CONTENTS
Ⅰ. Foreign Direct Investment
...8
1. Foreign Direct Investment System / 8
2. Foreign Investment Promotion Act / 12
3. Foreign Investment Promotion and Control / 14
Ⅱ. FDI Procedures
...22
1. Foreign Investment Procedures / 22
2. Follow-up Management of Foreign Investment / 30
Ⅲ. Establishment of a Corporation
...33
1. How Foreigners Advance Into Korea / 33
2. Establishment of a Local Corporation / 34
3. Establishment of a Foreign Company's Domestic Branch / 38
Ⅳ. FDI Incentives
...41
1. Tax Support / 41
2. Cash Grant / 55
3. Industrial Site Support / 63
PART
Ⅰ
Investment Guide
• The regulations on foreign direct investment are subject to change. Therefore, when using the information provided in this book for business purposes, it is advised to contact KOTRA for confirmation of the relevant information.
• Copyright ⓒ 2019 by the Investment Consulting Center of KOTRA. All rights reserved.
- Address : Investment Consulting Center, KOTRA, 7 Heolleung-ro, Seocho-gu, Seoul, Republic of Korea (06792)
- Phone : +82-2-1600- 7119 - Website : www.investkorea.org
※ The Act, Decree, Rules, and Regulations referred to in this publication are the Foreign Investment Promotion Act, its Enforce-ment Decree, its EnforceEnforce-ment Rules, and the Regulations on Foreign InvestEnforce-ment.
Ⅰ. Visa and Stay in Korea
...84
1. Visa / 84
2. Stay in Korea / 88
3. Policies for the Favorable Treatment of Foreign Investors / 95
Ⅱ. Labor
...100
1. Labor Laws / 100
2. Labor Management / 102
Ⅲ. Taxation
...108
1. Taxation / 108
2. National Tax / 109
3. Local Tax / 114
Ⅳ. Customs Clearance & Tariffs
...122
1. Customs Clearance & Tariffs / 122
2. Tariff Reduction, Exemption & Refund / 129
Ⅴ. Finance / Accounting
...131
1. Financial System / 131
2. Accounting System / 137
Ⅵ. Foreigners’ Real Estate Acquisition
...140
1. Regulations on Foreigners' Real Estate Acquisition / 140
2. Foreigners' Land Acquisition Procedures / 144
3. Transfer of Real Estate Transaction Funds / 147
4. Real Estate-Related Taxes / 148
Ⅶ. Factory Establishment
...151
1. Definition of Factory / 151
2. Factory Establishment and Registration / 156
3. Factory Sites and Factory Establishment Approval Procedure / 162
Ⅷ. Intellectual Property Rights
...165
1. Intellectual Property Rights System / 165
2. Efforts to Protect Intellectual Property Rights / 174
PART
Ⅱ
Business Management
Doing Business in Korea
Overseas FDI Network / 180
List of Delegated Agencies / 185
List of Law Firms and Accounting Firms / 187
AppendicesMajor Revisions in 2019
Foreign Direct Investment System
■ Revision of businesses in which foreign investment is restricted
Business Revision Note
Solar and sunlight power generation (35114) Added
-Trade of electricity (35130) Added
-Wholesale of meat (46313) Code number changed 46312 → 46313
Passenger air transport (51100) Business name changed Regular air transport → Passenger air transport Freight air transport (51200) Business name changed Non-regular air transport → Freight air transport Wireless and satellite communications (61220) Business name combined Wireless communications and satellite communications combined
Investment Incentives
■ Abolishment of corporate tax reduction/exemption
Tax reduction/exemption for foreign investment was abolished in 2019 (however, customs duty and local tax reduction/exemption is retained), and the corporate tax reduction/exemption section in this book applies only to foreign-invested companies that applied for tax reduction/exemption on or before Dec. 31, 2018.
■ Change in tax incentives for foreign engineers
Classification Before After
Special taxation
Income tax is reduced by 50% for wage & salary income generated from the first day of providing service in Korea to the month in which falls the date on which two years have elapsed since the first day of providing service.
Income tax is reduced by 50% for wage & salary income generated from the first day of providing service in Korea to the month in which falls the date on which five years have elapsed since the first day of providing service. Applicable period Special taxation applies if service was first provided in Korea on or before Dec. 31, 2018. The first day of providing service was extended to Dec. 31, 2021.
■ Change in special taxation for foreign employees
Classification Before After
Special taxation Foreign employees can choose to apply the 19% flat tax rate instead of
global taxation. Same as before
Applicable period
A five-year special taxation is applied if a foreign employee started providing service in Korea on or before Dec. 31, 2018.
※
Applicable only until Dec. 31, 2018, even for foreign employees who started working in Korea on or before Jan. 1, 2014. (The tax rate applied from 2017 is 19%.)
The first day of providing service in Korea was extended to Dec. 31, 2021.
■ Change in cash grant scheme
The cash grant scheme on foreign investment will be revised in 2019, so it is advised to check the rele-vant regulations after the changes apply.
■ Cancellation of designation of Saemangeum Area as a free economic zone
(The number of free economic zones is reduced from 8 to 7)
Free economic zones (Before change) Free economic zones (After change) Busan, Jinhae
Gwangyang Bay Area Incheon Yellow Sea
Daegu-Gyeongbuk Saemangeum, Gunsan (Saemangeum project area)
East Sea Chungbuk
Busan, Jinhae Gwangyang Bay Area
Incheon Yellow Sea
Daegu-Gyeongbuk East Sea Chungbuk
* The Saemangeum project area lost its status as a free economic zone on Apr. 6, 2018, but the Saemangeum project continues according to the Special Act on Promotion and Support for Saemangeum Project
Doing Business in Korea
Stay in Korea
■ Introduction of the permanent resident card renewal system for foreigners
with a permanent residence status.
In accordance with the revision of the Immigration Act (enforced Sep. 21, 2018), a foreigner who acquires a permanent residence status should have his/her permanent resident card renewed every 10 years. Foreigners who already have a permanent resident card at the time of the enforcement of the law should have his/her card reissued at the competent immigration office having jurisdiction over his/ her place of sojourn within a certain period of time*.
* Foreigners who acquired a permanent resident card over 10 years ago should renew his/her card within two years of the enforcement of the law, and foreigners who acquired a card less than 10 years ago should renew his/her card within two years of the date on which 10 years passed since acquiring the card.
■ Change in granting permanent residence (F-5) status to executives of large investing firms
Before change After change
Only foreign investors who have invested USD 500,000 or more and employed five or more Korean nationals are eligible to apply for permanent residence status.
※ An executive of a foreign-invested company cannot apply for permanent residence status.
Executives of foreign-invested companies can apply for permanent residence status as well.
