How to establish a COMPANY in Korea?
What is “Foreign Investment”?
Foreign-Investment means where a foreigner holds stocks or shares of a Korean corporation. Both private and corporate foreign investor can be a shareholder.
To be regarded as Foreign Investment, (1) the investment amount shall be at least KRW 100 million, and (2) a foreigner shall own at least 10/100 of either the total number of voting stocks issued by a Korean corporation
There are some categories of businesses in which foreign investment is prohibited or restricted: Matters determined as threats to national security such as defense material.
Establishing a company in Korea consists roughly of 4 steps.
Notify Foreign Investment
Remit Capital into the Account
Incorporation & Business Registration
Foreign-Invested Company registration
Only 1, 4 are additional to the incorporation procedure applied to Korean nationals.
Each procedure is described in detail below.
(1) Notify Foreign Investment
Why should notify?
(a) Remittance shall be guaranteed.
(b) Certificate of foreign investment notification is needed when you register incorporation and business.
Where to notify?
At KOTRA, KOTRA’s overseas investment KBCs, designated head office or branches of domestic banks and domestic branches of foreign banks
Open a Remittance Account at this step
You can use (a) a non-resident account in foreign currency or (b) a temporary account number issued by the designated foreign exchange bank.
We highly recommend (b) a temporary account number because it is required to clearly state the purpose of capital every time the capital is remitted when using a non-resident account.
(2) Remit Capital into the Account
As referred to earlier, the investment capital can be remitted to a non-resident account in foreign currency or a temporary account number.
After the transaction is completed, the bank shall issue a securities subscription deposit certificate which is required when you register the incorporation.
(3) Incorporation & Business Registration
Firstly, you will register incorporation at a district court within jurisdiction. When registered, a corporation becomes a legal entity that is separate and distinct from its owners.
And then, you will notify and register your business at a tax office within jurisdiction.
(4) Foreign-Invested Company Registration
Upon submitting an application, a foreign-invested company registration certificate shall be issued. The certificate is required when you apply for a D-8(business investment) visa. On top of that, the certificate also enables the procedure of overseas remittance of investment profits simplified.
Where to register?
Where you notified the Foreign Investment(At KOTRA, KOTRA’s overseas investment KBCs, designated head office or branches of domestic banks and domestic branches of foreign banks)
Why should register?
As the purpose of the FOREIGN INVESTMENT PROMOTION ACT is “to promote foreign investment in Korea by providing necessary support and benefit and to contribute to the sound development of the nation's economy”, benefits are given if an investment is the “foreign investment” defined in the law.
What are the benefits?
(a) Tax incentives
corporate tax, income tax, acquisition tax, registration tax, property tax and aggregate land tax, may be reduced or exempted
(b) Cash grants
A local government and the State may provide cash grants when constructing new factories under certain circumstances (i.e. the effect of technology transfer, the scale of job creation).
(c) Lease or sale of State or public property
The State and a local government may allow a foreign-capital invested company to use or profit from land owned by the State, local government at a reasonable price.
(1) Preparing required documents and sending them to the HWAUM LAW office.
Jaekwon JUNG, HWAUM LAW Office, 14F, 427 Teheran-ro, Gangnam-gu, Seoul, South Korea 06159
(2) Arrival of the document at HWAUM LAW office in Korea (D-0)
(3) Notifying Foreign Investment to KOTRA (D+1)
(4) Applying for Incorporation Registration to a court in Korea (D+3)
(5) Completion of the Incorporation Registration (D+6)
(6) Lease contract for the office (~D+7)
(7) Applying for the registration of Foreign-Invested Company to a tax office in Korea (D+7)
(8) Completion of the Foreign-Invested Company registration. (D+9)