BUSINESS IN SOUTH KOREA

South Korea has a high-tech industrial economy orientated towards foreign markets. The country is home to world-renowned corporations such as Samsung, Hyundai Motor Company, SK Group, Korea Electric Power Corporation, LG Electronics and many others. Universities of South Korea provide quality education and train qualified specialists who not only fill vacancies in the local labour market, but also open successful businesses.

Business in South Korea

Salaries in South Korea are higher than the European average in many industries. The country has an excellent infrastructure, transparent laws and optimal conditions for entrepreneurs, including those from abroad. Business in South Korea for foreigners is an opportunity to enter major Asian markets and increase the competitiveness of their products. In fact, for 20 years the law ‘On Encouragement of Foreign Investments’ has been in force in the country and local authorities take all necessary measures to attract foreign businessmen to their country.

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Features of doing business in South Korea

Today, thousands of migrant workers seek employment in South Korea, and some foreigners are interested in opening their own business. Of course, it is not easy to do it without the help of local specialists – lawyers, accountants, auditors. One of the main difficulties is the language barrier, business culture and mental differences of South Korean citizens. The adaptation process is quite difficult and long.

Besides, for the sake of objectivity, one should not overly idealise the well-being of the Republic of Korea. There are plenty of problems in the country. For example, the internal political crisis of recent years, tense relations with some neighbouring countries, ageing population, inflexible labour market, youth unemployment, monopoly of large corporations and high dependence on exports, at the expense of which about 40% of GDP is formed. Plus the growing pressure of regional competitors – Japan and China.

Despite all the socio-economic and political difficulties, South Korea retains a comfortable business environment that attracts hundreds of entrepreneurs and investors from all over the world. This fact is partly confirmed by the famous Doing Business rating, in which South Korea ranks 5th out of 190 countries in terms of accessibility of starting a business. This is the best result among all Asian countries after Singapore.

Business immigration to South Korea usually implies preliminary opening of a special visa D-8 in the Korean diplomatic department. Within 90 days of arrival in South Korea, an alien registration card must be issued. The minimum investment amount for the visa is 100 million won. Depending on the type of business, a D-8 visa is allowed to stay in South Korea from 2 to 5 years. Afterwards, it is possible to obtain permanent resident status (F-5 visa).

Forms of ownership in South Korea

Private Business
Branch of a foreign company
Corporation:
- General partnership (Hapmyeong Hoesa).
- Limited Liability Partnership (Hapja Hoesa).
- Joint Stock Corporation (Chusik Hoesa).
- Limited liability corporation (Yuhan Hoesa).

Company registration in South Korea

Using the example of a corporation, let us highlight the main steps of business registration in South Korea, including standard terms and financial costs. There is a special Start Biz servicein the country, with the help of which almost all procedures are carried out online in one place.

Creation of a company seal. Term – 1 day. Cost – 30,000 won.
Selecting a Korean bank to open a commercial account and deposit initial capital (after company registration). 1 day.
Selection of legal address.
Preparation of articles of association and incorporation documents.
Registering a company through Start Biz Online. Term – 3 days. Cost: electronic registration – 2,000 won, registration fee – 10,000 won, registration tax – 2% of the registered capital, education tax – 20% of the registration tax. The resource allows you to:
- Check availability and obtain a company name certificate.
- Apply, upload documents and conduct full-fledged company registration, i.e. obtain an identification number and confirm the seal.
- Send a document such as ‘employment regulations’ (information on the employment conditions of employees) to the Korean Labour Administration.
- Register with the tax office, health insurance, pension fund, employment insurance and industrial accident insurance.
- Make tax and registration payments.

Taxes in South Korea

A number of free economic zones with a favourable tax regime and additional incentives for doing business have been created in South Korea. This is the most suitable option for foreign entrepreneurs who plan to invest in the Korean economy or create a business from scratch. Very often the local government even imposes a mandatory condition for foreigners to register companies in such zones.

Tax rates in South Korea

Corporate income tax:

Turnover up to 200 million won – 10%.
Turnover from 200 million to 20 billion won – 20 million, plus 20% on the amount over 200 million won.
Turnover from 20 billion to 30 billion won – 3.98 billion, plus 22% of the amount over 20 billion won.
Turnover over 30 billion won – 65.58 billion won, plus 25% of the amount over 30 billion won.

Income tax:

Annual income up to 12 million won – 6%.
Annual income from 12 million to 46 million won – 720,000 won, plus 15% of the amount over 12 million won.
Annual income from 46 million to 88 million won – 5.82 million won, plus 24% on the amount over 46 million won.
Annual income from 88 million to 150 million won – 15.9 million won, plus 35% of the amount over 88 million won.
Annual income from 150 million to 300 million won – 37.6 million won, plus 38% of the amount over 150 million won.
Annual income from 300 million to 500 million won – 94.6 million won, plus 40% of the amount over 300 million won.
Annual income over 500 million won – 170.6 million won, plus 42% of the amount over 500 million won.

In addition to national taxes, South Korea has local taxes on corporate profits and on the income and property of citizens. On average, the rates are about 10% of the national taxes.

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