Terminate/Layoff an Employee in Korea: Terminating an Employee in Korea

The Korean Labor Standards Act mandates that employees under “contract” or “regular employees” may only be terminated for “justifiable reason attributable” to the employee or “urgent managerial necessity” after the completion of the employee’s probationary period. Both Korean employment law standards are, often, difficult for an employer to meet without the professional structuring of HR policies and procedures and a nuanced approach to termination of employees in Korea. We strongly recommend, prior to even considering firing or laying off Korean workers, to put a system of internal controls/systems in place that provides evidence to substantiate Korean employment terminations decisions.  We see too many companies in Korea that lack the systems necessary to substantiate termination.  Modest changes can, often, be refreshing for managers. FYI – Company executives/directors are, normally, not considered company “employees” and thus are not benefited by most of the protections afforded by the Korean Labor Standards Act.  However,

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Korean Tax Risk of Foreign Corporation Deemed “Actual Business Management Locale” within Korea: Korea Tax Law Basics

Foreign corporations, doing business in Korea, may be deemed local corporations subject to taxation on worldwide income if the foreign-incorporated company is deemed a Korean “domestic corporation” for Korean tax purposes.  This liaison-office Korean Tax Risk can, thus, lead to taxes on worldwide income, a tax audit and even criminal sanctions against those operating in Korea.  We have dealt with matters were employees, even, received exit bans. Thus, in most cases the establishment of a local Korean corporation is essential in assisting in shielding your foreign corporation from tax and other liabilities unless substantial reasons exist to not establish a local Korean corporate entity. One of the most significant risks of foreign companies doing business in Korea without a local entity is being deemed a local corporation subject to tax on worldwide income.  A domestic corporation under the Corporate Tax Act of Korea is a company with its “actual business

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