Invest KOREA

A foreigner who intends to invest by establishing a corporation or participating in capital increase with consideration of a domestic corporation can notify foreign investment through acquisition of new shares. 1. Notification of FDI through acquisition of stocks, etc. (new stocks) ◎ Basic requirements: The investment amount shall be not less than KRW 100 million, and at least 10 percent of voting stocks shall be held after the acquisition of new stocks. ◎ Organizations receiving notification (delegated agencies): KOTRA, foreign exchange banks in Korea, etc. ◎ Time of notification: Prior to remittance of investment funds ◎ Application form: Foreign Investment by Acquisition of Stocks (or Contribution) [ ] Notification Form [ ] Application for Authorization (Enforcement Rules of the Foreign Investment Promotion Act [Form 1]) ◎ Documents required for FDI notification – Two copies of the foreign investment notification form: Choose either a Korean form or an English form to fill out – A power of attorney: Only required in case of reporting by an agent – Documents certifying the foreigner’s nationality (Individuals: a certificate of citizenship issued by the relevant government or authorities, a passport, etc.; Corporations: a certified copy of corporate registration, a copy of a certificate of business, etc ) ◎ Issuance of a certificate of notification: A delegated authority will issue a certificate of notification without delay to the notifying party upon the receipt of an FDI notification. 2. Remittance of investment funds by a foreign investor ◎ A foreign investor intending to invest in Korea by establishing a corporation can receive a temporary account needed for the remittance of investment funds at a bank after completing a report on foreign investment. ◎ In case of a medium-or large-sized investment, the amount of remittance for the first transfer is limited (KRW 100 million), but as much funds as needed can be remitted afterwards. ◎ Remitter: ABC (a UK resident) (The remitter should be the same as the foreign investor on the FDI notification form.) ◎ Beneficiary: The name of the foreign investor (a temporary bank account number under the name of the foreign investor in case he/ she establishes a corporation) or the name of a foreign-invested company (Techno Fiber Korea Co. Ltd.) (in case of participation in capital increase with consideration of an existing corporation) ◎ Beneficiary bank : Korea Exchange Bank, Yangjaenam BR/IKP Office – Address: IKP B/D, 4th Floor 300-6 Yomgok-Dong, Seocho-Gu, Seoul, Korea – Swift code: KOEXKRSE ◎ Remarks: This fund will be used for the establishment (or for capital increase) of Techno Fiber Korea Co. Ltd. in Korea. 3. Registration of incorporation of a foreign-invested company (registration of capital increase in case of capital increase with consideration) ◎ Type of corporation: A stock company, a limited company, etc. ◎ Trade name: Whether the same trade name exists should be checked (at the Registrar of Supreme Court Internet Register Office: http:// www.iros.go.kr). ◎ Office address to be secured ◎ Executive officers (regardless of nationality or residency in Korea) – Directors: Inside directors (representative director), outside directors, and other directors not engaged in regular business (At least three directors are required for a stock company but one or two directors may be acceptable for a stock company whose capital is less than KRW 1 billion.) – Auditors (not required for a stock company whose capital is less than KRW 1 billion) ◎ A certificate of personal address of the representative director ◎ Notification of foreign investment (the investor, investment amount, business area, etc. should be confirmed) ◎ Appointment of a legal officer, attorney, or accountant (can be arranged upon request from a foreign investor) 4. Filing for registration of a foreign-invested company

Currently, notification of foreign investment cannot be filed online. In principle, foreign investment cannot be notified in countries outside of Korea, either. ◎ However, a foreign investment notification can be filed in certain countries where the Korea Trade-Investment Promotion Agency (KOTRA) operates overseas FDI offices to render support to foreign investors. The list of such overseas FDI offices is available on the Invest KOREA website (www.investkorea.org ▶ How We Can Help ▶ About Us ▶ Headquarters and Global Network).

Even if a registered foreign-invested company fails to meet the minimum FDI requirements due to transfer of shares or capital reduction, the investment shall still be recognized as FDI (Article 2(2) of the Enforcement Decree of the Foreign Investment Promotion Act). – Even if a foreign investor’s ownership of a foreign-invested company declines in value due to capital reduction without consideration, the total amount invested at the time of initial acquisition of the stocks, etc. is deemed to remain. ※ However, it should be noted that the foreign-invested company can retain its status only within a passive and limited scope, and may face difficulties when seeking active support with matters such as extension of a residence permit for its executive officers and employees.

The president of the Korea Trade-Investment Promotion Agency may designate a project manager (PM) for each foreign investor or each foreign-invested company to render effective support to investment affairs of a foreign investor or foreign-invested company (Article 21-2 of the Enforcement Decree of the Foreign Investment Promotion Act.). ◎ Designation and operation of PMs – The president of the Korea Trade-Investment Promotion Agency may designate a PM for each foreign investor or each foreigninvested company to render effective support to investment affairs of a foreign investor or foreign-invested company. – In such cases, the president of the Korea Trade-Investment Promotion Agency shall notify the relevant foreign investor or foreign-invested company of the designated PM. ◎ Persons eligible to become a PM – Employees of the Korea Trade-Investment Promotion Agency – Dispatched officers (public officials or employees of a foreigninvestment related agency dispatched to the Korea Investment Service Center under Article 15(2) of the Foreign Investment Promotion Act) – Public officials or employees from a central administrative organization,local government and public institution under the Act on the Management of Public Institutions that are related to foreign investment ◎ A project manager shall perform the following duties: – Collection and provision of data or information and arranging interviews at the request of a foreign investor or foreign-invested company – Presentation of opinions regarding support related to foreign investments under Articles 9, 13, 14 and 14-2 of the Act – Assistance in the affairs and vicarious execution of civil affairs related to foreign investments under Articles 15 and 17 of the Foreign Investment Promotion Act – Assistance in resettlement of the officers, employees and their families of a foreign investor or foreign-invested company, such as housing rental and guidance for school admission – Other affairs related to foreign investments

