There are three ways by which foreigners (foreign corporations) can enter Korea for business purposes: establishing a local corporation, a local branch, or a liaison office.
How Foreigners Advance Into Korea
Comparison of a Foreign-Invested Company and a Domestic Branch
(1) Establishment of a Foreign-Invested Company Under the Foreign Investment Promotion Act
The establishment of a local corporation in Korea by a foreigner (individual or corporation) is regulated by the Foreign Investment Promotion Act and the Commercial Act. For a local corporation to be recognized as a foreign-invested company under the Foreign Investment Promotion Act, a foreigner must invest not less than KRW 100 million in the local corporation and acquire not less than 10 percent of the company’s stocks with voting rights.
(2) Domestic Branch of a Non-Resident (Foreign Company) Under the Foreign Exchange Transactions Act
A domestic branch of a foreign company can be classified into a branch and a liaison office depending on whether the entity engages in sales activities. Establishment of a branch that operates a business that generates profit in Korea is not considered foreign direct investment because it is a branch of a foreign company, not a domestic company. A liaison office does not carry out businesses that generate profit in Korea, but instead undertakes non-sales functions such as market research and R&D. Unlike a branch, a liaison office does not need to undergo registration, and is issued an identification number equivalent to the business registration number at a jurisdictional tax office in Korea.