5 Ha Jong-su English 82-2-577-9938 2-ga, Yongsan-gu, branches, financing Corporation Seoul within U.S. 2F, Dongwon Bldg., SamKyung 333 Yeongdong- Yoon Jun-shik Audit (IFRS), inspection, Accounting Kang In-Jun 32 English 82-2-561-9091 daero, Gangnam-gu, (Peter, Yoon) other financial consulting Corporation Seoul 195 Steven Kang Inbound audit and consulting 82-2-709-4788 (Kang Chan-young) English regarding advancement into Daniel Fertig Korea 82-2-709-8714 LS Yongsan Tower, Consulting and audit 191, Hangangro English, Samil PwC Kim Young-Shik 2091 Jeon Yong-wook regarding Chinese 82-2-709-7982 2-ga, Yongsan-gu, Chinese, investment in Korea Seoul Henry Ahn English Tax 82-2-3781-2594 (Ahn Ik-heung) Park Dae-jun English M&A/ Valuation 82-2-709-8938 Kim Jin-man English 82-2-2112-0799 English, Park Seong-won 82-2-2112-7011 German M&A consulting, due diligence, JV establishment, Cao Liang Chinese overseas market entry 82-2-2112-6884 English, consulting 27F, Gangnam Shin Ji-won Spanish, 82-2-2112-3636 Samjong Kim Kyo-Tae Finance Center, 152, 1336 Portuguese KPMG ACI Gangnam-gu, Seoul In Byung-chun Tax consulting, establishment 82-2-2112-0951 of branches/subsidiary Kim Kyoung-mi English 82-2-2112-0471 companies, bookkeeping, Baek Seung-hyun wage service, tax report 82-2-2112-7911 service, business supporting Oh Young-seok Japanese service, and global general tax 82-2-2112-0269 management service Koo Ja-myung Financial audit (M&A) Establishment of liaison offices, branches and local Lee Gook-hee subsidiaries; consulting; HR outsourcing; tax consulting (international taxes); audit Financial audit, HR Kim Choon-seong outsourcing, audit, tax consulting Samhwa 10F, Namgang Bldg., Establishment of liaison Accounting Seok Wan-Ju 1340-6, Seocho-dong, 94 English 82-2-3452-9793 offices, branches and local Corporation Seocho-gu, Seoul subsidiaries; consulting; Kim Jeong-wook visa issuance; change of information of foreign company registration; M&A Technology transfer, export and import, market research, analysis of technology Park Jin-soo market, patent/trademark application, support for agencies and negotiation Name of No. of Language Representative Address Accountants Expertise/ Services Contact Company accountants Available Business accounting (IFRS transition & analysis of difference between IFRS- Namgoong Jin GAAP, agency writing of group report packages), audit, financial audit Doing Business In Korea
English Korea-China direct 196 investment support, validity analysis of inshoring, analysis of onsite Park Joong-yong investment, discovery of local buyers/partners and negotiation support, investment licensing support Business accounting (writing English, of group report package), Lim Se-gwang Japanese HR outsourcing, audit, tax agency report Domestic IPO consulting within Chinese corporations, due diligence and consulting for Chinese companies’ Samhwa 10F, Namgang Bldg., Ahn Seong-jin acquisitions, IFRS transitions Accounting Seok Wan-Ju 1340-6, Seocho-dong, 94 of Chinese corporations, 82-2-3452-9793 Corporation Seocho-gu, Seoul consulting on Korean tax regarding Chinese corporate income Kim Do-gyun Consulting (establishment Chinese of Korea-China branches, tax accounting consulting), business accounting (bookkeeping), tax consulting, tax agency report, audit, establishment Kim Joon-ho of liaison offices, branches, and local subsidiaries; consulting, consulting on labor/judicial affairs/ patents/business management