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FAQ

  • Title
    Is there a sector where a foreigner must have a Korean partner in order to invest in Korea?
  • Content

    o Most sectors do not require Korean partners for investment. However, some specified sectors must have Korean partners for investment in Korea and these sectors limit the amount of stocks and shares of foreign investors.  

     

    oThe details of limit and specified sectors are revised and announced every year in accordance with Article 4.4 of the Foreign Investment Promotion Act, Article 5.10 of the Enforcement Ordinance of the Act and the Integrated Public Notice of Foreign Investment. (Minister of Trade, Industry &Energy) 

     

    o Example of foreign investment limitation 

    Example of foreign investment limitation
    Sectors (Korea standard industrial classification) Overview Standard of permission
    Power transmission and electricity supply (35120)
    (35120)
    Refers to supplying electricity to specified regions or end-users. Industrial activities include providing electricity to households and industrial and commercial users. Permitted for the following:
    1. the ratio of foreign investment is less than 50%.
    2. the voting stocks owned by foreign investors must be less than domestic stockholders.
    Transportation and treatment of radioactive waste (38240) Refers to the collection, transportation and treatment of radioactive waste. Except for radioactive waste management business in accordance with Article 82 of the Electric Utility Act
    Wholesale of meat (46312) Refers to wholesale business of freshly meat-packed products of livestock and other land animals. Permitted if the ratio of foreign investment is less than 50%.

     

  • Title
    What is object of investment that is recognized as foreign investment?
  • Content

    o "Object of investment" refers to the investment of foreign investor to acquire stocks under the Foreign Investment Promotion Act and that falls under any of the following: 

    - Foreign means of payment or means of domestic payment following the Foreign Exchange Transactions Act 

    - Capital goods

    - Damages occurred by acquiring stocks under the Foreign Investment Promotion Act 

    - Industrial property right, intellectual property right decided by a Presidential decree and other rights related to the usage of relevant technology. 

    - When a foreigner closes a branch office or an office in Korea and transfers it to a domestic corporation or when a domestic corporation where a foreigner holds stocks is shut down, the object of investment is the remaining property distributed to the foreigner following the closing of the relevant branch office or corporation. 

    - Loan or the amount of repayment from abroad under the Foreign Investment Promotion Act 

    - Stocks decided by a Presidential decree

    - Real estate in Korea

    - The payment for selling stocks of a Korean company that are owned by a foreigner or real estate under the Foreign Exchange Transactions Act.

  • Title
    What businesses that benefit from foreign investment tax deduction can move into the free trade zone?
  • Content

    o Businesses that benefit from foreign investment tax deduction

    - A foreign-invested company in the manufacturing industry and meets the foreign investment standards in accordance with Article 2.2 of the Enforcement Ordinance of the Foreign Investment Promotion Act. However, a foreign-invested company that fails to meet the requirements of Article 2.2.1 of the Enforcement Ordinance of the Foreign Investment Promotion Act after the permission for moving in due to the increase of domestic capital for issuing new stocks will still be reckoned as foreign investment. 

     

    - Business in logistics such as handling, transporting, storing and displaying cargo.

    · Business in complex logistics such as international freight forwarding, international ship transaction and assembling including packaging, repairing and processing. 

    · Business in international logistics including repairing and assembling of ships and aircrafts (includes the equipments for the operation of ships and aircrafts). 

    · Business in supplying fuel, drinking water and meals for ships and aircrafts. 

    · Business in developing and renting logistics facilities. 

     

    o Requirements and details of tax deduction 

    - Requirements for facilities: Only applicable for newly established plant facilities

    - Requirements for amount of money

    · Manufacturing industry: Foreign investment of more than USD 10 million

    · Logistics industry: Foreign investment of more than USD 5 million

     

    o Tax (corporate tax) deduction 

    - For income generated by doing business that receives tax deductions, 100% tax deduction of amount subject to tax reduction* will be applied for the three years from the first tax year (if there is no income within five years from the initial business date, the tax year will be the fifth year of business) and 50% tax deduction will be applied to the next two years of the tax year. 

