– The advancement of a foreigner into the domestic business can be divided into 4 methods and they are the entrance by establishment of corporation or by a personal business, advancement through establishment of a branch or representative office in accordance with the Foreign Exchange Transaction Act, etc.
– In case of establishment of a local subsidiary (more than 100 million won investment but more than 1 million won per investor if investors are more than 2 persons) or the investment for the business run as a personal business, only more than 100 million won investment is considered the FDI under the Foreign Investment Promotion Act.
– The domestic branch of the overseas parent company is a branch of a foreign corporation, the income generated from domestic business is applied to the same corporate tax rate with domestic corporations and the representative office may perform the non-business activities or the head office. Because the installation of branch/ representative office (subsidiary) is applied to the Foreign Exchange Transaction Act, it is not applicable to the foreign investment under the Foreign Investment Promotion Act.
Classification of the foreign-invested company and domestic branch
Item | Foreign direct investment company | Branch of a foreign company |
Governing Law | Foreign Investment Promotion Act | Foreign Exchange Transaction Act |
Feature | Domestic corporation | Foreign corporation |
Coessential ness | A foreign investor and an invested company are separate entities (separate accountings and account settlements) | The head office and branch are the same entity (co accounting and account settlements) |
Reporting/ permitting institution | KOTRA (domestic and foreign investment base trade center), the head office and branches of KEB | Foreign exchange banks (filing) Financial Supervisory Service (Permission of financing business) |
Investment amount | Minimum: 100 million per case Maximum: None | No amount limitation |