Consulting on establishment and operation of foreign- invested companies, audit, internal audit and support Song Chi-wook English business, accounting outsourcing and group report support, investment/M&A consulting and financial audit SeBit Park Seung-ha English 82-2-3438-2406 M&A consulting, finance Accounting 2F, 711 Eonju-ro, Park Seung-Ha 25 audit, other financial Corporation Gangnam-gu, Seoul Ahn Sun-young Chinese consulting 82-2-3438-2493 (Mazars Korea) 3F, Shinyoung Bldg., Kim Min-chan 82-2-3218-8079 Seoil & M&A consulting & foreign Lee Jae-Deok 46-10, Jamwon-dong, 34 English Company investment guidance Seocho-gu, Seoul Joo Jin-hyuk 82-53-651-6900 Name of No. of Language Representative Address Accountants Expertise/ Services Contact Company accountants Available Appencices Tax consulting (investigation of prices of fixed business sites and transitions), audit, Lee Min-jae financial audit, application 82-2-513-0208 for foreign investment areas, agency registrations of high- technology business, etc. Establishment of liaison 197 offices, branches and local subsidiaries; consulting, HR outsourcing (wages), business accounting English Go Tae-il (bookkeeping), acting tax 82-51-460-4723 reports (corporate tax, Baker Tilly surtax, etc.), tax consulting Sungto 10F, 124 Teheran-ro, (investigation of fixed and Park Geun-Seo 34 Accounting Gangnam-gu, Seoul transferred business sites), Corporation auditing financial audit HR outsourcing (payment), business accounting (bookkeeping), acting tax Kim Hye-yoon 82-51-460-4710 reports (corporate tax, surtax, etc.), auditing and financial audit, etc. Bae Seok-won English Establishment of liaison 82-2-513-0204 offices, branches and local subsidiaries; consulting, English, HR outsourcing (payment), Choi Eun-young Japanese, business accounting 82-2-513-0267 German (bookkeeping), tax agency report (corporate tax, surtax, etc.) 5F, Hyun Tae-min Establishment of liaison Seil Poongseong Bldg., offices, branches and local Accounting Kim Jong-Sang 46 English 82-2-470-4666 19 Olympic-ro 45-gil, subsidiaries; consulting, Corporation Lee Eui-yoo Songpa-gu, Seoul investment consulting #1613, Samsung Establishment process of Shin Ho-Hwan Jeil Bldg., 702- liaison offices, branches and Tax Accounting Shin Ho-Hwan 1 Shin Ho-hwan English 82-2-527-4064 2, Yeoksam-dong, corporates, tax accounting Corporation Gangnam-gu, Seoul consulting service M&A consulting, financial Yang Yoon-ki English audit, other financial 82-2-561-7181 consulting 8F, Hyundai Tower, Shinwha Corporation establishment, 143-37, Accounting Kim Seong-cheol 17 Kim Gwang-soo bookkeeping, tax consulting, 82-2-553-7956 Samseong-dong, Corporation audit Gangnam-gu, Seoul Japanese M&A consulting, financial Jang Tae-il audit, other finance 82-2-555-9211 consulting Auditing, accounting 9F, One IFC Bldg., consulting, financial International Finance Deloitte Anjin due diligence of finance Centre Seoul, 23, Accounting Lee Jeong-hee 1077 Kim Seon-yup English organizations and M&A 82-2-6676-1130 Yeouido-dong, Corporation consulting, corporate Yeongdeungpo-gu, establishment and license, Seoul etc. Name of No. of Language Representative Address Accountants Expertise/ Services Contact Company accountants Available Oui Seol-hyang Audit, accounting 82-2-6676-3314 consulting, financial due diligence of finance Cho Tae-jin organizations, M&A 82-2-6676-3322 consulting, etc. Doing Business In Korea System of internal 198 accounting controls (SOX) Park Seong-ho review and consulting, US 82-2-6676-3160 GAAP and IFRS consulting, financial due diligence
