Doing Business in Korea
To protect those who transact with Foreign Company, the Commercial Act establishes requirements for Foreign Company which engages in business in Korea.
The requirements are:
Appoint a representative in Korea
Establish a business office in Korea, or have one or more representatives have his/her address in the Republic of Korea
Make the same registration as that of a branch office of a company incorporated in Korea of the same kind or of the most similar kind. A foreign company shall register the governing law under which it was incorporated and the name and address of its representative in Korea.
A “branch office” attempts sales activities in Korea to generate profits. This is the main difference with a “liaison office” which does not conduct sales activities to generate profit, but carries out non-sales functions such as business contacts, market research, etc. Liaison offices are limited in their scope of activities because they are not allowed to sell products directly on behalf of the headquarters.
Establishing a branch in Korea consists roughly of 4 steps.
Holding a board meeting about branch establishment in Korea and appointing its representative
Notifying branch establishment to a designated foreign exchange bank in Korea
Registration of branch establishment to a district court within jurisdiction in Korea
Registration of business to a tax office within jurisdiction in Korea
Each procedure is described in detail below.
(1) Hold a board meeting about branch establishment in Korea and appoint its representative
□ The representative does not have to be a Korean or to reside in Korea.
(2) Notify branch establishment to a designated foreign exchange bank in Korea
□ Where to Notify?
A foreign company should report to the head of a designated foreign exchange bank. But, in some cases, a company shall notify to the Minister of Strategy and Finance.
□ Matters to report to the Minster of Strategy and Finance
Engagement in financial businesses other than banking business, including fund loans, brokering and arranging overseas finance, cards, installment financing, etc.
Engagement in businesses related to securities and insurance
Engagement in businesses that are not permitted under the Foreign Investment Promotion Act or other laws
(3) Register branch establishment to a district court within jurisdiction
□ Why should Register?
As the purpose of the FOREIGN EXCHANGE TRANSACTION ACT is “to contribute to the sound development of the national economy, to maintain equilibrium in the balance of payments and to stabilize the value of currency”, it is needed to disclose:
The same matters to be registered by a branch office of a company incorporated in Korea either of the same kind or of the kind which it most closely resembles
The governing law under which it was incorporated
The name and address of the company’s representative in Korea (Foreign address is also allowed).
(4) Register business to a tax office within jurisdiction
An entrepreneur shall file an application for business registration for each place of business with the head of the tax office having jurisdiction over each place of business, within 20 days from the commencement date of his/her business (Article 8 (1) of the VALUE-ADDED TAX ACT)
There are tax disadvantages if not registered.
(1) Board of directors meeting for the establishment of branch and appointment of representative of the branch
(2) Preparing documents required (notarized with Apostille) and sending them to the HWAUM LAW office. The address is as below:
Jaekwon JUNG, HWAUM LAW Office, 14F, 427 Teheran-ro, Gangnam-gu, Seoul, South Korea 06159
(3) Arrival of the document in HWAUM LAW office in Korea (D-0)
(4) Notifying Branch Establishment to a bank in Korea (D+1)
(5) Applying for Registration of Branch Establishment to a court in Korea (D+2)
(6) Completion of the Registration of Branch Establishment (D+4~6)
(7) Lease contract for the branch office (~D+7)
(8) Applying for the registration of business to a tax office in Korea (D+7)
(9) Completion of the registration of business (D+9)