Permanent residence status is granted to executives (only auditors and directors) dispatched to a foreign-invested company investing USD 5 mil. or more and residing in Korea for three years or longer. However, the number of executives granted permanent residence is limited to 1 person per 10 Korean nationals employed as regular workers, and up to 10 executives per foreign-invested company.
Labor
■ Raise in minimum wage
Before change (2018) After change (2019)
KRW 7,530 per hour, KRW 60,240 per day
(based on 8 hour workweek) KRW 8,350 per hour, KRW 66,800 per day(based on 8 hour workweek)
Taxation
■ Revision of basic tax rate table for corporate tax
Before revision After revision*
Tax base rateTax Progressive deduction Tax base rateTax Progressive deduction
Up to KRW 200 mil. 10% - Up to KRW 200 mil. 10%
-Over KRW 200 mil. and
not over KRW 20 bil. 20% KRW 20 mil.
→
Over KRW 200 mil. and
not over KRW 20 bil. 20% KRW 20 mil. Over KRW 20 bil. 22% KRW 420 mil. not over KRW 300 bil.Over KRW 20 bil. and 22% KRW 420 mil.
Over KRW 300 bil. 25% KRW 9.42 bil. * Applicable to business years commencing on or after Jan. 1, 2018
Doing Business in Korea
Korea Trade-Investment Promotion Agency
Doing Business in Korea
PART
Ⅰ
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1. Foreign Direct Investment System
Foreign direct investment (FDI) refers to foreigners’ acquisition of the stocks or shares of a Korean company in order to build lasting economic relations, and generally involves participation in management or technology transfer. FDI differs from portfolio investment as it is intended to exercise substantive influence on the management of a company. In addition to cash investments, FDI includes investment in the objects of investment defined under the Foreign Investment Promotion Act (the “Act”) such as capital goods, industrial property, intellectual property rights, local real estate and the shares of a company listed overseas. Long-term loans with maturity of five years or longer provided by a foreign investor to a domestic company can also be recognized as FDI.
•Definition of Foreign Direct Investment •Forms of Foreign Direct Investment
1-1 Definition of Foreign Direct Investment
FDI refers to an investment made in order to forge lasting economic relations with a corporation of the Republic of Korea or a company run by a national of the Republic of Korea and includes the following forms of investment: acquisition of the stocks or shares of a Korean company; a foreign parent company’s provision of long-term loans with maturity of five years or longer to a foreign-invested company; and a foreign national’s contribution to a non-profit organization. It is regulated by the Foreign Investment Promotion Act and other related laws. FDI differs from portfolio investment, which is the purchase of stocks by foreign nationals with a view to realizing short-term financial gains.
1-2 Forms of Foreign Direct Investment
Under the Foreign Investment Promotion Act, FDI includes the acquisition of the stocks or shares of a Korean corporation or a company run by a national of the Republic of Korea, the supply of a long-term loan to a foreign-invested company, a contribution to a non-profit organization, etc.
(1) Acquisition of the Stocks or Shares of a Domestic Company
'Acquisition of the stocks or shares of a domestic company' refers to a foreigner's purchase of the stocks or shares of a Korean corporation (including one in the process of being established) or a company run by a Korean national through any one of the following means as prescribed by presidential decree for the purpose of establishing continuous economic relations with the corporation or company through participation in management activities, etc.
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1) Acquisition of the newly issued stocks, etc. of a company managed by a Korean corporation or a Koreannational.
2) Acquisition of the existing stocks or shares (existing stocks, etc.) of a company managed by a Korean corporation or a Korean national.
To be recognized as FDI, the investment amount should be KRW 100 million or more per foreigner and the foreigner should own at least 10 percent of either the total number of voting stocks issued by a Korean corporation (including a corporation in the process of being established) or a company run by a national of the Republic of Korea, or its total equity investment. However, even if a foreign-invested company registers as a foreign-invested company in accordance with Article 21 (1) and (2) of the Act but no longer satisfies the above conditions 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 Act). Also, when a foreign investor of a registered foreign-invested company makes an additional investment, no limit shall be imposed on the investment amount and investment ratio.
If there are two or more foreign investors involved, each should satisfy the above conditions. The foreign investment ratio* is measured when the investment is completed. The investment amount refers to the amount of acquisition of stocks, etc. (foreign investor-held shares after a foreign-invested company capitalizes its earned surplus reserves as prescribed by Article 458 and 461 of the Commercial Act [Article 2 (3) of the Enforcement Decree of the Act, enforced Oct. 6, 2010] shall be included). Even if the amount of the stocks, etc. held by a foreign investor decreases following the foreign-invested company’s capital reduction without consideration, the investment amount at the time of acquisition of stocks, etc. shall be maintained (Article 2 (3) of the Enforcement Decree of the Act, newly legislated on Dec. 30, 2015).
* Foreign investment ratio: The ratio of the stocks, etc. owned by a foreign investor to the total stocks, etc. of a foreign-invested company (Article 5 (3) of the Foreign Investment Promotion Act)
While no exceptions are recognized with regard to the investment amount, exceptions may apply to the foreign investment ratio. Even if the foreign investment ratio is less than 10 percent with the amount of foreign investment being KRW 100 million or more, the investment may be exceptionally recognized as FDI in the following case:
• Where a foreign investor dispatches or appoints an executive to the domestic company concerned (* An ‘executive’ refers to directors, representative directors, unlimited liability employees, auditors or persons corresponding thereto holding the right to participate in important management decisions.)
(2) Long-Term Loans
Loans with a maturity of not less than five years (based on the loan maturity prescribed in the first loan contract) supplied to a foreign-invested company by the following entities are recognized as FDI:
① An overseas parent company (OPC) of the foreign-invested company (corporation) ② A company that has capital investment relations with ①
③ A foreign investor (individual)
④ A company that has capital investment relations with a foreign investor (individual) (Article 2 (4), (5) of the Enforcement Decree of the Act)
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A company that has capital investment relations refers to
•A company that holds at least 50 percent of the total number of stocks issued by, or of the total equity investment of, its OPC
•A company whose OPC owns at least 50 percent of the total number of issued stocks or total equity investment of a foreign-invested company and falls under any one of the following:
- A company that holds at least 10 percent of the total number of issued stocks or the total equity investment of its OPC
- A company whose OPC holds at least 50 percent of the total number of issued stocks or the total equity investment of the company
- A company that holds at least 50 percent of the total number of issued stocks or the total equity investment of its OPC holds at least 50 percent of the total number of issued stocks or total equity investment of the company •A company of which at least 50 percent of the total issued stocks or total equity investment is held by an
individual foreign investor who owns at least 50 percent of the foreign-invested company’s total issued stocks or total equity investment
(3) Contribution to a Non-Profit Organization (NPO)
A contribution to a non-profit organization is recognized as FDI when: the foreign contribution amount is KRW 50 million or more and accounts for 10 percent or more of the total contribution amount; the NPO has independent research facilities in the field of science and technology; and the NPO meets any one of the following conditions:
• The number of research staff members who are full-time employees as prescribed by Article 11 of the Employment Standards Act is five persons or more, consisting of persons with a master's degree or higher in the field of science and technology, or persons with a bachelor's degree in the field of science and technology with a research career of not less than three years.
