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| HOME > Investment Guide > Business Establishment |
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 Establishment
of Presence for Foreigners |
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| A foreigner may establish a domestic business presence
in the following four ways: through establishment of a local corporation
or a sole proprietorship, to either of which the Foreign Investment
Promotion Act ("FIPA") is applicable, or through establishment
of a branch or an office under the procedures as set forth in the
Foreign Exchange Transactions Act ("FETA"). A foreign corporation,
however, may not be registered as a domestic sole proprietorship.
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Establishment of Presence
for Foreigners |
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| ■ Local Corporation
The provisions of the FIPA and the Commercial Law are applicable
to foreign investment through establishment of a local corporation
by a foreigner or a foreign company. A local corporation is treated
equally as a domestic corporation. Establishment of a local corporation
requires a foreigner to invest ￦50 million or more, whereas such
minimum capital requirement is not applicable in the case of a branch
or an office.
■ LSole Proprietorship
Investment in the form of sole proprietorship is classified as
direct foreign investment as well if the amount of the investment
is ￦50 million or more. Although such form is no different from
a local corporation in its ability to conduct business, yet it is
simpler and easier to open, suspend, and close a business and has
less social responsibilities and requirements than a local corporation
does. The down side, however, is that the poor creditworthiness
inherent in this form makes it more difficult to finance the business
and secure quality labor. Thus, sole proprietorship is more often
utilized for small businesses. |
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Differences between a Sole
Proprietor and a Corporation |
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Type |
Foreign-invested
company |
Domestic
branch of
foreign company |
| Governing law |
FIPA |
FETA |
| Nature |
Domestic corporation |
Foreign corporation |
| Legal entity |
The foreign investor and the foreign-invested company are
separate entities (independent accounting and closing) |
The head office and the branch office are the same entity
(in accounting and closing) |
Notification
and permits |
Invest KOREA, or designated foreign exchange bank |
Designated foreign exchange bank (notification), The Ministry
of Finance and Economy (MOFE) (financial business license and
other permits) |
| Minimum (maximum) amount of investment |
Minimum : ￦50 million per
investment
Maximum : N/A |
Maximum : N/A N/A |
| Taxability |
All income generated within or outside the country is taxable:
at 15 percent and 27 percent (13 percent and 25 percent from
2005) |
Only the income generated within the country is taxable:
at 15 percent and 27 percent (13 percent and 25 percent from
2005) |
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| ■ Office
An office is fundamentally different from a branch. An office is
allowed to perform non-business activities only while a branch may
conduct business activities. Accordingly, an office requires a serial
number issued by the competent tax office similar to that in business
registration, but no registration with the court. |
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| Procedures
to Establish Local Corporation |
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The procedures to establish a local corporation largely
consist of three steps: foreign investment notification; corporation
or sole proprietorship registration; and finally foreign-invested
company registration. The business-establishing procedures by a
foreign investor/foreign-invested company is essentially identical
with those by a Korean national, except that advance notification
of foreign investment and registration of a foreign-invested company
are required in addition.
① Foreign Investment Notification
Notification can be made by either the foreign investor himself/herself
or any other person presenting a power of attorney signed by the
investor. The notification must be filed with designated foreign
exchange bank or Invest KOREA and will be processed immediately
upon filing. The documents to be submitted are a foreign investment
notification form, a certificate of nationality, and a power of
attorney, if applicable.
② Import of Foreign Capital Contributions
Foreign capital contributions may be either remitted to a remittance
account or carried in through customs. If remitted, the contributions
are exchanged within the country and deposited in a capital contribution
account (or a securities margin account), then, against which the
bank issues a custody certificate of paid-in capital.
③ Registration of Incorporation with
Court
See the "Procedures to Register Incorporation" paragraph
below.
④ Business Registration
See the "Business Registration" paragraph below.
⑤ Transfer of Paid-in Capital to
Corporation's Account
Completion of the court registration and business registration
makes the newly incorporated company lawful and valid and allows
the paid-in capital in the custody of the bank to be transferred
to the account of the company.
