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The following documents are required for application for business registration. The processing period is three days.
– A copy of corporate establishment notification and application for business registration
– A certified copy of corporation registration
– A copy of the lease contract (in case the place of business is rented)
– A list of shareholders or investors
– A copy of certificate of completion of business approval, registration or notification (For the registering business. If applying for business registration before completing business approval, registration or notification, a a copy of an application for buisness approval, registration, etc. or a business plan may be submitted instead.)
– A statement of investment-in-kind (for corporations invested in-kind)
– A copy of certificate of foreign investment notification or foreign currency purchase
– A copy of alien registration card or passport (if the representative is non-resident)
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In terms of a simple comparison of the tax rate, a corporate business pays less tax than an individual business if the tax base is higher than KRW 12 million. It appears advantageous as the reduced taxation may translate into higher net profit, more reinvestment, and consequent expansion of the business. However, there are other aspects to consider from a more holistic view, including limited options to recover business profits (salary, retirement income, dividend, and others) and taxes on other income (earned income, retirement income, dividend income, etc.) imposed at each step.
< Individual Business vs. Corporate Business >
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A stock-listed corporation, a company that intends to be a stocklisted corporation, and other companies that meet the standards prescribed by Presidential Decree in terms of assets, liabilities, number of employees, or sales at the end of the immediately preceding business year shall undergo an audit performed by an external auditor. In this regard, foreign-invested companies that meet certain criteria4) are subject to external audit just as purely domestic companies are. From the business commencement year starting on November 1, 2019 or after, limited companies shall also receive an external audit. Limited companies that transitioned from stock companies on November 1, 2019 or after should meet the external audit requirements for the following five years from the date of registration of the change5).
< Companies subject to external audit6) >
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Foreign-invested companies bear the same tax burden as domestic companies. In general, corporations are subject to corporate tax, corporate local income tax, value-added tax (VAT), and additional taxes that may be imposed on specific cases according to tax laws.
◎ Corporate tax: Different tax rates based on the amount of corporate income
– KRW 200 million and below: 10%
– Above KRW 200 million and up to KRW 20 billion: 20%
– Above KRW 20 billion and up to KRW 30 billion: 22%
– Above KRW 30 billion: 25%
◎ Corporate local income tax: Different tax rate based on the amount of corporate income
– KRW 200 million and below: 1%
– Above KRW 200 million and up to KRW 20 billion: 2%
– Above KRW 20 billion and up to KRW 30 billion: 2.2%
– Above KRW 30 billion: 2.5%
◎ VAT: 10%
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According to Article 6(1) of the Farmland Act, farmland shall be owned only by a person who uses or will use it for his/her own agricultural management. Therefore, only agricultural corporations may own farmland. An agricultural corporation can register as a foreign-invested company by receiving equity investment from foreigners, such a foreign-invested agricultural company can own farmland.
◎ The Rules on Foreign Investment (the Ministry of Trade, Industry and Energy, 2020) specify that foreign investment is permitted in agricultural business with the exception of rice and barley cultivation. Consequently, a foreign-invested agricultural company may be restricted in its ownership of rice and barley farmland.
◎ According to the Farmland Act, only agricultural corporations can own farmland. However, Article 6(2) of the same Act lists exceptions that allow a person to own farmland even if it is not used for his/her own agricultural management. A non-agricultural corporation may acquire farmland if the land has obtained permission or completed consultation to divert, which means the purpose of the land use is changed from farmland such as field or rice field to land on which construction is permitted.
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The foreigner does not need to obtain permission from the head of the relevant local government.
◎ Under Article 56(1)4 of the National Land Planning and Utilization Act, a person who intends to engage in certain development activities shall obtain permission for development activities from the head of the local government. Certain development activities mentioned above include construction of buildings, erection of structures, changes in the form and quality of any land, extraction of earth and stone, and partition of land. However, the partition of land within an FIZ is possible without permission from the head of the local government (Article 20(1) of the Foreign Investment Promotion Act).
