With its highly developed infrastructure, expanding economy, and connections throughout the world, South Korea offers an ample number of business decisions to anyone wishing to launch their own company.
Let’s explore the steps involved and the important things to think about.
Can You Start a Business in South Korea as a Foreigner?
- Legal Framework for Foreign Entrepreneurs in South Korea
The Foreign Investment Promotion Act (FIPA) permits foreigners to create businesses in South Korea.
Under the Act, foreign investors who fulfill specific requirements may get 100% ownership of a South Korean company.
To prevent any legal complexities, it is necessary to become familiar with and understand the legal requirements, which include business registration, tax laws, and labor restrictions.
Korean business culture and etiquette – CLICK HERE
Types of Business Entities Available to Foreigners
The following are the most popular business entities among foreigners,
1. Sole Proprietorship
- A simple structure where the business owner is personally liable for all debts and obligations
2. Limited Liability Company (LLC)
- A separate legal entity where the owner’s liability is limited to their investment in the business
3. Joint Venture
- A business owned by two or more individuals, often with a mix of local and foreign partners, who share responsibilities and profits.
Visa Requirements for Starting a Business
Obtaining the correct visa is necessary for any foreigner looking to start a business in South Korea.
The D-8 (Business Investment) Visa is the most common visa for entrepreneurs, allowing foreign citizens to stay in South Korea for the purpose of managing or investing in a business.
To qualify for the D-8 visa you generally need to,
- Invest at least 100 million KRW (approximately $85,000 USD) in your business.
- Show that your business is legal and capable of generating employment for locals.
- Submit financial documents, business plans, and proof of investment.
In addition to the D-8 visa, other visa types, like the D-9 (Trade Management) visa, may also be applicable depending on the nature of your business.
Read: Can a foreigner start a business in France?
Registration Process – Business in South Korea
Registering a business in South Korea is a multi-step process that requires careful attention to detail.
Here is a simplified guide to the registration process,
- Choose a Business Name
Make sure that your chosen name is unique and follow with local regulations.
- Register at the Korea Chamber of Commerce and Industry (KCCI)
You must register your business and get a business registration certificate.
- Open a Corporate Bank Account
A corporate bank account is required to manage your business transactions.
- Register for Taxes
You will need to register for corporate taxes and Value Added Tax (VAT) with the National Tax Service (NTS).
- Secure Permits and Licenses
Depending on your industry, additional permits may be required.
Taxation and Financial Considerations
1. Corporate Income Tax
- The corporate tax rate in South Korea ranges from 10% to 25%, depending on the company’s income level.
2. Value Added Tax (VAT)
- The standard rate of VAT on the majority of products and services is 10%.
3. Withholding Taxes
- Depending on the tax treaties between South Korea and the home country of the foreign investor, dividends, interest, and royalties paid to foreign businesses may be subject to keeping taxes.
Getting advice from a tax expert is recommended to make sure you follow by all financial laws and prevent any possible tax fines.
Government Support and Incentives for Foreign Businesses
1. Foreign Investment Zones (FIZs)
- These are designated areas where foreign businesses can receive tax breaks, reduced rent, and other benefits.
2. Grants and Subsidies
- The government offers financial support to innovative businesses, particularly in technology and green industries.
3. Business Incubators
- South Korea has a many business incubators and accelerators aimed at helping foreign entrepreneurs develop their ideas and bring them to market.
Bottom Line
Starting a business in South Korea as a foreigner is an exciting but challenging procedure that demands careful planning and familiarity with regional laws.