• The NPO’s business should be classified as ‘research and experimental development on natural sciences and engineering’ under the Korea Standard Industrial Classification as publicly announced by the Commissioner of Statistics Korea in accordance with Article 22 of the Statistics Act.
Other contributions to an NPO by a foreigner of not less than KRW 50 million accounting for 10 percent or more of the total contribution amount that meet one of the following conditions, and which are recognized as foreign investment by the Foreign Investment Committee as prescribed by Article 27 of the Act, are recognized as foreign investment.
• An NPO established for the purpose of promotion, etc. of science, art, medical services, or education and which continues to conduct its business with a view to developing professionals in the relevant fields and to expanding international exchanges
• An NPO that is a regional office of an international organization that engages in international cooperation business between civilians or governments
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Term Definition (Article 2 (1) of the Foreign Investment Promotion Act)
Foreigner
•An individual of foreign nationality
•A corporation (foreign corporation) established in accordance with a foreign law •An international economic cooperation organization:
- An agency which vicariously performs the foreign economic cooperation business of a foreign government
- An international organization that deals with business matters concerning development finance, such as the IBRD, IFC and ADB
- An international organization which either directly or vicariously deals with business matters concerning foreign investment
•An individual of Korean nationality who holds permanent residency of a foreign country as prescribed by presidential decree (Article 3 of the Enforcement Decree of the Act):
- Individuals who have obtained permanent residency of a foreign country
- Individuals who have obtained permission to stay in a foreign country for four years or longer in the case of countries without a permanent residency system
- Individuals who have resided for four years or longer and was granted a stay permit of one year or longer in a foreign country that does not have a permanent residency system and only grants a stay permit of less than four years
Foreign investor A foreigner who holds stocks, etc. or has contributed as prescribed by the Foreign Investment Promotion Act
Foreign-invested company (FIC)
A company in which a foreign investor has invested, or a non-profit organization to which a foreign investor has contributed
Operator of establishments built to improve the foreign investment environment
Any person who operates establishments, including schools and medical institutions, etc. for foreigners, which are prescribed by the Enforcement Decree of the Foreign Investment Promotion Act, in order to improve the foreign investment environment
Object of investment
Any object in which a foreign investor invests in order to possess stocks, etc. under the Foreign InvestmentPromotion Act, and which falls under any of the following:
•Foreign means of payment as prescribed by the Foreign Exchange Transaction Act or domestic means of payment by the exchange of the said foreign means of payment
•Capital goods
•Proceeds (dividends) from stocks, etc. acquired under the Foreign Investment Promotion Act •Industrial property rights, intellectual property rights (copyrights to be utilized in industrial
activities and the layout design rights of semiconductor integrated circuits), other technologies corresponding thereto, and rights pertaining to the use of such rights or technologies
•Where a foreigner closes his/her own branch, office or corporation in Korea, the residual property allotted to the said foreigner upon liquidation of the said branch, office, or corporation •The amount of redemption of loans supplied to a foreign-invested company or other loans
from foreign countries
•Stocks of foreign corporations listed or registered on foreign stock markets
•Stocks owned by foreigners under the Foreign Investment Promotion Act or the Foreign Exchange Transactions Act
•Domestic real estate owned by a foreigner (The certificate of notification of capital transactions as prescribed by Article 18 of the Foreign Exchange Transactions Act should be attached.) •Proceeds from the sale of the stocks of a Korean company or real estate in Korea owned by a
foreigner
Capital goods
•Machinery, facilities, equipment, parts, accessories as industrial facilities, and livestock, breeds or seeds, trees, fish and shellfish which are necessary for the development of agriculture, forestry, and fisheries
•Such raw materials and reserve supplies as are deemed necessary by the competent Minister for the initial testing of the facilities concerned
•Fees for transportation and insurance as required for the introduction thereof and other know-how or services necessary therefor
Foreign investment ratio
The ratio of the stocks, etc. owned by a foreign investor to the total stocks, etc. of a foreign-invested company (Article 5 (3) of the Foreign Investment Promotion Act)
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2. Foreign Investment Promotion Act
The Foreign Investment Promotion Act was enacted in Korea in 1998 for the purpose of courting foreign direct investment in the aftermath of the 1997 Asian financial crisis. In January 2014, to promote inbound FDI and to attract investments from global companies, the Foreign Investment Promotion Act was amend-ed (Act no.12225, promulgatamend-ed Jan.10, 2014, enforcamend-ed Mar.11, 2014) to allow exceptions against the regulations of the Monopoly Regulation and Fair Trade Act, which requires that when the 2nd-tier sub-sidiary of a holding company establishes a 3rd-tier subsub-sidiary through a joint investment with a foreigner, the 2nd-tier subsidiary should own 100 percent of the 3rd-tier subsidiary’s stocks. In other words, notwith-standing the Monopoly Regulation and Fair Trade Act, the amended Foreign Investment Promotion Act allows 2nd-tier subsidiaries to hold 50 percent or more of the 3rd-tier subsidiary’s stocks while the foreign partner holds 30 percent of more (individual-type foreign investment).
Several amendments were made to the Act in 2016. The foreign investment notification system was sim-plified, combining the separate notification procedures by form of investment. In other words, the foreign investment notification forms that differed by form of investment (i.e., FDI by acquisition of new shares or contribution, FDI by acquisition of existing shares, FDI by means of merger, etc.) were combined into a single form (i.e. Foreign investment by acquisition of stocks (or contribution) – Notification form). Also, notification of transfer or reduction of stocks was repealed and merged with ‘application for registration/ change of information of a foreign invested enterprise’. In addition, application for cancellation of regis-tration of foreign-invested company was repealed and the system was changed to allow ex-officio cancel-lation of registration if the cause for cancelcancel-lation was confirmed. Notification of technology introduction contract and notification of disposal of capital goods were also repealed.
The exceptional clauses for negotiated contracts related to the lease or sale of state-owned or public property were upgraded from enforcement regulation to law, and a regulation on imposition of a fine for nonconformance was added. Also, clauses on administrative matters subject to bulk processing stipulated by law shall apply automatically to the Foreign Investment Promotion Act (promulgated Jan. 27, 2016, en-forced Jul. 28. 2016).