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The company should report real estate acquisition by foreigners under the Act on Report on Real Estate Transactions, etc. However, real estate acquisition report under the Foreign Exchange Transactions Act is not necessary.
◎ In this case, the company is classified as a foreigner under the Act on Report on Real Estate Transactions, etc., but as a resident under the Foreign Exchange Transactions Act. Therefore, the company does not need to report the real estate acquisition stipulated in the Foreign Exchange Transactions Act.
◎ It is important to note that foreign investors who plan to register a foreign-invested company will be subject to the Foreign Investment Promotion Act. That means if the company intends to bring in capital or long-term loans for the real estate purchase, the foreign funds can be transferred to Korea only after the notification of foreign investment.
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Yes, a report of real estate acquisition by a foreigner is required.
◎ Even if a company is a domestic corporation, if half or more of its executives are foreign nationals or half or more of its shares are held by foreign nationals or foreign corporations, the domestic corporation is classified as foreigner, etc. under the Act on Report on Real Estate Transactions, etc. Therefore, the company is subject to report real estate acquisition by foreigners.
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A domestic branch of a foreign corporation should report real estate acquisition by foreigners.
◎ Under the Act on Report on Real Estate Transactions, etc., a foreign corporation’s domestic branch is deemed a foreigner, hence reporting of a real estate acquisition is required.
◎ In this case, when introducing funds into Korea from overseas to acquire domestic real estate, the domestic branch is classified as a resident under the Foreign Exchange Transaction Act. In this regard, the branch can introduce the operational funds from its overseas headquarters through a designated foreign exchange bank without reporting the real estate acquisiton under the Foreign Exchange Act (Article 9-34 of the Foreign Exchange Transactions Regulations).
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Yes.
◎ Parties to a transaction including a foreigner, etc., entering into a contract to acquire real estate in Korea shall report to the relevant report-receiving authority within 30 days from the transaction contract date. (Article 3(1) of the Act on Report on Real Estate Transactions, etc.)
◎ However, when a foreigner, etc. enters into a contract on acquisition of any real estate under Article 8(1) of the Act on Report on Real Estate Transactions, etc., he/she shall file a report thereon with the report-receiving authority within 60 days from the acquisition date of the real estate. If the real estate acquisition is by means of inheritance, auction, or any cause other than contracts under Article
2 of the Act on Report on Real Estate Transactions or Article 5(2) of the Enforcement Decree of the Act on Report on Real Estate Transactions, the report shall be made to the report-receiving authority within six months.
◎ If a national of the Republic of Korea who possesses any real estate within the territory of the Republic of Korea or a corporation or organization incorporated under the statutes of the Republic of Korea becomes a foreigner, etc., and if the relevant foreigner, etc. intends to possess the relevant real estate, etc. continuously, the foreigner, etc. shall file a report thereon with the report-receiving authority within six months from the date of change to a foreigner, etc. as prescribed by Presidential Decree.
◎ Penalty for failure to report acquisition
1. A person who fails to report the real estate transaction under a contract shall be punished by an administrative fine not exceeding KRW 5 million, and a person who files a false report by an administrative penalty not exceeding five percent of the acquisition value of the relevant real estate, etc. (Article 28(2), 28(3) of the Act on Report on Real Estate Transactions)
2. A person (foreigner, etc.) who fails to file a report under Article 8(1) or files a false report shall be punished by an administrative fine not exceeding KRW 3 million (Article 28(4) of the Act on Report on Real Estate Transactions).
3. A person (foreigner, etc.) who fails to report a real estate acquisition by means of inheritance, auction, or any cause other than contracts or files a false report shall be punished by an administrative fine not exceeding KRW 1 million (Article 28(5) of the Act on Report on Real Estate Transactions).
4. A person (foreigner, etc.) who fails to file a report on continuous possession of land or files a false report shall be punished by an administrative fine not exceeding KRW 1 million (Article 28(5) of the Act on Report on Real Estate Transactions).
