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36 Country starter pack Getting started in Korea 2.4 MANUFACTURING IN KOREA Korea is an attractive destination for high-end manufacturing thanks to its highly skilled workforce, world-class infrastructure, advanced research and development, and strategic location for Asia and the Pacific. But businesses interested in setting up manufacturing operations in Korea should bear in mind that it is not a low-cost destination. The Korean Government actively encourages foreign investment in manufacturing and offers various incentives. Free trade, free economic and foreign investment zones offer specific incentives for high-tech manufacturers to set up in their locations (as discussed in section 2.1). To establish and register a company in Korea, the FIPA requires the following procedures, which normally take between four to six weeks to complete: • Foreign investment notification • Investment capital remittance • Incorporation registration • Business registration • Transfer of paid-in capital to corporate account • Foreign invested company registration. Branch office All foreign companies – except those operating in sectors where foreign investment is restricted – may set up a branch in Korea. The establishment of a branch is completed upon registration at a relevant tax office and the court registry. It usually takes two to three weeks to set up a branch office after receiving all the required documents from the head office. Additional approval may be required from relevant ministries, depending on the industry involved. For example, the Financial Services Commission must authorise banks, securities companies and other types of financial institutions. Branch offices are subject to the Foreign Exchange Transactions Law, and may be established as either repatriating or nonrepatriating entities. Liaison office Foreign companies are permitted to establish liaison (representative) offices in Korea. Compared to Joint Stock and limited liability companies, however, liaison offices have more restrictions on their activities and cannot conduct commercial business or generate revenue in Korea. Allowed activities for liaison offices include non-revenue generating activities such as marketing or promotion, market research, review of business opportunities and research and development. Selling goods or services is strictly not permitted. Liaison offices are available for foreign companies engaged in all sectors of the Korean economy and are covered by the Foreign Exchange Transactions Act. A JV with a Korean business is a popular option for foreign businesses wishing to establish manufacturing operations there; be it to produce a product for the Korean market or export to third countries. Another option is to engage a contract manufacturer. Contract manufacturers provide engineering and manufacturing services to companies and brands that do not want to own and operate their own factories. They are typically experts in manufacturing and can quickly adopt your products into their manufacturing lines and schedules. In engaging a contract manufacturer, make sure you have robust quality control mechanisms in place and perform due diligence (see Chapter 4 for further information on this). So how does Korea rank relative to other countries for ease of establishing business? The World Bank and International Finance Corporation in their Doing Business Report 2015, have compared 189 nations on nine specific measures related to establishing a business. As highlighted earlier, Korea was ranked fifth out of 189 economies for overall ease of doing business – with Singapore number one and Australia ranked 10th. They have particularly made starting a business easier by reducing costs, allowing online payment of registration taxes, setting time limits for value added tax registration and eliminating the minimum capital requirement and notarisation requirements.
Country starter pack Getting started in Korea 37 Nine areas to consider when setting up a business in Korea STARTING OFF DEALING WITH CONSTRUCTION PERMITS ELECTRICITY CONNECTION ☑ ☑ ☑ It takes three procedures to establish a corporate entity in Korea and it takes an average of four days to complete. Permits take an average of 29 days to acquire and involve 10 procedures. Korea is ranked 1st in the world for ease of getting electricity connected. It requires only three procedures and takes just 18 days. REGISTERING PROPERTY GETTING CREDIT PROTECTING INVESTORS $ Ranked 79th in the world, it takes seven days and seven procedures to register a property, which includes preparation of sale agreement and application by the buyer for the registration for the title. Korea is ranked 36th on the ease of obtaining credit. Although this is significantly better than developing Asian nations, it does not compare to regional peers such as Singapore (17th) and Australia (4th). Korea has relatively strong investor protection, with a world ranking of 21. Disclosure requirements have continued to improve, increasing transparency and protecting minority investors’ rights. PAYING TAXES TRADING ACROSS BORDERS ENFORCING CONTRACTS AND RESOLVING INSOLVENCY > Ranked 25th for ease of complying with tax laws, firms in Korea on average make 10 tax payments a year, and spend 187 hours filing, preparing and paying taxes. To import goods into Korea, it takes an average of three documents and seven days and costs $695 in administrative charges. Australia, by comparison, is ranked 49th. It takes an average of 230 days and 32 procedures to enforce a contract in Korea, with costs averaging 10.3 per cent of the value of the claim. Overall, Korea is ranked 4th on this measure.
Page 1 and 2: REPUBLIC OF Korea COUNTRY STARTER P
Page 3 and 4: SURFACE AREA 99,400 square kmS GDP
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Country starter pack Engage with us
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