A foreign company
intending to establish a branch in Korea (hereinafter
referred to as “the foreign company”) is required
to perform the following procedures:
1. File an application
for the establishment of a branch with a designated
foreign exchange bank in Korea. Upon obtaining
the bank’s acceptance of the application,
the foreign company shall have the branch
registered with the bank. (Hereinafter referred
to as “Bank Registration”).
2. Once the branch is registered with a bank,
the foreign company shall register the branch
with a court. (Hereinafter referred to as
“Court Registration”).
3. Upon completion of the two steps above,
the foreign company shall report establishment
of a branch to a tax office and have the branch
registered with the tax office for taxation
purposes. (Hereinafter referred to as “Tax
Registration”).
It takes approximately
one and a half week to complete all the branch
establishment procedures provided that all
required documentation is made available to
us.
Documentation
required
Each of the four
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
1. A certificate of corporate resolution regarding
establishment of the Korea Branch and nomination
of the
1. Branch Representative
by the foreign company (for Bank and Court
Registration);
2. A certificate of information on the foreign
company (for Court Registration);
3. Acceptance of election as Branch Representative
(for Court Registration);
4. A certificate of corporate nationality
(for Court Registration);
5. An application for registration of the
Korea Branch’s seal impression (for Court
Registration);
6. Powers of attorney (for Bank, Court and
Tax Registration);
7. A certified copy of the resident registration
of the Representative of the Korea Branch
if the representative is
7. a Korean national,
or a copy of a valid passport (the page with
photo) if the representative is a foreign
7. national
(for Court Registration);
8. A copy of the Articles of Incorporation
of the Head office;
9. A copy of the lease agreement of the Branch
office (for Bank and Court Registration).※※
Address of the
7. branch should
be presented in various applications to be
filed with the concerned authorities including
a
7. bank, a court,
a tax office and Korea Foreign Trade Association.
Therefore, the Korea Branch is required
7. to have a
fixed place of business (i.e., a fixed address)
prior to filing of the establishment-related
7. applications.
Documents to
be prepared by Lian
1. An application for registration of a branch
(for Bank Registration);
2. Plan of business activities (for Bank Registration);
3. A report on Branch establishment (for Court
Registration);
4. A copy of a bank’s acceptance of Branch
establishment (for Court Registration);
5. A certified copy of court registration
of the Branch (for Tax Registration);
6. Beginning balance sheet of the Branch (for
Tax Registration);
7. A sketch of Branch office location (for
Tax Registration);
8. A certificate of registered seal impression
(for Tax Registration);
9. Translation of the Exhibits in Korean (for
Bank, Court and Tax Registration)
In addition to the above listed documents,
various other 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.
Information
that should be provided by the foreign company
to Lian
Information
regarding the foreign company
1. Corporate (or trade) name
2. Date of incorporation
3. Representative’s name
4. Corporate address
5. Major business
6. Paid-in capital (number of shares, par
value, etc.)
7. Law under which the company was incorporated
8. Sales volume for the most recent year
9. Details of transactions made with Korea
(e.g., export to or import from Korea, if
any)
10. Other pertinent information on the foreign
company, if specifically requested by us
Information
regarding the proposed Korea Branch
1. Name of the Korea Branch
2. Representative’s name, address, passport
(or residence certificate) number and nationality
3. Purpose of establishing the Korea Branch
(A broad definition of the scope of business
intended to be
3. carried out
in Korea) ;
4. Description of assets, if any
5. Fiscal year
Corporate
income tax
A branch is subject
to corporate income tax on its Korean-source
income. The corporate income tax returns should
be filed at the end of each relevant fiscal
year. Korean tax law requires a branch to
keep double-entry bookkeeping system for supporting
taxable income.
Value
Added Tax(VAT)
A Korea branch has
to file VAT returns quarterly. In general,
Korea VAT system is similar to that in effect
in many European countries. When the branch
provides goods or services in Korea, it is
required to collect VAT from the purchaser
at the flat rate of ten percent of the goods
and service price ("output tax").
On the contrary, when the branch buys goods
or service , it has to pay 10% of VAT to the
supplier ("Input VAT").
The difference between output VAT and input
VAT should be paid to the appropriate tax
office quarterly. If input VAT exceeds output
VAT, the difference would be refunded on a
semiannual basis.
However, exports of goods or services are
granted a zero tax rate. And there are 18
types of VAT exempt transactions, including
provision of health care, education, books
and magazines.
Withholding
taxes
When a branch pays
interest, dividend, Class A wage and salary,
severance income or other income, it is required
to withhold income tax thereon at the time
of such payment and pay it to the tax office
by the 10th of the following month. The withholding
tax rate will be different according to the
nature of paid income.
Procedures
