Setting Up a Company in South Korea | Shield GEO

A ‘branch’ operates business that generates profits in Korea, but is not locally incorporated and is not recognized as direct foreign direct investment. According to InvestKorea, headquarters and their foreign branches are treated as a single legal entity (the same accounting & settlement). There is no limit in investment amount or ownership.

Branches do not require formal incorporation, making them easier in principle to set up than a local corporation, and with less registration fees. Unlike liaison offices, branches are also allowed to engage in sales activity. They are considered a separate legal entity providing some separation of debts and liabilities from their parent.

Generally branch offices are suitable for smaller scale operations. Foreign companies can move on to a local subsidiary later as needed.

C. Registration Steps

1. Notify Designated Exchange Bank

Branches of foreign corporations must designate a foreign exchange bank for the usual purpose of channeling working capital, but also to receive permission to establish in Korea.

In order for a foreign company to establish a domestic branch, a notification must be sent to the head of the designated foreign exchange bank (any Korean bank which handles foreign exchange), according to Korea Law. Alternatively, Invest Korea reports that a financial business must register at the Ministry of Strategy and Finance for permission of establishment of a financial business. Required Documents generally include:

Report form of the establishment of a foreign company’s domestic branch
Article of association (Notarization of the location of the headquarters is required)
A certified copy of registration or operation permission of headquarters
General principles of headquarters
Minutes of board of directors meeting that state the establishment of a branch or liaison office in Korea and the appointment of a Korean representative.
A certificate of permission for business
Power of attorney where the establishment of a domestic branch is commissioned to another person (Notarization of the location of the headquarters is required)

All documents from the home country need to be notarized, and most likely provided with a Korean translated copy (the translator need not be certified).

2. Register with Court Registry Office

Once notification is confirmed by the exchange bank, the company must submit this to a local court registry office. In addition to the report/confirmation from the bank, the branch must nominate a representative who is responsible for day-to-day administration of the branch. The representative does not have to be a Korean resident.

Little to no information was found on the actual procedure of registering, so time and cost is an estimation.

Time: 1-2 weeks (estimate)

Cost: no known charge

3. Register at Tax Office for Business Registration Certificate

The branch must register at a tax office to obtain a business registration number. This process covers registering for tax such as sales and payroll tax.

Korea4expats reports that most foreign employees are required to pay Korean income taxes, which are generally withheld and paid by the employer. Meanwhile, according to a guide by KPMG, every business engaged in supplying of goods or services, whether or not for profit is required to register for VAT purposes by applying for a business registration certificate.

There was not much information available on the actual procedure. It seems that the forms can be downloaded from the national tax office’s website at http://www.nts.go.kr/eng/data/Application(Forms-2).pdf and must be submitted to it, or to a district tax office.

Time: 1-3 days

Cost: no known charges

4. Open Commercial Bank Account

There was not much information available on starting commercial bank accounts in South Korea. Generally, documentation such as identification documents would be required, and may require an initial deposit, as well as the business registration number.

Generally a company will likely deposit capital in an exchange bank as mentioned earlier, and at this stage organize with the bank to transfer in the capital funds.

Time: 1 day

Cost: No charges

5. Establish an Office

It was not clear whether a branch is legally required to have a physical office in Korea. In any case, there appears to be no specific registration requirement of the office location with government authorities. Thus there is no estimated time or cost related to setting up a business (though of course there will be separate time and cost arranging lease agreements with a real estate agent or virtual office).

It seems that there is no restriction on using a virtual office as a business address or similar services in Korea.

Time: n/a

Cost: n/a

6. Register for Social Security Insurances

According to the National Pension Service website, since 1 Jan, 2011, the National Health Insurance Service (NHIS) has been collecting contributions for all social insurance programs (National Pension, Health Insurance, Employment Insurance, and Industrial Accident Compensation Insurance).

Korea has a mandatory state pension service which is contributed to by both employer and employee. The national pension scheme is run by the National Pension Service (NPS). All Koreans and foreigners aged between 18 to 59 who live and work in South Korea must contribute to the national pension scheme. A company only needs to start contributing when it has 5 or more employees (otherwise, employees must individually manage their own contributions).

Branches will be required by law to have some form of accident compensation insurance to cover any employees. The Korean Workers’ Compensation & Welfare Service states all workplaces subject to the declaration of WCI/EI relations shall submit a Declaration of WCI/EI Relations within 14 day after having started their business(es). An employer must report employment information including worker’s name, resident registration number, address, employment date, employment termination date, average monthly wages, etc. using “relevant declaration forms”; the reported information will be used to assess and bill relevant (insurance) premiums.

The employer must enroll and declare employees to the system. According to the NHIS, documents required include:

Employee Health Insurance Application Form (Annexed Document Form: No. 27)
Copy of the business registration

Presumably, details of employees and wages would also be required. The website and information is located at http://www.nhis.or.kr/static/html/wbd/g/a/wbdga0602.html however it does not appear provide more details of the exact procedure or where/how to enroll. The forms most likely need to be submitted to the NHIS, at least via post or in person. A listing of office locations can be found at http://www.nhic.or.kr/english/about/about04_5.html

Time: 1-3 days (estimate)

Cost: no known registration charges

7. File Rules of Employment

According to international HR consultancy Compandben, if a company has 10 or more employees in Korea its working conditions need to be documented in a “Rule of Employment” and this has to be filed with the Ministry of Labor and Employment. Either one “Rule of Employment” or different “Rules of Employment” can be created, split by working type or occupation type.

As with most other steps, while several sources mention the requirement to file at the ministry (e.g. Korean Law Blog or Reuters’ PLC Law Guide, among others), none provide any detail on the details of where or how to apply, or if there is any processing time or costs. It would be necessary to look up a local office of the ministry and apply there directly.

Time: 1-2 weeks (estimate)

Cost: no known registration costs