Before After (2016) Note
Notification of foreign investment by acquisition of new shares or contribution
Foreign investment by acquisition of stocks (or contribution) – Notification/ application for authorization (combined FDI notification form)
Single combined FDI notification form for FDI by acquisition of stocks (form no.1 of the Enforcement Rules of the Act)
Notification/ application for authorization of foreign investment by acquisition of existing shares Notification of stocks or shares through merger, etc.
Notification of transfer or reduction of shares Notification of transfer or reduction of stocks repealed
Replaced with application for registration of change of information of foreign-invested enterprise
Application for cancellation of registration of foreign-invested company
Application for cancellation of registration repealed
Replaced with application for registration of change of information of foreign-invested enterprise or ex-officio cancellation
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•Understanding the Foreign Investment Promotion Act•Legislations Related to the Foreign Investment Promotion Act
2-1 Understanding the Foreign Investment Promotion Act
The Foreign Investment Promotion Act is designed to facilitate foreign investment by supporting foreign investment and enhancing investors’ convenience. The Act serves as the framework law on foreign investment, and its subordinate statutes include the Enforcement Decree of the Foreign Investment Promotion Act and the Enforcement Rule of the Foreign Investment Promotion Act, which prescribe matters delegated by the Act and matters necessary for the enforcement thereof.
2-2 Legislations Related to the Foreign Investment Promotion Act
Unless provided otherwise in the Foreign Investment Promotion Act, all matters concerning foreign exchange and foreign transactions related to foreign investment are governed by the Foreign Exchange Transaction Act. For foreign investment, taxes may be abated or exempted under the conditions prescribed by the Restriction of Special Taxation Act, the Enforcement Decree of the Restriction of Special Taxation Act, the Enforcement Rules of the Restriction of Special Taxation Act, and the Regulations on Tax Abatement or Exemption on Foreign Investment. Since a foreign-invested company is a domestic corporation established under domestic law, the company is governed by the same laws that apply to purely domestic corporations even if the foreign-invested company has followed the procedures prescribed by the Foreign Investment Promotion Act. Therefore, a foreign-invested company should obtain permission or authorization under the domestic law when it is required.
Acts and Statutes on Foreign Investment
Basic Acts and Statutes•Foreign Investment Promotion Act, Enforcement Decree and Enforcement Rules of the Foreign Investment Promotion Act
•Regulations on Foreign Investment (Promulgated by the Ministry of Trade, Industry & Energy on Jul. 6, 2018; formerly Regulations on Foreign Investment and Technology Introduction)
•Consolidated Public Notice for Foreign Investment (Promulgated by the Ministry of Trade, Industry & Energy) •Regulations on Tax Abatement or Exemption for Foreign Investment (Promulgated by the Ministry of Economy
and Finance)
•Restriction of Special Taxation Act (Chapter 5. Special Cases Concerning Taxation for Foreigners’ Investment, Etc.), Enforcement Decree and Enforcement Rules of the Restriction of Special Taxation Act
Other Related Acts
•Foreign Exchange Transactions Act: Matters concerning foreign exchange and foreign transactions • Act on the Designation and Management of Free Trade Zones
• Special Act on the Designation and Management of Free Economic Zones • Financial Investment Services and Capital Markets Act
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3. Foreign Investment Promotion and Control
Foreign investors may face various difficulties caused by the political and economic circumstances of a country in which they operate, besides the normal business risks. Given the risk factors, Korea has implemented various schemes to protect foreign investors. Meanwhile, the Regulations on Foreign Investment and the Integrated Public Notice of Foreign Investment prescribe details on businesses restricted from foreign investment.
•Liberalization of Foreign Investment •Protection of Foreign Investment
•Restrictions and Prohibitions on Foreign Investment
3-1 Liberalization of Foreign Investment
Except as otherwise prescribed by the Acts of the Republic of Korea, a foreigner may conduct, without restraint, various activities of foreign investment in the Republic of Korea. Foreigners are restricted from foreign investment in the following cases: where it is deemed to threaten the maintenance of national security and public order; where it is deemed to have harmful effects on public hygiene or environmental preservation or run counter to Korean morals and customs; and where it violates the laws and subordinate statutes of the Republic of Korea.
3-2 Protection of Foreign Investment
Foreign direct investment is protected stronger than indirect investment such as investment in securities and bonds, as prescribed by the Foreign Investment Promotion Act.
(1) Guarantee of Remittance to Foreign Countries
With regard to the proceeds from stocks, etc. acquired by a foreign investor; proceeds from the sale of stocks, etc.; and the principal, interest and service charges paid in accordance with the loan contract as prescribed by the Foreign Investment Promotion Act (Article 2 (1) 4 (b)), their remittance to foreign countries shall be guaranteed in accordance with the details of the notified or authorized foreign investment at the time when the said remittance is made.
(2) Exceptions to the Safeguard Clause on Foreign Exchange Transactions
The Minister of Economy and Finance may temporarily suspend or restrict foreign exchange transactions, if such measures are deemed inevitable on account of the outbreak of a natural calamity, war, conflicts of arms, grave and sudden changes in domestic and foreign economic conditions, or other situations equiv-alent thereto (Article 6 (1) to (3) of the Foreign Exchange Transactions Act). However, such measures shall not apply to foreign investment as provided for in the Foreign Investment Promotion Act (Article 6 (4) of the Foreign Exchange Transactions Act).
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(3) National TreatmentExcept as otherwise prescribed by the Acts of the Republic of Korea, foreign investors and foreign-invested companies shall be treated in the same way as the nationals of the Republic of Korea and Korean corpora-tions in respect of their business operacorpora-tions.
(4) Equal Application of Tax Abatement Regulations, etc.
Except as otherwise prescribed by the Acts of the Republic of Korea, the provisions concerning the abatement or exemption of taxes from the tax laws applied to the nationals of the Republic of Korea or Korean corporations shall also apply to foreign investors, foreign-invested corporations, persons who have extended loans as prescribed by the Foreign Investment Promotion Act, and persons who have provided technology thereto.
3-3 Restrictions and Prohibitions on Foreign Investment
Out of a total of 1,196 categories of business listed under the Korean Standard Industrial Classification (KSIC), foreign investment is not permitted in 61 categories including public administration, diplomacy, and national defense (unpermitted categories of business). Among the 1,135 categories of business in which foreign investment is permitted, restrictions on investment ratio, etc. apply in 29 categories (restricted categories of business), as prescribed by the Foreign Investment Promotion Act.
(1) Unpermitted Categories of Business
The categories of business in which foreign investment is not permitted generally have public features, hence the difficulties in applying the Foreign Investment Promotion Act. The prohibition of foreign investment in the said categories is prescribed by the Regulations on Foreign Investment and the Integrated Public Notice of Foreign Investment.
