- Investment Guide
- Establishment of Corporation
- Real Estate Acquisition
- Taxation and Accounting
- Factory Establishment and Location
- Legal interpretations
My company has a foreign-invested company registration certificate issued by KOTRA and wishes to register change of information of registration of foreign-invested company at its primary bank instead of KOTRA for the sake of convenience. What is the procedure for this?It is possible to change the management institution for foreign investment and this is referred to change of delegated authority. You can submit the application form for change in delegated authority to the original institution by using attached Form 2: Application for change in delegated authority of the standards for handling business affairs related to foreign investment (Downloadable at www.investkorea.org/kr/published/presentation.do).
What is the difference between the stock subscription payment method and the balance certificate method when establishing a corporation?When registering a company’s incorporation, a certificate of deposit for payment for stock subscription should be submitted to the court. However, if the capital is less than KRW 1 billion, a balance certificate may be submitted instead ◎ Once the foreign investment is notified, a temporary account should be opened at a designated foreign exchange bank under the foreign investor's name. The temporary account serves to deposit foreigncurrency investment funds for stock subscription payment, and the designated bank can issue a certificate of payment for stock subscription. ◎ A balance certificate can be submitted for a stock company whose initial capital is less than KRW 1 billion. The investment fund should be deposited into a foreign currency account under the investor's name, and the bank can issue the balance certificate. The balance certificate is deemed to have the same effect as the certificate of deposit for payment for stock subscription to be submitted to the court registry office
A foreign-invested company should pay registration license tax and associated costs before registering the incorporation of a company. However, the funds deposited in a bank for the purpose of incorporation cannot be withdrawn before the corporation is registered. What is the solution for this?There is a regulation that allows a foreign-invested company to receive remittance from the parent company for incorporation costs and repay the amount upon the corporation's registration, which is separate from the foreign investment fund. According to subparagraph 6 of Article 4-3 of the Foreign Exchange Transactions Regulations, it is permitted to make the payment to return the expenses borne by non-residents to incorporate a foreign-invested company under the Foreign Investment Promotion Act. ◎ Once the company is registered, expenses spent prior to the incorporation should be recorded in the book as business startup costs. The amount received from the parent company can be transferred back via wire transfer. In this case, the parent company should have recorded the remittance to the subsidiary or branch for its establishment as a receivable. For accounting purpose after incorporation, the initial expenditure received from the parent company should be spent under the name of the representative of the established corporation, and the supporting documents should be prepared.
The cost of incorporation includes the capital registration tax, local education tax, and fees for application for registration.
※Legal fees are not included. ◎ Seoul Metropolitan Overconcentration Control Region – Seoul, Incheon, Uijeongbu-si, Guri-si, Namyangju-si, Hanam-si, Goyangsi, Suwon-si, Seongnam-si, Anyang-si, Bucheon-si, Gwangmyeong-si, Gwacheon-si, Uiwang-si, and Gunpo-si – Enforcement Decree of the Seoul Metropolitan Area Readjustment and Planning Act [attached Table 1]
I am aware that 0.4 percent of the paid-in capital should be paid as registration license tax when establishing a foreign-invested company and the tax payable triples to 1.2 percent when the address of the head office is located in the Seoul Metropolitan over-concentration control region. Is there a way to avoid such heavy taxation?According to Article 28(2) of the Local Tax Act, the heavy taxation rate shall not apply to the types of business specified as those for which it is unavoidable to establish business facilities in a large city, and an amount equal to 0.4 percent of the paid-in capital shall be paid as license registration tax. Around 30 business types are subject to this exception, which are listed in Article 26 (Exception from Heavy Taxation on Corporations in Large Cities) of the Enforcement Decree of the Local Tax Act.
What are the precautions for a foreigner intending to establish a corporation by investing capital goods instead of cash?Since capital goods can be an object of investment in establishing a foreign-invested company, the foreigner should notify foreign investment to a delegated agency (a bank or KOTRA, etc.). The foreigner should prepare a written specification of the goods, etc. to be introduced into Korea and apply for the examination and confirmation thereof to the delegated agency before their import declarations are accepted by a competent customs office. Despite the related regulations of the Foreign Trade Act, a written specification of the goods, etc. to be introduced, which has been examined and confirmed by the delegated agency, shall be deemed an import approval. ◎ After import declarations are accepted, the foreigner should receive a certificate of completion of investment in kind from the Commissioner of the Korea Customs Service (or a Korea Customs Service officer dispatched to KOTRA) by submitting a certificate (copy) of the completion of import declaration. Despite Article 299 of the Commercial Act, a certificate of completion of investment in kind which certifies that the Commissioner of the Korea Customs Service (or a Korea Customs Service officer dispatched to KOTRA) has confirmed the execution of the investment in kind and the type, amount and price of the object of investment shall be deemed an inspection report by inspector following the Non-Contentious Case Procedure Act and can be submitted for registration of incorporation and for registration of foreign-invested company.