⑥ Foreign-Invested Company Registration
A foreign-invested company must register, within 30 days from the
date the payment of the capital was completed, to the agency that
was earlier notified of the foreign investment. The documents to
be submitted are one copy of an application for foreign-invested
company registration, one copy of a corporate registry extract,
and one copy of a foreign exchange purchase receipt / deposit certificate.
The foreign-invested company registration certificate is attached
to filing for overseas remittance of investment proceeds and is
required when the investor applies for extended-stay visa (D-8).
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| Procedures
to Register Incorporation |
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The Commercial Law allows four types of companies:
unlimited partnership companies; limited partnership companies;
corporations; limited companies, and corporations. As corporation
is the most popular form of business, the following explanation
is focused on corporation. It is highly recommended to entrust a
lawyer, a judicial scrivener or Invest KOREA with incorporation
registration than to undertake it by oneself. Any foreign-invested
company whose head office is in Seoul can get help from Invest KOREA
as long as the representative director of the local corporation
is present at the time of the filing.
① Types of Business Establishment
There are two ways to establish business(es) in Korea: by promotion
and by public offering. By promotion, the promoters subscribe for
all shares issued at the time of establishment. By public offering,
on the other hand, promoters subscribe for part of the shares issued
at the time of incorporation and the remaining shares publicly offered.
② Procedures for Establishment of
a Corporation
Promoters → promoters' general meeting and keeping minutes of the
meeting → preparation and notarization of Articles of Corporation
→ decision on the number and class of the shares to be issued →
subscription by the promoters for the shares (business establishment
by promotion), or subscription by the promoters for the shares,
offering of the shares to the public and allotment of the shares
(business establishment by public offering) → investment in cash
or in kind made → the progress of business establishment examined
and reported by directors and a statutory auditor → inaugural meeting
(by public offering) → board of director's meeting → incorporation
registration → notification of business establishment and business
registration
③ Registration
□ Period of Registration
The new business established by promotion must be registered within
two weeks of the completion of the investigation of the establishment
progress, and as for establishment by public offering, within two
weeks of the closing day of the inaugural meeting.
□ Pre-Registration Decisions
The promoters and any similar corporate names are subject to review.
A corporation requires one or more promoters, who must subscribe
for shares in writing and thereby become shareholders of the newly
incorporated company. Any corporate name that is identical to or
not clearly differentiated from another name registered by another
person for the same line of business in the same municipality may
not be registered.
□ Documents Required for Registration
The list of the documents required for registration is as follows: |
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Prepared
by applicant |
Prepared
with the aid
of Invest KOREA |
1. Foreign investment notification form
2. Power of attorney:
① If applied for by the representative director:
The representative director must be the appointee
in all powers of attorney.
② If applied for by a judicial scrivener:
The scrivener must be the appointee in the
powers of attorney regardless of promoters or
officers
3. Acceptance of appointment of officer
① Korean nationals: Each acceptance must be
sealed, to which a seal impression certificate and
a resident registration certificate must be
attached.
② Foreign nationals: Each acceptance must be
signed, to which an original copy of signature
notarization and a photocopy of the passport must
be attached.
4. Custody certificate of paid-in capital
5. Common seal of the company
6. Urban rail bond
7. Supreme Court revenue stamp
8. Registration tax receipt: issued by the ward office
exercising jurisdiction over the head office
9. Seal of each officer and promoter
(including foreign nationals) |
10. Corporate Statute: notarized
11. Share subscription certificate
12. Application for shares
13. Organizational report
14. Consent to shortening the inaugural
meeting period
15. Minutes of the inaugural meeting :
notarized
16. Minutes of the board of directors'
meeting : notarized
17. Common seal notification and
application for common seal card
18. Register of shareholders
19. Consent to issuance of shares |
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The list of the documents prepared by the investor in
his/her own country depends on whether the investor is an individual
or a corporation and as to a Japanese investor, a separate rules will
be applied. In the case of a corporate investor, the applicant must
bring a copy of the resident registration certificate or driver's
license of the representative, and seals of all shareholders and officers
(including foreign nationals) listed in documents.
