Korea Expansion Agency “KEA”

KEA is a one-stop-shop for all professional services
a FDI needs from market entry, on-going operation, to market exit in Korea.

Subject #1. Liaison Office - Navigating Korea's Business Terrain: A Guide to Entity Selection for Foreign Investors [Jan. 2024]

🔍 Exploring Entity Types for Foreign Investors in Korea: Focus on the Liaison Office 🇰🇷

Welcome to the first installment of our series aimed at clarifying the most utilized entity types for international investors in Korea.

👉 Up first: The Liaison Office - Your Gateway to the Korean Market. #LiaisonOffice #MarketEntry

What Is a Liaison Office? It's the front line for businesses planning to venture into Korea, governed by the Foreign Exchange Transaction Act. Distinct from a Foreign-Invested Company, a Liaison Office is for those taking their first step towards understanding and entering the Korean market without immediate profit-making activities. #BusinessExpansion #MarketResearch

Key Characteristics:

  • Company Name: Must be a direct reflection of your global headquarters.
  • Business Scope: Dedicated exclusively to non-profit activities such as establishing contacts (think preparatory and auxiliary tasks!).
  • Legal Liability: Your global headquarters is directly answerable for the Liaison Office’s obligations.
  • Independence: While part of your larger corporate structure, the Liaison Office operates under the strategic guidance of the headquarters.

Establishment Essentials for Liaison Offices:

  1. Registration Step 1: Liaison Offices must initiate their establishment by registering with a foreign exchange bank in Korea. This is a crucial first step in legitimizing your presence in the Korean market.
  2. Registration Step 2: Obtaining a tax identification number is essential. This number is critical for ensuring compliance with Korean tax regulations and is a fundamental aspect of your business setup. #BusinessSetup #CorporateStrategy
  3. Bank Accounts & Contracts: If your plan includes setting up a bank account for the Liaison Office or if the Office needs to enter into legal contracts in Korea, additional steps for establishment are required. These extra measures are important for offices that seek more operational independence and financial handling capabilities within Korea.

Accounting & Taxation Insight: A Liaison Office is free from the usual demands of bookkeeping according to Korean standards and is not subject to corporate income taxation - a significant consideration for financial planning. #Accounting #TaxExemption

📢 Recently Introduced Reporting Requirement (Effective from FY 2022): The Korean government has introduced a new reporting requirement for liaison offices of foreign corporations. This includes:

  • Submission of Specific Information Annually: Overview of the liaison office, foreign corporation details, domestic transactions, and total input VAT invoice amounts.
  • Purpose: To prevent businesses from conducting income-generating operations through their liaison office.
  • Deadline: Report due by February 10th of the following year for the previous year's activities. #Compliance #RegulatoryUpdate

🔑 Closing Thoughts

A Liaison Office offers a prudent approach to market entry with its non-revenue-generating scope. Yet, with the recently introduced reporting requirements, it's crucial to align your business strategies with the current legal framework (non-profit generating activities only).

🔜 Upcoming in Our Series: The Korea Branch. Get ready to explore another critical entity type that could shape your strategy in Korea. Don't miss out on these essential insights!

Stay tuned and stay informed—your journey into the Korean business arena is just beginning.

For the latest insights and updates on global business expansion, we invite you to connect with the CEO's LinkedIn profile by clicking on the LinkedIn icon at the bottom of the webpage. We share valuable market insights, trends, and strategies that empower your business journey. Let's engage, learn, and grow together.

#ForeignInvestment #KoreaBusiness #BusinessExpansion #MarketResearch #BusinessSetup #CorporateStrategy #Accounting #TaxExemption #Compliance #RegulatoryUpdate #BusinessGrowth #KoreanMarket

Published: 23 January 2024

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