Unpermitted Categories of Business
•Postal services, central banking, individual mutual aid organizations, pension funding, administration of financial markets, activities auxiliary to financial service activities, etc.
•Legislative, judiciary, administrative bodies, foreign embassies, extra-territorial organizations and bodies
•Education (pre-primary, primary, secondary, higher education, universities, graduate schools, schools for the disabled, etc.)
•Artists’, religious, business, professional, environmental advocacy, political, and labor organizations
(2) Restricted Categories of Business
In principle, foreign investment is also prohibited in certain restricted categories of business. However, when there are standards for permission, foreign investment is partially permitted. The restriction of foreign investment is prescribed by the Regulations on Foreign Investment and the Integrated Public Notice of Foreign Investment.
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No foreigner shall be permitted to make an investment in any company concurrently running both a category of business in which foreign investment is not permitted and a category of business in which foreign investment is only partially permitted. And, when intending to invest in any company operating two or more categories of business in which foreign investment is only partially permitted, a foreign investor shall be prohibited from investing in the company in excess of the ratio of foreign investment in the category of business in which the ratio of permissible foreign investment is the lowest.
<Businesses where foreign investment is restricted (including 3 unpermitted categories) and standards for permission (Regulations on Foreign Investment amended Jul. 6, 2018)>
Category of Business (KSIC) Standards for Permission Competent Authorities Growing of cereal crops and
other food crops (01110) The cultivation of rice and barley is prohibited
Ministry of Agriculture, Food and Rural Affairs Farming of beef cattle (01212) Permitted where the foreign investment ratio is less than
50%
Ministry of Agriculture, Food and Rural Affairs Manufacture of other basic
inorganic chemicals (20129)
Permitted with the exception of the manufacture and distribution of nuclear fuel
Ministry of Trade, Industry and Energy Manufacture of other smelting,
refining and alloys of non-ferrous metals (24219) Nuclear power generation
(35111) Prohibited
Ministry of Trade, Industry and Energy Hydroelectric power generation
(35112)
Fire power generation (35113) Solar and sunlight power generation (35114)
Other power generation (35119)
The sum of power plant facilities purchased by foreigners from the Korea Electric Power Corporation (KEPCO) must not surpass 30% of the total domestic power plant facilities ※ Applicable only to purchases made from KEPCO (including
its subsidiaries)
Ministry of Trade, Industry and Energy
Transmission and distribution of electric power (35120)
Trade of electricity (35130)
Permitted where the following conditions are met: 1. The foreign investment ratio is less than 50%
2. The stocks with voting rights owned by foreign investors are less than the stocks held by the largest domestic shareholder ※ Trade of electricity: Applicable only to electric sales business
under the Electric Utility Act
Ministry of Trade, Industry and Energy
Disposal of radioactive waste (38240)
Radioactive waste management business under Article 9 of the Radioactive Waste Control Act is prohibited
Ministry of Trade, Industry and Energy Wholesale of meat (46313) Permitted where the foreign investment ratio is less than
50%
Ministry of Agriculture, Food and Rural Affairs Coastal water passenger
transport (50121)
Coastal water freight transport (50122)
Permitted where all of the following conditions are satisfied: 1. Transport of passengers or freight between South and North Korea 2. Joint venture with a shipping company of the Republic of Korea 3. The foreign investment ratio is less than 50%
Ministry of Oceans and Fisheries
Passenger air transport (51100) Freight air transport (51200)
Permitted where the foreign investment ratio is less than 50% * The Ministry of Land, Infrastructure and Transport
classifies air transportation businesses into international air transportation (51), domestic air transportation (51) and small air transportation (51) business.
Ministry of Land, Infrastructure and Transport Publication of newspapers
(58121)
Permitted where the foreign investment ratio is less than 50% (less than 30% for daily newspapers)
Ministry of Culture, Sports and Tourism Publication of magazines and
periodicals (58122)
Permitted where the foreign investment ratio is less than 50%
Ministry of Culture, Sports and Tourism
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Category of Business (KSIC) Standards for Permission Competent Authorities
Radio broadcasting (60100) Prohibited Korea Communications
Commission Over-the-air broadcasting (60210) Prohibited Korea Communications Commission Program distribution (60221)
Permitted where the foreign investment ratio is 49% or less (20% or less in the case of general programming channel operators or program providers and 10% or less in the case of news channel operators)
※ ‘Program providers’ refers to program providing business operators under the Broadcasting Act.
However, in the case of program providing business operators excluding operators of general programming channels or news channels and operators of channels that engage in featuring and selling products, a company whose stocks or shares are owned by the government, organization or individual of a counterpart country to a bilateral or multilateral free trade agreement with Korea designated by the Minister of Science and ICT shall not be deemed a foreign fictitious company as prescribed by Article 14 (1) 3 of the Broadcasting Act.
※ For more information, refer to the relevant free trade agreement. - Ministry of Science and ICT - Korea Communications Commission Cable networks (60222)
Permitted where a cable system operator’s foreign investment ratio is 49% or less
(20% or less in the case of relay cable operators)
Ministry of Science and ICT
Broadcasting via satellite and other forms of broadcasting (60229)
Permitted where the foreign investment ratio is 49% or less (20% or less in the case of Internet multimedia broadcasting content providers that operate general programming channels or news channels)
However, in the case of Internet multimedia broadcasting content providers excluding operators of general programming channels or news channels and operators of channels that engage in featuring and selling products, a company whose stocks or shares are owned by the government, organization or individual of a counterpart country to a bilateral or multilateral free trade agreement with Korea designated by the Minister of Science and ICT shall not be deemed a foreign fictitious company as prescribed by Article 9 (2) 3 of the Internet Multimedia Broadcast Services Act.
※ For more information, refer to the relevant free trade agreement.
Ministry of Science and ICT
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Category of Business (KSIC) Standards for Permission Competent Authorities
Wired telecommunications (61210)
Permitted where the sum of shares (limited to voting shares, including depositary receipt (DR) and other share equivalents and equity interests) held by a foreign government or a foreigner (including a fictitious corporation of foreigners) is 49% or less of the total issued shares of the company. (Foreigners are not allowed to become a majority shareholder of KT. However, they may invest in KT if they own less than 5% of the total shares.)
※ Foreign fictitious company: A company whose largest shareholder is a foreign government or a foreign national (including a specially-related person as referred to in Article 9 (1) 1 of the Financial Investment Services and Capital Markets Act), where not less than 15/100 of the gross number of whose issued stocks is owned by the said foreign government or foreigner.
However, foreign fictitious companies of a country that is a counterpart to a bilateral or multilateral free trade agreement with Korea designated by the Minister of Science and ICT, which are determined by the Minister as not likely to harm public interest shall not be deemed a foreigner.
※ For more information, refer to the relevant free trade agreement.
