South Korea, known as the "Asian Dragon", is one of the most important global economic powers today. Not only is the local economy very prosperous, it’s also open to foreign investment. If you want to set up a business or invest in an existing company, South Korea is definitely the right place for you. While opportunities exist in various sectors, you should undergo a market study in order to determine the best approach, before embarking on this new adventure.
The South Korean government has taken a series of measures over the past few years to encourage more investment and entrepreneurship. The country specialises in various sectors, namely electronics, food processing, engineering, and automobiles.
Procedures
You will need a business or partnership visa to set up or manage a business in South Korea as an expat. The application must be submitted to the Korean embassy or consulate in your country (see Visas section) and you must obtain a residence permit from the South Korean immigration services. It involves a lot of research and phone calls to authorities to find out the right type of business in South Korea.
Types of businesses
There are five different types of businesses in South Korea: joint stock company (chusikhoesa), limited liability company (yuhanhoesa), private limited company (yuhanchaek-imhoesa), general partnership company (hapmyunghoesa), and limited partnership company (hapjahoesa). Your business will largely depend on your goals, tax implications, and business regulations in South Korea. Most expatriates begin with a liaison office as this does not require any complicated registration formalities, besides registering it with the national bank and the tax authorities. A liaison office is governed by the Foreign Exchange Transactions Act and the Commercial Act.
You can also open a branch of a foreign company in South Korea. To do this, you will have to report the branch to a specified foreign exchange bank and complete the court registration and business registration.
If you wish to establish a commercial entity or limited liability company, you will need a minimum capital of 50 million Korean Won (about 36,000 euros).
Moreover, the company status must be certified by a notary and a founder shall be appointed for registration. The Board of Directors of the company will then be responsible for its management.
Tax system
Foreign companies operating in Korea are taxed only on income from domestic sources. The total amount of tax is deducted at source and paid to the government. Moreover, companies subject to value added tax (VAT) must register with the tax authorities within twenty days following the start of their activities. VAT will be levied on the supply of goods and services at the rate of 10%. Check with Korean taxation authorities before your start.
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