All powers of attorney or acceptance of appointee to officer(s) must
be notarized if given by foreign nationals (with the exception of
Japanese nationals). The list of the promoters is not required to
be identical to that of the officers. |
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Documents Prepared by Individual
Investor |
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| Power
of attorney(1) |
o Given by investors, officers
and any other persons listed in
documents
- Korean/Japanese: sealed and with a seal impression
- certificate attached thereto
- Foreign national: signed and notarized |
| Acceptance of
appointment(1) |
o Prepared by all persons listed as officers
- Korean/Japanese: sealed and with a seal impression
- certificate and a resident registry
extract attached thereto
- Foreign national: signed and notarized |
Seal impression
certificate(2)
Resident registry extract(1) |
o To be attached to the powers of attorney and acceptances
o of appointment |
| Photo copies
of passport(1) |
o All foreign nationals |
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Documents Prepared by Corporate
Investors |
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| Power
of attorney(1) |
o Given by investors, officers
and any other persons listed in
documents
- Korean/Japanese: sealed and with a seal impression
- certificate attached thereto
- Foreign national: signed and notarized |
| Acceptance of
appointment(1) |
o Prepared by all persons listed as officers
- Korean/Japanese: sealed and with a seal impression
- certificate and a resident registry
extract attached thereto
- Foreign national: signed and notarized |
Seal impression
certificate(2)
Resident registry extract 1) |
o To be attached to the powers of attorney and acceptances
of
o appointment |
Corporate registry
extract,
power of attorney given by
the corporation |
o Korean/Japanese corporation: with the common seal
o
affixed, and a common seal impression certificate and
a
o corporate registry extract
attached thereto
o Foreign corporation: notarized and given by the
o
representative director of the foreign investor corporation
to
o the representative director
of the Korean corporation,
o
together with a corporate registry extract notarized and
o attached there to |
| Photo copies
of passport(1) |
o All foreign nationals |
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| ■ Business Establishing
Expenses The costs and expenses for setting up
companies include, among other things, the registration tax, education
tax, and urban rail bond and registration application fee. |
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Incorporation Costs Exemplified
(capital of ￦50 million, in a large city) |
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Registration tax : 0.4percent of the paid-in capital
or 3 times as much
if the company is to locate in a large city |
￦600,000 |
| Local education tax: 20 percent of the registration tax |
￦120,000 |
| Purchase of urban rail bond: 0.1 percent of the paid-in capital |
￦50,000 |
| Supreme Court revenue stamp (registration application fee) |
￦15,000 |
| Notarization fee (articles of incorporation, etc.) |
Approx. ￦150,000 |
Total |
Approx. ￦935,000 |
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| Notifying
Business Establishment and Business Registration |
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| ① Notification and Business
Registration Done at the Same Time In general,
notification of setting up a company and business registration application
filed at the same time at the tax office-exercising jurisdiction
over the head office or Invest KOREA. The business registration
must be filed for within 20 days of the commencement of business,
and the notification be filed within two months of the registration
of business establishment. The schedule of the required documents
is as follows: |
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○ FDI notification and business registration application
forms
○ (available at Invest
Korea and the tax office)
○ Corporate Statute
○ (as well
as the specification of contributions in case of contributions
in kind)
○ List of shareholders
○ Business license (if it falls on the category of the line
of businesses requiring license, approval or
○ notification)
○ Copy of the lease agreement (if the place of business is
rented)
※ If part of a building is rented, the applicable floor plan
must be attached (Only if the key money
※ deposit is equal to or less
than ￦240 mil. in Seoul, ￦190 mil. in the Metropolitan Overpopulation
※ Control District, ￦150 mil.
in other metropolises, or ￦140 mil. in any other area)
○ Miscellaneous
- Tax payment manager notification (unless there is an employee
to handle tax matters)
- Copy of foreign exchange purchase receipt / deposit certificate
- Copy of foreign exchange purchase certificate
- Copy of foreign national registration or passport
- (if the representative director
is a non-resident) |
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| ② Business Registration
to Be Done Beforehand When a foreign investor
wishes to set up a company through contributions in kind, business
registration must be completed before the capital contribution in
kind is imported because business registration certificate is required
to get refund of the VAT imposed during the customs clearance upon
the contribution. Required documents include the resident registry
extracts of the promoters, copies of lease agreements, and a copy
of the application for business license (if applicable) or a business
plan. Others must also be filed after the business setup as well. |
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| Sole
Proprietorship Registration |
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| ① Registration Flowchart
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| ② Foreign Investment Notification
Notification can be made by either the foreign
investor himself/herself or any other person presenting a power
of attorney signed by the investor (notarization not required).
