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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.
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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
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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).
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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)
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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.
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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.