M&A consulting, financial Hwang Jae-ho 82-2-6676-3129 due diligence
Accounting audit (foreign- invested companies), due diligence for overseas fund Yoo Ji-hoon 82-2-6676-3124 investment, consulting on financial regulations and others
US GAAP, IFRS inspection Lee Ji-shin and consulting, financial 82-2-6676-3115 audit, finance consulting
Audit, financial due Kim Joon-cheol 82-2-6676-3170 9F, One IFC Bldg., diligence International Finance Deloitte Anjin M&A consulting, financial Centre Seoul, 23, Jeon Yong-seok 82-2-6676-1524 Accounting Lee Jeong-hee 1077 due diligence Yeouido-dong, Corporation Yeongdeungpo-gu, IFRS inspection and Seoul consulting, financial due Choi Jae-young diligence, coordination of 82-2-6676-1552 consulting on investment in Korea
Auditing (IFRS, K-GAAP), M&A consulting, finance consulting, consulting Na Gi-young on system of internal 82-2-6676-1530 accounting controls, coordination of consulting on investment in Korea
Finance due diligence, Hwang Seung-hee coordination of consulting 82-2-6676-1642 on investment in Korea
Audit and consulting on US GAAP and IFRS, financial Yoo Byung-moon audit, internal control and 82-2-6676-1546 accounting consulting regarding SOX
Audit, accounting consulting, financial Kim Gi-hyun audit (except finance 82-2-6676-1397 organizations), and M&A consulting Name of No. of Language Representative Address Accountants Expertise/ Services Contact Company accountants Available Appencices Overseeing of foreign investment consulting, audit, Lee Seok-hyung 82-2-2631-1230 M&A consulting, financial audit, other tax consulting Agency establishment of English, liaison offices, branches and Chinese 9F, 109 Teheran-ro, Lee Ji-hyun local subsidiaries Gangnam-gu, Seoul 199 Tax consulting (transfer Osung (Osung Accounting pricing, international tax) Accounting Nam Shi-Hwan Corporation, 9F, 18 Corporation Gangnam Jeil Bldg., Bookkeeping, various tax Eom Tae-woong Yeoksam-dong, reports 82-2-2631-1230 Seoul) Management of the 4 major Lee Na-kyung Chinese insurances Head office finance report Okazaki Yuki package Japanese Management of the 4 major Choi Yoon-young insurances Tax consulting and reports EJung & Co #326, 27, 24-gil, on foreign investment/ Accounting Lim Byung-Gwan Seocho Joongang-ro, 17 Lim Byung-gwan overseas investment, 82-2-566-8500 Corporation Seocho-gu, Seoul foreign-invested companies, bookkeeping English Establishment of liaison 6F, Seoksang Bldg., offices, branches and local Easi 234-8, subsidiaries; consulting, Accounting Jin Hyung-Joon 11 Park Sang-hyun 82-2-541-9996 Nonhyeon-dong, business accounting Corporation Gangnam-gu, Seoul (bookkeeping, group report packages) Establishment of liaison offices, branches and local subsidiaries; consulting, tax consulting (tax reduction, etc., corporate tax-related Jeong Sung-moon English consulting), tax reports 82-2-6617-7210 (corporate tax reports, VAT reports), filing of withholding tax for earned income, business accounting #1403, (bookkeeping) e-Chon Miwon Bldg., 70, Audit, tax consulting and tax Accounting Jeong Seok-Yong Gukjegeumyung-ro, 66 adjustment, establishment Corporation Yeongdeungpo-gu, of foreign invested Seoul corporations (including Seo Gwan-soo 82-51-715-0100 branch and liaison office address), consulting, foreign English investment law service, outsourcing service M&A consulting, financial audit, tax consulting Jin Gang-min and related services, 82-51-819-1356 incorporation, financial consulting Name of No. of Language Representative Address Accountants Expertise/ Services Contact Company accountants Available Lee Yoo-jeong Establishment of liaison English offices, branches and local 8F, Gwangseong Kang Chang-gu subsidiaries; agency and Bldg., 11 Yeoksamro consulting, registration, JungJin LLC Jeon Yee-Hyun 45 82-2-557-4034 3-gil, Gangnam-gu, bookkeeping, tax agency