Ministry of Science and ICT
Wireless and satellite
communications (61220) Same as the permission standards for wired telecommunications Ministry of Science and ICT
Other electronic communications (61299)
Same as above [No restrictions for supplementary communications business (61299)]
News agency business (63910) Investment is permitted where the foreign investment ratio is less than 25%.
Ministry of Culture, Sports and Tourism
Domestic commercial bank (64121)
Permitted with the exception of the National Agricultural Cooperative Foundation (finance) under the Agricultural Cooperative Act and the National Federation of Fisheries Cooperative (finance) under the Fisheries Cooperatives Act.
- Ministry of Agriculture, Food and Rural Affairs - Ministry of Oceans
and Fisheries - Financial Services
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<Businesses where foreign investment is unpermitted (as of Jul. 6, 2018>KSIC code Business Competent authority
61100 Postal services Ministry of Science and ICT
64110 Central banking Ministry of Economy and Finance
64912
Development financial institutions
※ Korea Development Bank, The Export-Import Bank of Korea under special Acts
- Financial Services Commission - Ministry of Economy and
Finance
65301 Individual mutual aid organizations Governing ministry 65302 Business mutual aid organizations Governing ministry
65303 Pension fund Governing ministry
66110 Administration of financial markets Financial Services Commission
66199
Other activities auxiliary to financial service activities
※ Foreign investment is permitted in financial service businesses excluding financial instrument clearing services such as financial clearing businesses
- Financial Services Commission - Ministry of Economy and
Finance 84111 Legislative administration
84112 National executive offices
84114 Administration of financial and economic policy
- Ministry of Economy and Finance
- Financial Services Commission 84119 Other general public service activities Ministry of the Interior and Safety 84120 Ancillary service activities for government Ministry of the Interior and Safety 84211 Regulation of activities of education affairs Ministry of Education
84212 Regulation of activities of cultural and tourism affairs Ministry of Culture, Sports and Tourism
84213 Regulation of activities of environment affairs Ministry of Environment 84214 Administration of health care and welfare Ministry of Health and Welfare 84219 Other regulation of activities of agencies that provide healthcare,
education, cultural services, excluding social security Governing ministry
84221 Administration of general labor affairs Ministry of Employment and Labor
84222 Administration of agricultural, forestry, fishing and hunting affairs
- Ministry of Agriculture, Food and Rural Affairs
- Ministry of Oceans and Fisheries 84223 Administration of construction and transportation programs
- Ministry of Land, Infrastructure and Transport
- Ministry of Oceans and Fisheries 84224 Administration of communications Ministry of Science and ICT 84229 Other regulation and contribution to more efficient operation of
business
Ministry of Trade, Industry and Energy
84310 Foreign affairs Ministry of Foreign Affairs
84320 Defense activities Ministry of National Defense
84401 Courts
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KSIC code Business Competent authority
84403
Correctional institutions
※ With the enforcement of the Act on the Establishment and Operation of Private Correctional Institutions in July 2001, foreign investment is permitted in private correctional institutions.
Ministry of Justice
84404 Police protection Ministry of the Interior and
Safety
84405 Fire protection Ministry of the Interior and
Safety
84409 Other justice, public order and safety activities Governing ministry
84500 Compulsory social security activities Ministry of Health and Welfare
85110 Pre-primary education Ministry of Education
85120 Primary schools Ministry of Education
85211 Junior high schools Ministry of Education
85212 General senior high schools Ministry of Education
85221 Commercial and information industry high schools Ministry of Education
85222 Industrial high schools Ministry of Education
85229 Other technical and vocational secondary education Ministry of Education 85301 Junior technical and vocational colleges Ministry of Education
85302 Universities Ministry of Education
85303 Graduate schools Ministry of Education
85410 Schools for the handicapped Ministry of Education
85630
Facilities for social education
※ Foreign investment is permitted in lifelong education facilities for adults that are not established for the purpose of recognition of academic credit or provision of diploma.
Ministry of Education
85699
Other educational institutions not elsewhere classified
※ Among other educational institutions not elsewhere classified, foreign investment in private teaching institutes prescribed by the Act on the Establishment and Operation of Private Teaching Institutes and Extracurricular Lessons is permitted.
Ministry of Education
90131 Independent performing artists Ministry of Culture, Sports and Tourism
90132 Independent non-performing artists Ministry of Culture, Sports and Tourism
94110 Business organizations Governing ministry
94120 Professional organizations Governing ministry
94200 Labor organizations Ministry of Employment and
Labor
94911 Buddhism organizations Ministry of Culture, Sports and
Tourism
94912 Christianity organizations Ministry of Culture, Sports and Tourism
94913 Catholicism organizations Ministry of Culture, Sports and Tourism
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KSIC code Business Competent authority
94914 Korean religious organizations Ministry of Culture, Sports and Tourism
94919 Other religious organizations Ministry of Culture, Sports and Tourism
94920 Political organizations
94931 Environmental advocacy organizations Ministry of Environment 94939 Other social advocacy organizations Governing ministry
94990 Other membership organizations Governing ministry
99001 Foreign embassies Ministry of Foreign Affairs
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1. Foreign Investment Procedures
Foreign investment procedures mainly consist of the following: foreign investment notification, remittance of investment funds, registration of incorporation and business registration, and registration of foreign-invested company. The procedures applied to foreigners are basically the same as those applied to Koreans with the exception of two additional steps: foreign investment notification and registration of foreign-invested company. Where a foreign investor acquires the existing stocks of a corporation or registers a privately-owned business, 'registration of incorporation' is not required.
Registration of incorporation, registration of capital increase
(court registry office)
Notification of incorporation and business registration
(KOTRA or tax office)
※ Note: Registration of capital increase is required when acquiring new stocks due to an established domestic corporation’s capital increase for value. Registration of capital increase is not required when acquiring existing stocks.
•Foreign Investment Notification
•Foreign Investment Notification Procedure by Form of Investment
1-1 Foreign Investment Notification
A foreign investor may notify foreign investment as follows:
• Notifying person: A foreign investor or his/her agent (a power-of-attorney should be attached in the case of notification by an agent.)
• Where to notify: Headquarters and branches of domestic banks, domestic branches of delegated foreign banks, KOTRA, or KOTRA’s overseas offices (36 investment hub offices)
• Processing period: On the spot (The certificate of completion of notification is issued without delay.)
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Foreign investment notification is classified into pre-notification - notification prior to the acquisition ofstocks - and post-notification - notification after the acquisition of stocks or the conclusion of a contract. The details are as follows:
<Pre- & Post-Notification >
Category Matters to be Notified Note
Pre-notification
•Notification/ Application for authorization of foreign investment by acquisition of stocks (or contribution)
•Notification of change of information of the above
Acquisition of new stocks or existing stocks, or contribution (The authorization of the Ministry of Trade, Industry & Energy is needed to acquire the existing stocks of a defense industry company.)
