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A liaison office may be used only for non-income-producing liaison activities conducted exclusively for the entity of which is a part. A liaison office can thus act on behalf of its parent company as an agent; it can enter into purchase agreement as long as the agreement does not result in its earning income. A foreign company that purchases goods in Korea may establish a liaison office. If a liaison office renders any service to another entity, it could lose its liaison status and would be required to register as a branch.

Procedures
A foreign company intending to establish a liaison office in Korea (hereinafter referred to as “the foreign company”) is required to perform the following procedures:
1. File report on establishment of a liaison office with a bank operating in Korea. (Hereinafter referred to as “Bank Registration”).
2. Upon completion of the step above, the foreign company shall report establishment of a liaison office to a tax office and have the liaison office registered with the tax office. (Hereinafter referred to as “Tax Registration”).
Each of the aforementioned two steps takes approximately two or three days to perform after all of the required documents and information are received by our firm. Therefore, it takes about one week from the time we receive all of the necessary documents and information as described in the following chapters from the foreign company for us to complete the entire process of establishing a liaison office.

Documents required
Each of the two steps summarized in the foregoing chapter requires various forms of documentation. Some of the documents are required to be submitted to several different authorities. These documents will be reproduced by us and submitted to the relevant authorities. Therefore, the foreign company is only required to provide us with one copy of each of the required documents.

All of the required documents and information should be prepared in English by the foreign company. We will be responsible for translating all required materials into Korean for submission to the concerned authorities in Korea.

The required documents may be classified into two categories, i.e., documents that should be prepared by the foreign company and documents that should be prepared by our firm (“Lian”) based on the information provided by the foreign company as listed below:
Documents to be prepared by the foreign company (home office of the proposed Liaison office)

1. A certificate of corporate resolution regarding establishment of the Korea Liaison office and nomination of
1. the Liaison office Representative by the foreign company (for Bank Registration) ;

2. A certificate of information on the foreign company (for Tax Registration) ;

3. Acceptance of election as Liaison office Representative (for Bank Registration) ;

4. A power of attorney (for Bank and Tax Registration) ;

5. A certified copy of the resident registration of the Representative of the Korea Liaison office, or a copy of
5. passport and driver license in the event the representative is a foreign national (for Tax Registration) ;

6. A certified copy of the foreign company’s registration (and a business license where applicable) with a
6. court, a chamber of commerce or any other authorities of the foreign company’s resident country
6. (for Bank Registration) ;

7. A copy of the lease agreement of the Liaison office (for Bank Registration)※ ;

※ Address of the liaison office should be presented in the various applications to be filed with the concerned
※ authorities including a bank, a court and a tax office. Therefore, you need any address of the liaison office
※ before the applications are filed.
Among the documents listed above, Items 1, 2, 3 and 4 should be duly notarized by a notary public in the foreign company’s resident country. Item 6 should also be notarized unless it is a copy of original certificate. All of the documents should be carefully prepared and mailed to our office. The attached exhibits demonstrate how to prepare the documents. The foreign company should either re-type the exhibits or use the enclosed disc containing electronic copies of the exhibits. Simply filling in the blanks of the sample exhibits will be unacceptable. Exhibits should be free of edits and corrections.

Documents to be prepared by Lian based on information to be provided by the foreign company

1. A report on establishment of a liaison office (for Bank Registration) ;
2. Plan of business activities (for Bank Registration) ;
3. Beginning balance sheet of the Liaison office (for Tax Registration) ;
4. A sketch of Liaison office location (for Tax Registration) ;
5. A certificate of registered seal impression (for Tax Registration) ;

In addition to the above listed documents, various other kinds of documentation will be prepared by Lian based on the information to be provided by the foreign company as summarized in the following chapter. Therefore, the foreign company is required to provide Lian with the information in a timely and precise manner.

Since a liaison office, by definition, acts only for its home office and does not generate income in Korea, it is not subject to corporate income tax and need not file corporate income tax return in Korea. However, it is subject to withhold payroll income tax as an employer with respect to employees who are paid by the liaison office.

A liaison office does not have an obligation to report and collect Value Added Tax (VAT), although it has an obligation to cooperate with the relevant tax authorities. But a liaison office has to pay VAT to Korean supplier (Input VAT), when it purchases goods or services in Korea. A liaison office cannot claim to refund input VAT, thus rather being absorbed as additional costs or expenses.

The liaison office should submit an application to the tax office for a nontaxable business tax code number.

Since a liaison office, by definition, has no income derived from Korean source, it must be funded by its head office through remittance of operating fund. The repatriation of operating fund back to the home office is not generally allowed unless and until the office cease its activities and liquidate all of its assets in Korea.
 
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