Should a foreign-invested company attach its office lease contract when applying for registration of incorporation?Although the submission of a lease contract is not mandatory, a fixed address is required. However, a lease contract should be submitted when applying for business registration with the competent tax office after the registration of incorporation is completed with the registry office.
Documents a foreign investor should prepare in his/her country vary depending on whether the investor is an individual or a corporation. The document requirements for foreign investors from Japan or Taiwan are the same as those for a Korean national or corporation. In addition, some of the documents required should be apostilled or notarized by a public notary and subsequently by the Korean consulate located in the home country of the foreign investor in case of a non-signatory nation of the Apostille Convention.
The following information need to be included in the articles of association. ◎ Matters absolutely required to be entered (Article 289(1) of the Commercial Act): – If any of the following matters is omitted in the articles of association, the establishment of the company shall become null and void. a. Objectives b. Trade name c. The total number of shares authorized to be issued d. Par value per share: At least KRW 100 e. Total number of shares to be issued at the time of incorporation f. The location of a principal office g. Method of giving a public notice by the company h. The name, resident registration number and address of each incorporator ◎ Relative matters required to be entered: – ① Particulars of exceptional incorporation ② Other relative matters required to be entered – The particulars of exceptional incorporation shall be entered into a share subscription form signed by incorporators and be reviewed by inspectors (Article 299 and Article 302(2)2 of the Commercial Act) ◎ Optional matters that can be entered – Optional matters have no specific impact on the effects of the articles of association or on the business activities of a company when they are not entered into the articles of association, but will have the same legal effect as other matters upon entry into the articles of association. Optional matters differ from relative matters in that the latter takes effect only upon entry into the articles of association. – Optional matters include matters on business operations (e.g., the number of directors/auditors, a schedule of general meetings, business year, opening/relocation/closure of branches, etc.) within the boundaries that do not counter the essence of a stock company, imperative provisions of laws, and social order and take effect upon entry into the articles of association.
In the event of incorporation by promotion, registration for incorporation should be completed within two weeks of the date of the completion of the inspection on the incorporation process and in the event of incorporation by subscription, within two weeks of the date of the completion of the inaugural meeting. * The composition of incorporators and existence of the same trade name should be reviewed prior to the registration of incorporation. A stock company requires one or more incorporators who are required to acquire stocks in writing and become the shareholders of the newly created corporation.
1. An application for registration of incorporation 2. Articles of incorporation (notarized when the total capital is not less than KRW 1 billion) 3. A copy of document certifying the acquisition of stocks 4. The stock subscription agreement (in the case of incorporation by subscription) 5. Written consent to matters concerning issuance of stocks 6. Written consent to a reduction of the notice period for the inaugural meeting (in the case of the reduction of the notice period) 7. The minutes of the inaugural meeting or the minutes of the incorporators’ meeting (notarized when the total capital is not less than KRW 1 billion) 8. The minutes of the board of directors’ meeting (notarized when the total capital is not less than KRW 1 billion) 9. A certificate for custody of stock subscription payment (can be substituted by a certificate of balance when the total capital is less than KRW 1 billion) 10. An inspection report by directors, auditors, or the audit committee 11. A certificate of transfer of assets (in case of investment in kind) 12. A report on the particulars of exceptional incorporation prepared by a notary 13. An appraisal report by a certified appraiser 14. A certified copy of an investigation report by an inspector 15. A certificate of notification of foreign investment 16. A certificate of inauguration acceptance for executive officers* a) Korean nationals should affix his/her seal on the certificate, and attach a certificate of the seal impression and a certified copy of resident registration. b) Foreigners should attach a notarized original certificate of signature, and a copy of his/her passport. 17. A certificate of registration of seal impression (notarization of signature)* 18. A certified copy of resident registration (a certificate of address)* 19. Translations of the required documents (In case where the required documents including the directors’ inauguration acceptance are written in a foreign language) 20. A certificate of payment of registration tax (issued by the tax department of the Gu office having jurisdiction over the area in which the business’ headquarters is located) 21. Supreme Court revenue stamp 22. A power of attorney (where an agent makes the application)* 23. Corporate seal 24. An application for issuance of a corporate seal card (after the registration for incorporation). ※Items 11, 12, 13 and 14 apply only where particulars of exceptional incorporation exist such as investment in kind. Items 16, 17, 18 and 22 require notarization in the investor’s country and an apostille or a confirmation by the Korean consulate.