     

    * Corporate tax of the income generated by doing business that receives tax deductions multiplied by the ratio of foreign investment. 

  • Title
    What is the process for direct investment by acquiring existing stocks?
  • Content

    o If a foreigner tries to make foreign investment by acquiring stocks or shares of a Korean corporation, he or she will declare in advance in accordance with the law of the Ministry of Trade, Industry & Energy. 

     

    o Exception of advance declaration

    -For the acquisition of stocks issued by a stock-listed corporation following the Financial Investment Services and Capital Market Act, the foreigner can declare within 30 days of the acquisition and report the modification. 

    - If a foreigner wishes to make foreign investment by acquiring stocks of a defense company, he or she will have to receive permission from the Minister of Trade, Industry & Energy under the law of the Ministry of Trade, Industry & Energy. 

     

    o Application form: [ ] Declaration [ ] Permission of Foreign Investment by Acquisition of Stocks (Attached form 3 of the Enforcement Regulations of the Foreign Investment Promotion Act) 

  • Title
    If a foreign-invested company moves into a national industrial complex, would the company receive a reduction in rent fee?
  • Content

    o If a foreign-invested company does business that meets certain requirements, the company can pay reduced rent fee for state-owned land. 

     

    o In the case where the foreign-invested company receives 100% reduction of rent fee:

    - If a foreign investor makes investment that meets a certain criteria and if the foreign-invested company does business in the zone (individual-type foreign investment zone) where the foreign investor wishes to invest. 

    -If the business that benefits from tax deduction under Article 121.2.1.1 of the Restriction of Special Taxation Act has foreign investment of more than USD 1 million. 

    - Business that has foreign investment of more than USD 5 million and is subject to Article 2.1 of the Act on Special Measures for the Promotion of Specialized Enterprises, etc. for Components and Materials.  

     

    o In the case where the foreign-invested company receives 75% reduction of rent fee:

    - Manufacturing business with foreign investment over USD 5 million 

    - Business that contributes significantly to social overhead capital, industrial structure or financial independence of local government and that is decided by the Minister of Trade, Industry & Energy through the deliberation of the Foreign Investment Committee. 

     

    o In the case where the foreign-invested company receives 50% reduction of rent fee:

    -Land, etc. of national industrial complexes under Article 6 of the Industrial Sites and Development Act 

    -Land, etc. of urban high-tech industrial complexes and agricultural industrial complexes under Article 7, 7.2 and 8 of the Industrial Sites and Development Act

  • Title
    What civil affairs can KOTRA Invest Korea officials handle directly?
  • Content

    o The dispatched public servants of Invest Korea and employees of relevant organization are called dispatched officials and they can directly handle works related to civil affairs of foreign investors or foreign-invested companies. This kind of work is defined as “direct handling of civil affairs”. (Article 17.2 of the Foreign Investment Promotion Act)

     

    o Direct handling civil affairs

    Direct handling civil affairs
    Types of civil affairs Applicable laws
    1. Declaration of technology implementation contract Article 25.1 of the Foreign Investment Promotion Act
    2. Conformation of completion of investment in kind Article 30.3 of the Foreign Investment Promotion Act
    3. Business registration Article 8 of the Value-Added Tax Act
    4. Qualification for stay and permission for work Article 20 of the Immigration Act
    5. Revision and addition of place of work Article 21 of the Immigration Act
    6. Grant the qualification for stay Article 23 of the Immigration Act
    7. Permission to revise the qualification for stay Article 24.1 of the Immigration Act
    8. Permission of extending the period of stay Article 25 of the Immigration Act
    9. Permission of reentry Article 30.1 of the Immigration Act
    10. Registration of a foreigner Article 31 of the Immigration Act
    11. Declaration of modification of foreigner registration Article 35 of the Immigration Act
    12. Declaration of changed place of sojourn Article 36 of the Immigration Act
    13. Application for tax deduction Article 121.2.6 of the Restriction of Special Taxation Act
    14. Application for cash support Article 20.3.1 of the Enforcement Decree of the Foreign Investment Promotion Act

     

  • Title
    If a foreign-invested company pays the interest of the borrowed capital (long-term loan foreign investment) from its parent company, will the interest rate be determined between the two companies?
  • Content

    o There is no limit. However, related transaction should be arm’s-length transaction. In other words, if the related transaction with the overseas parent company directly or indirectly owns more than half of the voting stocks, the interest rate will be of an arm’s length price of general transaction. 