•Notification of foreign investment in the form of a long-term loan or
notification of change of information
- Post-notification
•Notification/ Application for authorization of foreign investment by acquisition of stocks (or contribution)
Notification within 60 days in the case of acquiring the existing stocks of a listed company •Notification/ Application for authorization of foreign investment by
acquisition of stocks (or contribution): Same notification form applies to ‘Notification of acquisition of stocks, etc. through merger, etc.’ - Acquisition by capitalization of reserves, revaluation reserves, etc.
of a foreign-invested company
- Acquisition by merger, company division, or an all-inclusive stock swap or transfer
- Acquisition by investing the proceeds (dividends) from acquired stocks - Acquisition by purchase, inheritance, testamentary gift, or gift - Acquisition by using convertible bonds, exchangeable bonds, stock
depository receipts, and such similar items as may be converted into, available for the acceptance of, or exchanged for stocks, etc.
Notification within 60 days of acquisition
•Notification of transfer/ reduction of stocks
Replaced with application for registration of foreign-invested enterprise
•Application for registration of foreign-invested company (new registration and change of information)
Notification within 60 days of the date of occurrence of the cause (30 days in the case of change of information)
Required documents
•Two copies of the foreign investment notification form
•Documents certifying the applicant's nationality (foreigner’s certificate of nationality)
- A foreign corporation or organization: certificate of incorporation issued by the government or other authorized organizations of the foreign country, or proof that the said corporation or organization is based in the said country - Foreign individuals: certificate of citizenship, passport, or other proof of a foreign investor's nationality, issued by
the government or other authorized organizations of the country in question
- If a foreign investor holds the nationality of the Republic of Korea, the above documents may be replaced with a certificate of evidence of residential status issued by the government or other authorized organizations of the country in which he/she resides, or a certificate of overseas residence, etc. issued by embassies and overseas legations of the Republic of Korea
•Letter of attorney (where an agent who has received the right to represent a foreign investor files a notification or applies for authorization)
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Additional documents required when necessary
•Document certifying objects of investment•Document certifying share acquisition
1-2 Foreign Investment Notification Procedures by Form of Investment
(1) Notification of Foreign Investment by Acquisition of Stocks or ContributionIn cases where a foreign investor intends to invest by means of purchasing the newly issued or existing stocks of a Korean corporation or a company run by a national of the Republic of Korea, the foreign inves-tor shall notify such fact in advance (pre-notification).
Required documents
•Two copies of the notification form of foreign investment by acquisition of stocks or contribution (A letter of attorney shall be attached when notified by an agent.)
•Document certifying foreign investor's nationality
•Contract to appoint executives, report on appointment (dispatch) of executives (e.g. minutes of a board of directors’ meeting or general meeting of shareholders) – Applicable to investments with foreign investment ratio of less than 10% to be exceptionally recognized as FDI
•Document certifying specially related party relations between the transferees (if there are multiple investors when acquiring existing shares)
•A copy of a document certifying the acquisition of stocks (in the case of acquisition of stocks by merger, etc. as prescribed by Article 5 (2) of the Act)
•Documents certifying object of investment (If necessary)
- Documents certifying the monetary value of industrial property rights, etc. *Note)
- Documents certifying the residual assets after liquidation of a branch, office or corporation - Documents certifying the amount the applicant has repaid against a domestic or overseas loan - Documents certifying the stocks of a corporation listed in overseas securities markets
- Documents certifying the ownership of stocks held by a foreigner under the Foreign Investment Promotion Act or the Foreign Exchange Transactions Act
- Documents certifying that the investor has duly registered all capital transactions involving Korean real estate in which the investment will be made
- Documents certifying the funds received through the sale of stocks or real estate under the Foreign Investment Promotion Act or the Foreign Exchange Transactions Act
•Documents certifying contribution to a non-profit organization
※ Additionally required documents can be submitted before application for registration of foreign-invested enterprise
※ Note: Agencies that evaluate technologies including industrial property rights: Korea Institute for Technology Advancement, Korea Technology Finance Corporation, Korea Institute of Industrial Technology Evaluation, Korea Environment Corporation, Korean Agency for Technology and Standards, Korea Institute of Science and Technology, Korea Institute of Science and Technology Information, and National IT Industry Promotion Agency
1) Acquisition of Newly Issued Stocks
• Where a foreigner establishes a new corporation either independently or jointly with a Korean national • Where a foreigner participates in a Korean company’s paid-in capital increase
• Where a foreigner (individual) operates a private business in Korea
• Where a foreigner makes a contribution to a non-profit corporation (i.e., acquisition of newly issued stocks in the form of a contribution)
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Changes to the following should also be notified: trade name or title and nationality of the foreigninvestor, foreign investment amount, foreign investment ratio (ratio of stocks held by a foreign investor to the total number of stocks of a foreign-invested company), investment method, type of business to be operated, etc.
Where a foreign investor makes an investment-in-kind with capital goods
A foreign investor is required to apply for an examination and confirmation of the specifications of imported capital goods prior to the acceptance of declaration of import as prescribed by Article 241 (1) of the Customs Act, after notifying foreign investment by acquisition of newly issued stocks, etc.Required documents:
•Three copies of the application form for examination and confirmation of the specifications of imported capital goods
•Three copies of a document certifying the monetary value thereof, such as an offer sheet
•Application for written confirmation of completion of investment-in-kind to be submitted to an officer from the Korea Customs Service dispatched to KOTRA, upon completion of the import of capital goods
2) Acquisition of Existing Stocks
Where a foreign national intends to invest by the acquisition of stocks that have already been issued by a company run by a national of the Republic of Korea or a Korean corporation, he/she shall notify the facts in advance (pre-notification). However, acquisition of existing stocks, etc. issued by a listed corporation un-der the Financial Investment Services and Capital Markets Act can be notified within 60 days of the date of such acquisition.
※ If a foreigner who has acquired nine percent of the stocks of a listed company under the Financial Investment Services and Capital Markets Act intends to additionally acquire 3.5 percent of the stocks of the said company (the additional investment amount is more than KRW 100 million and the acquisition will raise the foreigner’s stake above 10 percent), the additionally acquired stocks will be recognized as foreign investment under the Foreign Investment Promotion Act. Therefore, the foreigner should notify (or apply for authorization of) foreign investment by acquisition of existing stocks, etc. In this case, exceptions to the pre-notification regulations apply, and foreign investment can be notified within 60 days of the date of such acquisition.