Notification must be filed as foreign investment by acquisition
of newly issued equity securities with designated foreign exchange
bank or Invest KOREA and will be processed immediately upon filing.
③ Remittance of Capital Contributions
Funds of domestic origin are not allowed to be remitted as capital
contributions to a foreign-invested company. In principle, remittance
by third party in lieu of the investor is not allowed either. Against
remittance of capital contributions, the bank issues a foreign exchange
purchase receipt or deposit certificate, which is required when
filing for business registration and foreign-invested company registration.
④ Business Registration
The application must be filed by, in principle, the applicant in
person, but other person can do the job if only the person presents
a notarized power of attorney. The filing must be done at the tax
office that exercises jurisdiction over the place of business or
Invest KOREA within 20 days of the commencement of business. The
required documents are as follows: |
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ㅇ Business registration application form (available
at Invest KOREA or the tax office)
ㅇ Copy of business license (if it falls on the category of
the line of business requiring license,
ㅇ approval or notification)
ㅇ Copy of the lease agreement (if the place of business is
rented)
※ If part of a building is rented, then the applicable floor
plan must also be attached.
※ (Only if the rental deposit
is ￦240 mil. or less in Seoul, ￦190 mil. in the Metropolitan
※ Overpopulation Control District,
￦150 mil. in other metropolises, or ￦140 mil. in any other
area)
ㅇ Miscellaneous
- Tax payment manager notification (if the sole proprietor
stays outside the country for 6 months or
- more or is not ordinarily stationed
at the place of business)
- Joint venture agreement, if applicable (notarized)
- Copy of foreign investment notification
- Copy of foreign exchange purchase receipt / deposit certificate
- Copy of foreign national registration or passport (if the
sole proprietor is a non-resident) |
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| ⑤ Foreign-Invested Company
Registration The registration must be filed, within
30 days of the completion of the payment of the capital contributions,
with the same agency where FDI notification was made. Required documents
include an application for foreign-invested company registration,
a certificate of business registration, and a foreign exchange purchase
receipt / deposit certificate. |
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| Sole
Proprietorship Registration |
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| ① Foreign Investment Notification
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| ② Classification of a
Branch |
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Classification |
Activities |
| Branch office |
Engaged in business activities that generate income within
the country |
| Liaison office |
Nonprofit-making activities like liaison works, market research,
research and development are allowed, Quality control, market
research, advertising, and other activities of preliminary and
supplementary nature may be allowed, but maintaining an inventory
of products for the purposes of direct sales or sales on behalf
of the head office are not allowed. |
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| ③ Establishment Notification
□ Principle
＊Notification must be made to the head of designated foreign exchange
bank.
□ Notification must be made to the minister of Finance
and Economy in case of
business(es) as follows (both branch offices and liaison offices);
＊Extension of loans, overseas financial brokerage and mediation,
credit card services, installment
＊financing and other non-banking financial
services
＊Services related to securities and/or insurance
＊Any other services not allowed as prescribed in the provisions
of the FIPA or any other law
＊Any other services deemed to threaten public order and standards
of decency
□ Documents to be Submitted when Applying for Permits or
Filing Notification with a
Designated Foreign Exchange Bank
＊Notification form of establishment of domestic branch by foreign
company
＊Corporate statute of the head office (notarized in the region where
the head office is located)
＊Letter of appointment of the head of the domestic branch
＊Power of attorney if applicable (notarized in the region where
the head office is located)
＊Corporate registry extract or business license of the head office
(a copy notarized in the region where
＊the head office is located can substitute
the original)
④ Registration of Establishment of
Branch
□ Concept under Commercial Law
The Commercial Law does not have a classification for branches
and merely defines a branch as a place of business, which is required
to be registered if engaged in profit-generating business activities.