When a foreign investor meets the criteria of a “company required to report its business combination”, he/she shall report its business combination in the same manner as a domestic company under Article 12 of the Monopoly Regulation and Fair Trade Act. Since any business combination that restricts competition is prohibited, all cases of business combination should be examined, in principle. However, in order to reduce unnecessary burden on corporations and raise administrative efficiency, the reporting requirement is imposed only on business combinations meeting certain criteria in terms of size. ◎ Companies required to report their business combination – Reporting company (foreign investor): A company whose total assets or sales are KRW 300 billion or more – Merged company (domestic company): A company whose total assets or sales are KRW 30 billion or more (A business combination by a company whose total assets or sales are KRW 30 billion or more of another company whose total assets or sales are KRW 300 billion or more is also subject to the reporting requirement. The total assets or sales of a company that retains the status of a subsidiary both before and after the business combination should be added.) ◎ Business combinations required to be reported – Acquisition of stocks: Where a company acquires 20 percent or more (or 15 percent or more in the case of a listed corporation) of the total number of stocks (excluding non-voting stocks) issued by another company (including in the case when it becomes the largest shareholder by acquiring the stocks of that company additionally) – Concurrent holding of executive position: Where an executive officer of a large company concurrently holds an executive office position in another company – Merger: In the case of a merger of a company – Acquisition of business: In the case of acquisition of a business by transfer – Participation in company establishment: Where a company becomes the largest shareholder by participating in the establishment of a new company

No. The term "capital goods" means machinery, apparatus, facilities, equipment, parts, and accessories as industrial facilities (including vessels, motor vehicles, aircraft, etc.), livestock, breeds or seeds, trees, fish and shellfish which are necessary for the development of agriculture, forestry, and fisheries, raw materials and reserve stocks deemed necessary by the competent Minister (referring to the head of the central administrative agency in control of the project concerned) for the initial test (including pilot projects) of the facilities concerned, and the fees for transportation and insurance required for the introduction thereof and other know-how or services necessary therefor.

Yes. In accordance with the definition of “capital goods” under the Foreign Investment Promotion Act, investment in kind of used capital goods is not restricted. When used capital goods are invested, their fair market value can be computed based on the residual value of the goods reflecting depreciation and the current market value at the time of investment.

In accordance with the exceptional provision stipulated in Article 8 of the Act on Special Measures for the Promotion of Venture Businesses, the investment can be considered foreign direct investment when a foreigner invests in investment associations such as the Small and Medium Enterprise Establishment Investment Association or Korea Venture Investment Corp., and the investment meets the minimum FDI requirements under the Foreign Investment Promotion Act (investment amount of KRW 100 million and investment ratio of 10 percent). ※The exceptional provision in Article 8 was deleted from the Act on Special Measures for the Promotion of Venture Businesses (the Venture business Act) on August 12, 2020 and merged into the exceptional provision in Article 64 of the newly legislated Act on the Promotion of Venture Business. The Small and Medium Enterprise Establishment Investment Association and Korea Venture Investment Corp. have been merged into the Korea Venture Fund. ◎ Similarly, other exceptional provisions such as Article 53 of the Act on the Special Measures for the Promotion of Specialized Enterprises, etc. for Materials and Components, and Article 24 of the Act on Formation and Operation of Agricultural, Fisheries and Food Investment Funds, etc. can be used as legal grounds for recognizing certain investments as foreign investment.

Generally, there are no restrictions. However, a transaction between foreign related parties should be an arm’s length transaction. If the overseas parent company constitutes a foreign related party who holds, directly or indirectly, at least 50 percent of the voting stocks of the foreign-invested company, the foreigninvested company should pay interest computed based on the same interest rate that would apply or be deemed to apply in an arm's length transaction with a person that is not a foreign related party (arm's length price). ◎ When the use of a price higher or lower than the arm's length price in a transaction with a foreign related party results in a reduction in the taxable income of a company, the tax authorities will reassess the taxable income by applying the arm's length price to the transaction and levy taxes on the recomputed taxable income. This practice is referred to as the transfer price tax scheme.

Bonds with warrants are bonds issued by a domestic company to a creditor (foreigner) with attached warrants which give the creditor the right to receive newly issued stocks of the company. If the acquisition of stocks made through the exercise of such warrants meets the requirements under the Foreign Investment Promotion Act (at least KRW 100 million and acquisition of at least 10 percent of voting stocks), it can be recognized as foreign investment and the foreign investor should notify the acquisition of stocks, etc. within 60 days from such acquisition.