Set up a branch office in Korea or establish a liaison office to expand your business into one of Asia’s most vibrant markets. Both options provide unique opportunities to establish a corporate presence, but they differ in purpose, requirements, and tax implications. This guide covers everything you need to know about setting up either a branch or liaison office in South Korea.
What is a Branch Office in Korea?
A branch office in Korea allows foreign companies to conduct profit-generating activities such as sales and business operations. Under the Foreign Exchange Transactions Act, branch offices must undergo a formal registration process and are treated as permanent establishments under Korean tax laws.
Key Features of a Branch Office:
- Activities: Engages in revenue-generating operations.
- Legal Registration: Requires court and business registration.
- Taxation: Profits generated in Korea are subject to corporate tax rates, ranging from 10% to 22%.
What is a Liaison Office in Korea?
A liaison office in Korea, on the other hand, is restricted to non-sales activities. It serves as a representative of the head office and focuses on tasks like market research, R&D, and quality control. Liaison offices do not require court registration but must obtain a business code from the local tax office.
Key Features of a Liaison Office:
- Activities: Limited to non-sales functions such as business contacts, market research, and advertisements.
- Legal Registration: No court registration required; instead, a tax identification number is issued.
- Taxation: Liaison offices are not subject to corporate tax as they do not generate profit in Korea.
Differences Between a Branch Office and a Liaison Office
| Criteria | Branch Office | Liaison Office |
|---|---|---|
| Purpose | Revenue-generating activities | Non-sales activities |
| Legal Registration | Court registration required | Tax identification number only |
| Taxation | Subject to corporate tax | No corporate tax |
| Activities | Sales, operations, and services | Market research, R&D, etc. |
Steps to Set Up a Branch Office in Korea
Establishing a branch office requires compliance with the Foreign Exchange Transactions Act. Below is the process:
- Submit Application: Report the establishment of a branch to a foreign exchange bank.
- Approval: The application is reviewed by the bank and the Ministry of Strategy and Finance. Approval typically takes one week.
- Registration: For branch offices, court and business registration are required.
- Compliance: Complete relevant administrative procedures in line with Korean laws.
Required Documents for Branch Office Registration
When setting up a branch office in Korea, you’ll need the following:
- A completed application form for branch establishment.
- Articles of incorporation (notarized in the country of the head office).
- Certificate of appointment for the branch representative, including a passport copy.
- Power of attorney for delegated tasks (notarized).
- A certified copy of corporate registration or relevant permits (notarized).
- A resolution from the board of directors approving the branch establishment.
Steps to Establish a Liaison Office in Korea
The process for setting up a liaison office is more straightforward:
- Report the establishment of the liaison office to a foreign exchange bank.
- Notify the Ministry of Strategy and Finance for certain restricted business activities, such as financial or securities-related tasks.
- Obtain a unique business code from the local tax office.
Since liaison offices are not engaged in sales, their establishment process is less complex than that of branch offices.
Key Differences Between a Foreign-Invested Company and a Domestic Branch
| Aspect | Foreign-Invested Company | Domestic Branch of Foreign Company |
|---|---|---|
| Governing Law | Foreign Investment Promotion Act | Foreign Exchange Transactions Act |
| Corporation Type | Domestic Corporation | Foreign Corporation |
| Accounting | Independent entities | Consolidated with the head office |
| Minimum Investment | KRW 100 million | No minimum |
Reference: Invest Korea
Why Choose Behalf Korea?
Navigating the complexities of setting up a branch office or a liaison office in Korea can be challenging, especially for foreign businesses unfamiliar with Korean regulations. Behalf Korea specializes in facilitating the establishment of both branches and liaison offices, ensuring compliance with Korean laws and a seamless setup process.
How Behalf Korea Helps You:
- Expert guidance on legal requirements and tax obligations.
- End-to-end support with documentation and application submissions.
- Tailored solutions to align with your business objectives in Korea.
At Behalf Korea, we clear the path for your success so you can focus on growing your business in South Korea. Contact us today to learn more!