Doing Business In Korea Seoul Choi Jong-yeol Japanese report, tax consulting outsourcing (wage, 4 major 200 insurances) Establishment of branches and liaison offices, accounting and tax trust business, audit, tax Kim Sang-yoon Japanese investigation response, 82-2-511-1402 16F, Construction wage and 4 major Jewon Bldg., 71-2, insurances, consulting on tax Accounting Lim Deok-Taek 27 Nonhyeon-dong, accounting, financial audit Corporation Gangnam-gu, Seoul and financial consulting Guidelines on foreign investment notification Choi Byung-ho English process, M&A consulting, 82-2-512-0164 financial audit, audit, bookkeeping, tax affairs Lee Dae-jin Establishment of liaison #701, Ilshin Bldg., offices, branches and local Jin Il 11, Eunhaeng-ro, subsidiaries; consulting, Accounting Chang Gyu-sik 55 English 82-2-6095-2137 Yeongdeungpo-gu, business accounting Corporation Choi Young-yoon Seoul (bookkeeping, group report packages), tax consulting Foreign-invested companies and foreign 3F, K Cube Bldg., businesses’ establishment Taesung English, Nam Seong- 726-2, Yeoksam- of local branches in Accounting 70 Kim Min-jung Chinese, 82-2-561-6513 Hwan dong, Gangnam-gu, Korea, accounting and Corporation Japanese Seoul tax outsourcing audit, accounting service, tax and management consulting Establishment of liaison offices, branches and local Taeyoung 16F, Janggyo Bldg., subsidiaries; consulting; Accounting Lee Byung-Gwon 363, Samil-daero, 20 Lee Dong-yun English 82-2-541-9760 HR outsourcing (wage, 4 Corporation Jung-gu, Seoul major insurances); business accounting (bookkeeping) 6F, Changjo Bldg., Ham Young-jin English M&A consulting, 82-2-3453-0142 Hanmi 143-9, Samseong finance audit, corporate Accounting Kim Sung-Gyu 50 2-dong, Gangnam-gu, establishment, accounting Corporation Lee Jong-yup Japanese 82-2-3453-0124 Seoul and tax outsourcing Establishment of Korean Lee Ji-eun corporation 3F, Choseok Bldg., Hansung 1550-10, Tax return (wage, VAT, 82-70-4332- Accounting Jeon Jung-Hyun 3 Chinese Seocho-dong, corporate tax, etc.), audit, 6005 Corporation Seocho-gu, Seoul Lee Min-hee tax accounting consulting, finance audit, other finance consulting Name of No. of Language Representative Address Accountants Expertise/ Services Contact Company accountants Available Appencices Setup of local subsidiaries, Moon Seung-seok 82-2-529-4600 tax consulting Establishment of liaison 7F, Danseong Bldg., offices, branches and local Ecovis Hanshin 1-23, subsidiaries; consulting; Accounting Seon Hyeong-gi 21 English Yangjae 1-dong, business accounting LLC Seocho-gu, Seoul Sohn Hwan-mok (bookkeeping; finance 82-2-574-9991 reports to head office); 201 tax responsibilities; proxy returns and tax consulting; HR outsourcing; audit Park Yong-geun 82-2-3787-6558 Heo Joon-young English 82-2-3787-6380 Lee Dong-geun Audit 82-2-3787-6471 Lee Sun-gyu 82-2-3787-6812 Japanese Lee Seong-yup 82-2-3787-6879 M&A consulting, financial Seok Jin-hyun English 82-2-3770-0932 due diligence, tax