Acquisition of existing stocks:
• Where a foreign investor directly purchases 10 percent or more of the stocks of an unlisted company from a domestic shareholder
• Where a foreign investor acquires 10 percent or more of the stocks of a listed corporation
However, the Minister of Trade, Industry & Energy’s authorization should be obtained in advance when a foreigner intends to invest in a defense industry company by acquiring its existing stocks (application for authorization). If the existing stocks are acquired without obtaining authorization, the foreigner shall be banned from exercising his/her voting rights of such existing stocks and may receive an order from the Minister of Trade, Industry & Energy to transfer the stocks to a third party.
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Notification of information change can be filed where there are changes to the following: foreign invest-ment amount, foreign investinvest-ment ratio, transferor of stocks, etc. Where there are changes to the autho-rized details, an application for authorization of information change can be filed.
3) Acquisition of Stocks, etc. by Merger, etc.
Unlike acquisition of newly issued or existing stocks, the acquisition of stocks, etc. by merger, etc. should be notified within 60 days of the date of acquisition thereof (post-notification). In most cases, foreigners who notify acquisition of stocks, etc. by merger, etc. are subject to foreign-invested company registration or registration of change of information.
Acquisition of stocks, etc. by merger, etc.:
• Where a foreign investor acquires the stocks of the foreign-invested company issued through capitalization of reserves, revaluation reserves and reserves as prescribed by other Acts
• Where a foreign investor acquires stocks, etc. of a newly incorporated corporation or a surviving corporation after a merger, an all-inclusive stock swap or transfer, or a company division with the stocks he/she is holding at the time of the relevant foreign-invested company's merger, all-inclusive stock swap or transfer with another company, or a company division
• Where a foreigner has acquired stocks, etc. of a registered foreign-invested company by means of purchase, inheritance, testamentary gift, or gift from a foreign investor
• Where a foreign investor has acquired stocks, etc. by means of investing the proceeds from the stocks, etc. acquired under the laws of Korea
• Where a foreigner has acquired stocks, etc. using convertible bonds, exchangeable bonds, stock depositary receipts, and other such similar items as may be converted into, taken over as, or exchanged for stocks, etc
(2) Notification of Foreign Investment in the Form of a Long-Term Loan
Where the overseas parent company of a foreign-invested company, a foreign investor, or an enterprise with a capital investment relationship with the overseas parent company or the investor intends to make a foreign investment in the form of a long-term loan with maturity of not less than five years supplied to the foreign-invested company, the foreign investment should be notified in advance (pre-notification).
A borrower of a long-term loan should be a foreign-invested company, while a foreign-invested company in the process of being established cannot be a borrower. Therefore, foreign investment in the form of a long-term loan can be notified after a foreign-invested company has been established. Since the amount of a loan is not an object of investment, the loan amount is not required to be stated in the foreign-invested company registration certificate. A foreigner should notify the arrival of a long-term loan and attach documents certifying that the foreign investor has purchased or deposited foreign currency, in order for a long-term loan to be recognized as foreign investment.
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Required documents
•Two copies of the notification form of foreign investment in the form of a long-term loan (A letter of attorney should be attached when notified by an agent.)
•A copy of the loan contract
•A document certifying investment relations and a certificate of nationality of the loan provider ※ The copy of the loan contract can be submitted before the long-term loan is remitted.
When there are changes to the notified amount of loans or conditions of loans (interest rate, repayment period, grace period), a notification of change of information should be filed.
Parent company of overseas parent company
(grandparent company)
Overseas sister company of overseas parent company
Quasi-parent company of overseas parent company Overseas subsidiary of overseas parent company
Overseas subsidiary of foreign investor (indvidual)
Owns 50% stake or more
Owns 50% stake or more
Supply of loan (FDI ratio should be 10% or more)
Supply of loan (FDI ratio should be 50% or more) Supply of loan (FDI ratio should be 50% or more) Owns 1 0% stake o r more Owns 50 % stake or more Owns 50% stake or more
Overseas parent company (corporate) Foreign investor (Individual) Domestic company (=foreign-invested company)
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(3) Foreign Investment Procedure by Form of Investment
<Foreign Investment Notification and Foreign-Invested Company Registration>
Foreign investment by acquisition of stocks (or contribution) - Notification/ Application for authorization
Remittance of investment funds (Remitted through a bank or carried-through customs)
- Capital increase without consideration
(capitalization of reserves, revaluation reserves, etc.) - Corporate merger/split, all-inclusive stock
exchange/transfer
- Foreigners’ purchase, inheritance, testation, donation
- Investment of proceeds (cash dividends, stock dividends) - Stock conversion of CB, EB, DR
Application for authorization of foreign investment by acquisition of existing stocks
(Pre-notification): Article 6 of the Act Notification of foreign
investment by acquisition of new/ existing stocks or contribution
(Pre-or post-notification): Article 5 of the Act
Notification of acquisition of stocks by merger, etc. (Post-notification within 60 days):
Article 5 (2) 2 - 6 of the Act
Application for review of specification of imported capital goods
Import clearance of capital goods
Application for confirmation of completion
of investment-in-kind
Deposit of payment for shares/Deposit of private
business funds
Incorporation (capital increase) registration and business registration
(*private business registration)
Application for visa issuance
Payment for shares
Investment-in-kind of capital goods
Initial notification of loans after foreign-invested company registration Investment in cash
Foreign-invested company registration (new registration): Article 21 of the Act, Article 27 of the Enforcement Decree of the Act
Notification of investment in the form of a long-term loan (pre-notification):
Article 5 of the Act
<Follow-up management: Registration/ registration of change, additional investment, cancellation of registration, etc.>
- Transfer or reduction of stocks
- Notification of acquisition of stocks by merger, etc.
- Notification of acquisition of newly issued stocks (additional investment) - Notification of acquisition of exiting stocks (additional investment) - Notification of change of information (if applicable)
Registration of foreign-invested company – Registration/ Change of information: Article 21 of the Act, Article 27 of the Enforcement
Decree, Article 17 of the Enforcement Rules
Cancellation of foreign-invested company registration (ex-officio cancellation): Article 21 (4) of the Act,
Article 28 of the Enforcement Decree, Article 17-2 of the Enforcement Rules
Notification of information change
- Change in loan provider - Change in loan amount - Change in loan conditions
(repayment conditions, interest rates, early repayment, debt-equity swap)
Occurrence of cause for registration of information change - Change in capital (capital increase/ CB conversion, etc.) - Merger with foreign investor, change in company name - Change in foreign-invested company name and address, etc.
Occurrence of cause for cancellation of foreign-invested company registration - Closure (individual: certificate of business closure; corporate: certified copy of liquidation registration; investment association: resolution of dissolution of association members, etc.)
- Transfer of all foreign-held shares/ capital reduction of all foreign-held shares - Liquidation (corporation: certified copy of liquidation registration), etc.
