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FAQs about Foreign Invested Companies I

FAQs about Foreign Invested Companies I

Date: July 3, 2020

I. Introduction

The following is the most frequently asked questions about establishment of foreign direct investment corporations.


II. FDI Corporation Establishment

Q1. What are the procedures for establishment of a corporation?

Preparing POAs (in case of delegation) -> notification of foreign investment (bank) ->capital remittance-> receipt of a certificate of balance -> corporation establishment -> business registration -> receipt of a certificate of FDI Corporation



Q2. How long does it take to establish a corporation?

It varies depending on how fast POAs are prepared and how long it takes to make a remittance of capital money. It takes about seven days (except weekend) to establish a corporation and a business certification is issued since all documents and POAs are submitted.



Q3. Is it possible to invest less than 100 million won?

Of course, there is no problem with it but you should make a notification for acquisition of shares under the Foreign Exchange Transaction Act. The difference is that you are given D8 visa and your company is recognized as a foreign invested company only when you invest 100 million won and more.



Q4. Is it ok to remit the capital to someone I know in Korea beforehand?

No. You must file a notification for foreign invested company first before making any remittance of a capital fund.



Q5. Then, how can I transfer capital for company establishment?

When you file a notification for foreign invested company to a bank the bank opens an account specially designated for company establishment and your capital must be transferred to the account. Your capital fund will stay in the bank account until your corporate establishment finishes.



Q6. Account transfer is the only way to send capital?

No. You can carry in capital. However, you must declare the money at customs.



Q7. If a domestic investor and a foreign investor establish a corporation together is it recognized as a foreign invested company, too?

Yes, it is. When total capital is 100 million won and more and the amount invested by the foreign investor exceeds 100 million won it is deemed a foreign invested company.



Q8. Is there anything to be prepared for establishment in advance?

You should determine your company name, capital, the representative and executives of the newly established company, and the location of headquarters. A lease contract is the essential document for business registration. Therefore,it must be prepared beforehand.



Q9. Is there anything to be prepared by foreign investors?

Foreign investors need to prepare Power of Attorney (POA). Required documents vary depending on whether a foreign investor stay in Korea during establishment and he or she will be the representative of the corporation. Please check in advance in terms of required documents.



Q10. How much does it cost to establish a FDI corporation?

For the case with the capital of 100 million won,taxes including the registration fee are about 1.5 ~ 1.8 million won for establishing a corporation in the over-populated constraint district, excluding judicial scrivener’s fees and consulting fees for corporate establishment.Taxes increase as you invest more.



Q11. Is it mandatory to have an auditor?

No. If capital does not exceed 1 billion won it is not a must for a company to have an auditor in the corporation. However, in that case, it takes longer to establish the corporation and costs more such as notarial fees.



Q12. Is it mandatory for a foreign representative to stay in Korea?

No. The foreign representative does not have to say in Korea and could be exempted from health care insurance and national pension with the submission of confirmation of working without pay.



Q13. Is it regarded as a foreign invested corporation to buy a company by buying stocks of an existing company?

Yes, but the capital for acquisition should be 100 million and more, and foreign investment notification is required.



Q14. When a domestic corporation increases capital and foreign investors buy the new stocks is it regarded a foreign invested company?

Yes. It is regarded as a foreign invested company. However, foreign investment notification should be field and required documents need to be checked in advance.



Q15. Should foreign investors always be a corporation?

No. Individual businesses are also the case. However, for individual businesses, D8 visa is issued only when 300 million won and more is invested.






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