Guide to Establishing a Company in Korea: Branch vs. Office; FIPA vs. FETA

The establishment of a foreign enterprise in Korea is governed mainly by Korea’s Foreign Investment Promotion Act and the Korean Foreign Exchange Trade Act.Formation of a local Korean corporation of a private business in Korea is governed by the Foreign Investment Promotion Act of Korea. The establishment of a branch or office is governed by the Foreign Exchange Act of Korea.  A branch or office, in Korea, is considered a domestic branch of a foreign corporation under Korean law.

FOREIGN-CAPITAL INVESTED COMPANIES IN KOREA
The Foreign Investment Promotion Act of Korea and the commercial law of Korea apply to investments that a foreign individual or a foreign corporation makes by establishing a corporation in Korea.  The corporation is considered a local corporation that was foreign-capital invested.  The foreigner or foreign company, in most cases, must invest a minimum of KRW 100 million to avail of the benefits of the acts.

The Foreign Investment Promotion Act will also apply to foreign individuals investing KRW 100 million and more who operate a “private business.” Such an investment is a foreign investment under the Foreign Investment Promotion Act and other acts.

OFFICE VS. BRANCH
An “Office” as compared to a “Branch”  differs in that an Office is unable to conduct any sales functions in Korea and also, only needs to register at the tax office. Any company that is looking to actively engage in business in Korea is advised, in most cases, to establish a Branch.

Category	Foreign-Invested Company	Domestic Branch of a Foreign Company
Law	Foreign Investment Promotion Act of Korea	Foreign Exchange Trade Act of Korea
Corporation Type	Domestic corporation	Foreign corporation
Identity	Foreign investors and foreign-invested companies are separate entities (independent accounting & settlement)	Headquarters and branches are of a single entity (the same accounting & settlement)
Institution for Notification Acceptance and Permit	Invest KOREA (KOTRA) or the headquarters of a foreign exchange bank	Foreign exchange bank branch (notification), MOFE (permission for financial business, etc.)
Minimum (Maximum) Investment Amount	Minimum KRW 100 million per case, no upper limit	No monetary limit
Scope of Tax Obligations	Tax obligations for all domestic and overseas income Corporate tax rate: 10% for KRW 200 million and less 22% for over KRW 200 million * The business year starting in 2009 (11% for KRW 200 million and less, 22% for over KRW 200 million)	Tax obligations for income from domestic sources Corporate tax rate: 10% for KRW 200 million and less 22% for over KRW 200 million * Branch tax obligations (France, Australia, Morocco, Brazil, Indonesia, Canada, Kazakhstan, the Philippines)

If you are interested in establishing a company in Korea, please contact me, and please check the following archive: IPG Legal’s Corporate Law Archive.

Sean Hayes is the first non-Korean attorney to have worked for the Korean court system (Constitutional Court of Korea) and one of the first non-Koreans to be a regular member of a Korean law faculty. Sean is ranked, for Korea, as one of only a few non-Korean lawyers as a Top Attorney by AsiaLaw,  IPG Legal is consistently ranked a Top Dispute Resolution Law Firm for our litigation, arbitration, and mediation services, and IPG Legal is consistently rated a top-tier law firm in corporate law, litigation, arbitration, franchise law, distribution law, estate law, family law, employment & labor law, and criminal defense.

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