According to registration practice, an office is not engaged in
revenue-generating business activities but is only allowed to conduct
routine exchange of information and similar activities under foreign
exchange regulations and thus may not be registered as a place of
business. Only a branch may be registered as a place of business.
□ Registration Procedure
- Registration Applicant: Representative of the Korean Branch
- Registration Period: Within three weeks since the establishment
of the place of business
- Matters Required to be Registered
· Matters identical to those of a branch of other corporation in
the same business category or the most
· similar corporation
· Governing law for the corporation establishment
· Name, Address, Resident Registration No. or Date of Birth of
the Representative of the Korean
· Branch
- Matters to be included in the application form
· Name of the company in Korean letters and classification of it
(unlimited partnership, limited
· partnership,
corporate or limited company)
· Head office: place where the headquarters located overseas
· Business place in Korea
· Purpose of registration: place of business
· Reasons for registration: establishment of business place, resolution
date and period, etc.
· Matters Required to be Registered:
· Law governing the company's establishment
· Name, address, resident registration No. or date of birth of
the representative of the Korean branch
· Date of Establishment of the company, purpose in establishing
the place of business and its
· establishment date.
· Date of arrival of the necessary written Permits
· Registered Tax Amount, etc.
· Date of Application
· Foreign company's name, head office, name and address of the
representative for Korean branch
· If applied by an agent or attorney, the name and address of the
agent or attorney
· Mention of concerned registration office
- Supporting Documents
· Certificate (certificate of company establishment Matters):
· government's certificate or attested copy of register
· Document(s) verifying the status of the representative: minutes
of the general meeting of
· stockholders; or letter of resolution
from the board of director's meeting; or letter of appointment
· Corporate statute of the company or any other document identifying
the nature of the company:
· as certified by the competent office
of the foreign company's home government or by the consul of
· the country stationed in Korea
- Letters of permit, if necessary
- Translations of each of the above documents or written permits
by the consul of the country stationed in
- Korea
- Notice of all concerned tax receipts and confirmations, and registration
filing fees
- Power of attorney
- A registered seal of the Representative: or a signature affixed
to the power of attorney given for
- registration purposes and certified
by a government office or a notary public in the company's home
- country.
- Letter of acceptance of appointment (Representative)
- A document verifying the foreigner's address or certification
of address of the foreigner
o Registration costs
＊Registration tax: ￦23,000 (or 3 times as much in Seoul and other
large cities in its vicinity)
＊Education tax: 20% of the registration tax (￦4,600 or ￦13,800 if
levied 3 times as much)
＊Registration filing fees: ￦15,000
⑤ Withdrawal of Residual Assets
from Closure and Liquidation
□ Notification
If any person having obtained a permit for establishment, etc.
under Korean law intends to close a domestic branch or to withdraw
the fund from disposal of his domestic assets after the closure,
such person must file a notification with the president of a designated
foreign exchange bank.
□ Limit of Withdrawal Amount
The withdrawable amount is limited within the sum of the initial
operating capital imported from abroad, retained earnings and other
reserves (deducting deficits, if any)
□ Application form for withdrawal of liquidation income
ㅇ Letter of Application: to be filed under the name of the liquidator
if an applicant is
appointed
ㅇ Background to the application
ㅇ Liquidation report audited by a CPA (including a balance sheet
and a statement of income
as of the date of closure or liquidation)
ㅇ Certificates of tax clearance (one copy each for national and
local taxes)
ㅇ A statement of the operating capital remitted from abroad, retained
earnings and other
reserves
ㅇ A certificate of deposit balance (must be consistent with the
remittable amount as stated
on the liquidation report)
ㅇ A certified copy of liquidation registration, if the branch has
been engaged in business
activities
ㅇ Or the following documents if a certified copy of liquidation
registration is not available
- A closure notification certificate (issued by the competent
tax office)
- A document evidencing appointment of a liquidator
- A document evidencing that notification has been made to liquidation
creditors
(photocopies of public notices in newspapers)
- A confirmation of wage arrears clearance for Korean workers
(issued by the competent labor office)
ㅇ An original copy of the closure notification |
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