Invest KOREA

In most business categories, a foreigner can invest alone in Korea without a Korean partner. However, a foreigner should have a Korean partner to invest in “restricted business categories” and there are restrictions as to the percentage of stocks or shares that can be held by a foreign investor. ◎ The restricted and prohibited business categories are revised and announced every year by the Minister of Trade, Industry and Energy through the Integrated Public Notice of Foreign Investment pursuant to Article 4(4) of the Foreign Investment Promotion Act and Article 5(10) of the Enforcement Decree of the Act. ◎ Restrictions on Foreign Investment (Example)

No. If separate requirements for minimum capital are prescribed for each business under separate Acts, such requirements should be satisfied. ◎ Examples of minimum capital requirements under separate laws – International logistics brokerage business: Any person who intends to file for registration of international logistics brokerage business with the head of the competent local government shall possess capital of at least KRW 300 million (referring to the appraised value of assets of at least KRW 600 million if he/she is not a juristic person) (Article 43 of the Framework Act on Logistics Policies). – Civil engineering business: Any person who intends to file for registration of civil engineering business with the head of the competent local government shall possess capital of at least KRW 500 million (attached Table 2 of the Enforcement Decree of the Construction Technology Management Act). – International travel business: Any company that intends to register an international travel business with the head of the competent local government shall possess capital of at least KRW 30 million. (A foreign-invested company shall possess capital of at least KRW 100 million to engage in international travel business.)

A foreign-invested company under the Foreign Investment Promotion Act is basically treated in the same manner as purely domestic companies (national treatment) and can receive preferential treatments in terms of taxes and location. ◎ General benefits – Guarantee of remittance to foreign countries: Remittance of dividends and proceeds from the sale of the stocks and shares owned by a foreign investor shall be guaranteed in accordance with the details of the report or permission at the time of such remittance. – National treatment: Except as otherwise explicitly prescribed by law, foreign investors and foreign-invested companies shall be treated in the same manner as Korean nationals or corporations with respect to their business operation. – Special treatment for import declaration of capital goods: Imported capital goods for which confirmation of review of specification of imported capital goods was obtained pursuant to the Foreign Investment Promotion Act shall be considered as having obtained import approval under the Foreign Trade Act. – Special treatment for investment in kind: A “certificate of completion of investment in kind” verified by the Commissioner of the Korea Customs Service shall be deemed an “investigation report by inspector” under Article 203 of the Non-Contentious Case Procedure Act to ease the procedures prescribed by the Commercial Act. ◎ Tax reductions and exemptions: National taxes and local taxes may be reduced or exempted when engaging in businesses subject to tax reductions and exemptions under the Restriction of Special Taxation Act or the Restriction of Special Local Taxation Act (businesses accompanying technologies for new growth engine industries, etc.). However, corporate tax reductions and exemptions were eliminated on December 31, 2018. ◎ Industrial site support – The land, factories, or other property owned by the State, local government, or public institution may be used, profited from, lent, or sold to a foreign-invested company by a negotiated contract. – When State-owned land is rented to a foreign-invested company, its rental charges may be reduced or exempted. ◎ Exemption of customs duty: Customs duty shall be exempted for capital goods* that are directly used in the business subject to tax reductions or exemptions and are imported within five years from the date of the report** of foreign investment by the acquisition of newly issued stocks. (Individual consumption tax and valueadded tax are also exempted for foreign-invested companies that operate in a business accompanying technologies for new growth engine industries and a tenant company of an individual-type foreign investment zone.)

Establishment of a Korean branch by a non-resident is subject to the Foreign Exchange Transactions Act (The Regulation on Foreign Exchange Transactions) instead of the Foreign Investment Promotion Act. A branch established by a non-resident in Korea1) is divided into a “branch” that engages in sales activities that generate profit in Korea and a “liaison office” that does not engage in sales activities that generate profit in Korea and only executes non-sales business activities including liaison services, market research, and research and development, etc. A foreign corporation establishing a branch or a liaison office in Korea2) should report the establishment to the head of a foreign exchange bank.

Yes, it can be recognized as foreign direct investment. ◎ The 2020 amendments by the Ministry of Trade, Industry and Energy to the definitions of “foreign investment” under the Foreign Investment Promotion Act (promulgated on February 4, 2020 and enforced on August 5, 2020) confirmed that an individual business (sole proprietorship) established by a foreigner shall be recognized as foreign investment. ※ Clarifications of the definitions of “foreign investment” (Article 2(1)3 and Article 2(1)4(a) of the Foreign Investment Promotion Act) – The term “Korean corporation or a company” means a corporation established under the laws of the Republic of Korea or a company registered as a business (Article 2(1)3 of the Act) – The term “foreign investment” means where a foreigner holds stocks or shares (hereinafter referred to as "stocks, etc.") of a Korean corporation (including a Korean corporation in the process of establishment) or a company in order to establish a continuous economic relationship with the Korean corporation or company, such as participating in the management of such Korean corporation or company in accordance with this Act (Article 2(1)4(a) of the Act) ◎ The above amendments to the Foreign Investment Promotion Act were promulgated and enforced in August 2020. Under the authority of the Minister of Justice, however, the current visa system for foreign investors will remain unchanged: D-8 visa will be applied and issued for corporate businesses and D-9 visa for individual businesses in accordance with the Immigration Act. (Please call the 1345 Immigration Contact Center for inquiries.) 1) D-8 (business investment) visa: Issued to a foreigner who invests in a Korean corporation or company. – D-8-1: Issued where a foreigner invests not less than KRW 100 million in a domestic corporate business and the investment ratio is not less than 10 percent – D-8-3: Issued where a foreigner partners with a Korean national and each of them invests not less than KRW 100 million with the investment ratio of not less than 10 percent in a domestic individual business. The joint business agreement (partnership agreement) verifying the investment amount and ratio should be submitted. (The relevant immigration office shall examine the documents verifying that the foreigner and the Korean national each invested not less than KRW 100 million.) 2) D-9 (trade management) visa: Issued where a foreigner invests in a domestic individual business alone or jointly with others. – The amount invested by a foreigner should be at least KRW 300 million (a condition for visa issuance) and the investment ratio should be at least 10 percent for both a sole or joint investment. – Pursuant to a court ruling issued in January 2012 that denied the status of a foreign-invested company to a foreign-invested individual business, the Ministry of Justice has issued D-9 (trade management) visa to foreign-invested individual business owners instead of D-8 (business investment) visa since August 29, 2012.