     

    o If the taxable income of a company is reduced for related transaction that is higher or lower than arm’s-length price, the tax authority will recalculate the taxable income based on the arm’s-length price of the transaction and impose tax. This is called transfer price tax.

  • Title
    If a foreign-invested company borrows capital from its overseas parent company, would this be FDI?
  • Content

    o If the following companies borrowed capital from their parent companies for more than five years can be recognized as foreign investment (long-term loan foreign investment): 

    - A foreign-invested company or company that has investment relationship with overseas parent company of a foreign-invested company 

    - A foreign investor or company that has investment relationship with foreign investors 

     

    o Foreign investment declaration as long-term loan  

    - Application form: Attached form 6 of the Enforcement Regulations of the Foreign Investment Promotion Act ([ ] Declaration [ ] Declaration of change of foreign investment as long-term loan) 

    - One copy of document that verifies that the company has investment relationship with the overseas parent company 

    - Once copy of the loan contract

    - One document that verifies the nationality of the loan provider (except for when an overseas parent company that has declared as foreign investment lends capital.)

  • Title
    What are the precautions for a foreigner to establish a corporation with spot goods instead of capital?
  • Content

    o Since capital goods are investment objects of the establishment of a foreign-invested company, the goods must be declared as foreign investment to the consigned organizations (bank or KOTRA, etc.) and the adopted goods (capital goods) must be confirmed by the consigned organizations before the customs clearance. Despite the regulations of the Foreign Trade Act, the statement of the capital goods reviewed and confirmed by the consigned organizations will be regarded to be approved of import.  

    o After the customs clearance, the foreigner should issue the certificate of completion of capital goods investment from the Commissioner of the Korea Customs Service (a Korea Customs Service dispatch officer of IK) with the attachment of the certificate of completion of import declaration (copy). Despite Article 299 of the Commercial Act, the certificate of completion of capital goods investment, which the Commissioner of the Korea Customs Service (a Korea Customs Service dispatch officer of IK) has confirmed the execution of investment and the type, amount and price of investment object, will be attached as part of the documents to be submitted for the registration of the establishment of corporation and foreign-invested company under “the inspector’s report” following the Non-Contentious Case Litigation Procedure Act. 

  • Title
    Can a foreigner who lives abroad and does not have a foreign registration number purchase a resort condominium in Jeju Island and register in his or her name?
  • Content

    o Yes. A foreigner who does not have a place of sojourn in Korea (a foreigner without a foreign registration number) can make registration of ownership transfer once he or she receives registration number for real estate registration from the head of the Korea Immigration Service or the head of its regional offices that have jurisdiction over the location of the Supreme Court. 

     

    o For a foreigner without a place of sojourn in Korea to receive a foreign registration number 

    - For a first-time foreigner, he or she should submit the Application for Granting a Registry Number for Foreigner's Real Estate Registration, the Attached form 5 of the Real Estate Registration Act and the Granting Procedures for Registry Number for Real Estate Registration of an Association or a Foundation to the Seoul Immigration Office and Sejong-ro Branch (the Korea Immigration Service or its branch offices that have jurisdiction over the location of the Supreme Court). The issued registration number will be written in the registry the and the Certificate for Granting a Registry Number for Foreigner’s Real Estate Registration <Attached form 7> will be issued to the recipient. 

     

    o If a foreigner who has a registration number wishes to issue a certificate of registration, he can receive the Certificate for Granting a Registry Number for Foreigner’s Real Estate Registration <Attached form 7> when he submits the Application for Certificate of Granting a Registry Number for Foreigner’s Real Estate Registration <Attached form 9> to the head of the branch office. 

     

    o Attached documents for applying for the registration number of a non-resident (Individual foreign non-resident)

    - One copy of his or her passport or certificate of nationality

    - Declare by a substitute: Identification card of the substitute, power of attorney and signature certificate

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