consulting Tax consulting, proxy tax return (corporate tax returns, English, VAT returns, withholding tax Woo Seung-yup 82-2-3787-6508 Japanese of earned income returns), 3-8F, 111, Ernst & Young business accounting Yeouigongwon-ro, Accounting Seo Jin-Seok 817 (bookkeeping) Yeongdeungpo-gu, Corporation General tax consulting, Seoul English, Woo Seung-baek consulting on foreign 82-2-3787-6320 German investment incentives English, Kook Jong-chul Establishment of liaison 82-2-3787-6448 Chinese offices, branches and local Matsumoto Makoto Japanese subsidiaries; consulting 82-2-3787-6856 Tax consulting, tax report (corporate tax return, VAT return, withholding tax Shin Jang-gyu 82-2-3770-0954 English of earned income return), business accounting (bookkeeping) Kim Min-ah General income tax report 82-2-3787-4019 Hwang Heung-joo 82-2-316-6610 English Kang Jeong-dae 82-2-2009-5701 English, Kim Seong-hui 82-2-2009-5757 Chinese Lee Joon-woo 82-2-2084-5811 3F, Shindo Bldg., Nam Ki-bong 82-2-2009-5762 Hanul 943-27, Daechi Consulting on due diligence, Accounting Nam Ki-bong 160 Park Sang-hyun 82-2-316-6638 3-dong, bookkeeping Corporation Gangnam-gu, Seoul Park Seong-hyun English 82-2-316-6630 Shim Ji-soo 82-2–316-6622 Wi Sang-young 82-2-316-6621 Ko Hyun-chul 82-2-2084-5860 Kwon Il-kyu 82-2-2009-5784 Chinese Yoon Hyung-geun 82-2-2084-5825 Name of No. of Language Representative Address Accountants Expertise/ Services Contact Company accountants Available Restructuring and liquidation (liaison offices, branches, subsidiary companies), compliance and consulting of foreign exchange transaction regulations, accounting, Doing Business In Korea bookkeeping, withholding 202 tax, VAT, corporate tax, Oh Yoon-taek individual income tax report 82-2-761-3821 consulting, compliance 3F, Daeha Bldg., and consulting on social- Barun Kim Gwang- 14-11, Yeouido-dong, security tax, management of Accounting 26 English Hoon Yeongdeungpo-gu, funds, outsourcing service, Corporation Seoul international transaction, domestic transaction, tax investigation support-related consulting, tax appeal Tax and accounting consulting, payment, corporate tax reports, Moon Jeom-shik tax appeal, corporate 82-2-3775-4706 establishment and liquidation, outsourcing services, external audit #201, Gyeongnam Trade Center, Bomyoung Audit, internal audit, 7-4, Yongho- Accounting Lee Chang-Yeol 7 Lee Chang-yeol English financial due diligence, 82-51-328-9328 dong, Uichang- Corporation M&A consulting gu, Changwon-si, Gyeongsangnam-do Jeon Jong-moon Foreign investment Pyeong Jin #401, Seogin Bldg., requirements, consulting Accounting Jeon Jong-Moon 1238, Gaepo-dong, 4 English on establishment of foreign 82-2-516-6908 Corporation Gangnam-gu, Seoul Yoon Eun-mi invested companies and subsidiaries
* This list was provided by the Korean Bar Association and the Korean Institute of Certified Public Accountants, and KOTRA assumes no responsibility regarding the use of the service provided by the above firms. Should you experience any inconvenience, however, please contact us, and we will reflect your views in our next update. Doing Business in Korea
Publisher : Jaehong Kim Published by: KOTRA Date of publication: July 2017 Address: KOTRA, #7 Heolleung-ro, Seocho-gu, Seoul, Republic of Korea Tel.: +82-2-1600-7119 Website: www.kotra.or.kr/ www.investkorea.org
ISBN 979-11-6097-331-0(93320) 979-11-6097-330-3(95320) [PDF]
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