It can be recognized as foreign direct investment if either of the following conditions are met: ◎ Where a foreigner contributes at least KRW 50 million, accounting for at least 10 percent of the total amount of contributions, to a non-profit corporation (a Korean corporation or a company in the field of science and technology) in order to establish a continuous cooperative relationship with the corporation pursuant to Article 2(1)4(c) of the Foreign Investment Promotion Act, and the corporation meets all of the following requirements: – It has an independent research facility. – The number of regular employees as prescribed by Article 11 of the Labor Standards Act who are full-time researchers with a master's degree or higher in the field of science and technology is five or more. – The corporation engages in 'research and experimental development on natural sciences and engineering' pursuant to the Korean Standard Industrial Classification (KSIC) prepared and publicly announced by the Commissioner of Statistics Korea pursuant to Article 22 of the Statistics Act. ◎ Where a foreigner contributes at least KRW 50 million, accounting for at least 10 percent of the total amount of contributions, to a nonprofit organization which meets either of the conditions below and the investment is recognized by the Foreign Investment Committee as foreign investment in terms of the type and nature of its business operation (Article 2(1)4(e) of the Foreign Investment Promotion Act): – A non-profit organization that has been established with the purpose of promotion, etc. of science, art, medical services, or education, and continuously performs projects for developing experts in the relevant fields and for expanding international exchanges – Local headquarters of an international organization performing international cooperation projects between civilians or governments

It is not recognized as foreign direct investment. When two or more foreigners make a joint investment, the amount invested by each person should be not less than KRW 100 million (Article 2(3) of the Enforcement Decree of the Foreign Investment Promotion Act).

The term “object of investment” means any object in which a foreign investor invests in order to possess stocks, etc. pursuant to Article 2(1) 8 of the Foreign Investment Promotion Act, and which falls under any of the following: – A means of international payment as defined under the Foreign Exchange Transactions Act or a means of domestic payment incurred by the exchange of such a means of international payment – Capital goods – Proceeds from stocks, etc. acquired under the Foreign Investment Promotion Act – Industrial property rights, intellectual property rights prescribed by Presidential Decree, other technologies corresponding thereto, and rights pertaining to the use of such rights or technologies – Where a foreigner closes his/her own branch or office located in Korea and converts the branch company or office into another domestic corporation, or where a domestic corporation, the stocks of which are held by a foreigner, is dissolved, the residual property to be distributed to the foreigner upon liquidation of such branch,office, or corporation – The amount of redemption of loans prescribed by the Foreign Investment Promotion Act or of other loans from foreign countries – Stocks prescribed by Presidential Decree 1. Stocks of foreign corporations listed or registered on foreign securities markets 2. Stocks held by foreigners under the Foreign Investment Promotion Act or the Foreign Exchange Transactions Act – Real estate located in Korea (required to submit documents certifying the transaction pursuant to the Foreign Exchange Transactions Act) – Other means of domestic payment prescribed by Presidential Decree (Proceeds from the sale of stocks, etc. of a Korean corporation or a company or of real estate owned by a foreigner pursuant to the Foreign Investment Promotion Act or the Foreign Exchange Transactions Act)

When applying the Foreign Investment Promotion Act, the provisions of the Act concerning foreigners shall apply to individuals prescribed by Presidential Decree among Korean nationals permanently residing in a foreign country. ◎ “Individuals prescribed by Presidential Decree” among Korean nationals permanently residing in a foreign country means a person who falls under any of the following categories (Article 2(2) of the Foreign Investment Promotion Act and Article 3 of the Enforcement Decree of the Act): – A person who has acquired permanent residency in the country where he/she resides in – A person who has acquired a resident permit for four years or longer in a country without a permanent residency system – A person who has resided for four years or longer and acquired a resident permit for one or more year(s) in a country without a permanent residency system which only grants a resident permit for less than four years.

According to the Foreign Investment Promotion Act, foreign investment refers to the following: 1) Where a foreigner acquires the stocks or shares of a domestic company or corporation (recognized where the amount of investment is KRW 100 million or more and the foreign investment ratio is 10 percent or more) 2) Where a long-term loan of five years or longer was borrowed from the overseas parent company, etc. 3) Where a foreigner contributes to a non-profit corporation in the field of science and technology (KRW 50 million or more and accounting for 10 percent or more of the total contribution amount) 4) Where a foreign-invested company re-invests unappropriated earned surplus in the establishment or expansion of a factory without transferring them to capital.