Generally, there are three types of entity established by foreign investment in Korea as follows:
Subsidiary or joint venture company
The form of entity established in Korea will be determined depending on the purpose of its business, tax implications and Korean government regulations. With regard to establishing an entity, a joint venture will be subject to the Foreign Investment Promotion Act of Korea (FIPA), whereas a branch office or a representative office is governed by the Foreign Exchange Transaction Act of Korea (FETA).
Foreign investors establish a subsidiary or a joint venture company in Korea through acquisition of newly issued or outstanding stocks. A subsidiary or a joint venture company established in Korea is deemed as a domestic company. The foreign investment should be KRW 50 million or more by investor. There are four types of the subsidiary or the joint venture company under the Korean Commercial Act as follows:
Limited Partnership Company
Corporation (Stock Company)
Limited Liability Company
For your information, most of the subsidiaries or the joint venture companies in Korea are corporations.
Incorporation procedures of foreign invested company are outlined below:
FDI reporting to a foreign exchange bank;
Carrying-in of FDI capital;
Registration of incorporation with a local court;
Registration of corporation with the competent tax office;
Account transfer of capital investment; and
FDI company registration with a foreign exchange bank
A foreign company intending to set up a branch office or provide goods or services through a permanent establishment (PE) in Korea is required to perform the following procedures:
Reporting to a foreign exchange bank;
Registration with a local court; and
Registration with a tax office
If the branch wishes to repatriate or remit overseas its earnings or profits, it should report such repatriation to the foreign exchange bank.
A representative or liaison office is not a legal entity and needs no formal registration (with a court). Its operations are restricted to non-income generating activities such as purchasing goods in Korea for its head office, etc.
General establishment procedures are as follows:
Reporting to a foreign exchange bank; and
Appliying for a taxpayer identification number to the local tax office