>> Branch Office

How & When?

If you need to provide your goods or services through a permanent establishment in Korea, you have to register it with the court as a branch. The registration will allow a foreign company to hold its assets in the branch's name. This improves the control the head office has over its assets and make it much easier to replace employees and transfer assets, compared with a liaison office.

A Korea branch of a foreign corporation should be registered with the following three Korean institutions, at a minimum.

Foreign exchange bank (or Ministry of Finance & Economy)
Jurisdictional Court
Tax Office

Registration with the bank

A Korea branch of a foreign company should be filed to foreign exchange bank along with the following documents :

Application form for establishment of Korea branch
Business Plan
Documents verifying identity of the foreign company concerned (e.g., name, address, etc.)

In the following cases, however, registration should be made to the Ministry of Finance and Economy.

Finance related business other than banking (i.e, lending of funds, arrangement of foreign finance, credit card business, etc.)
Business which is not permitted pursuant to laws and regulations of Korea
Business which would likely to harm public morals

Registration with the court

Under the Commercial Code of Korea, a Korea branch of a foreign corporation should be registered with the jurisdictional court as a legal entity. The documents required for registration are as follows:

Certified copy of the articles of incorporation establishing the Korea branch
Certificate of Corporate information in the designated form
Certificate of Corporate Resolutions approving the establishment of the Korea branch and appointing the Korea branch representative.
Power of attorney
Certificate of Corporate nationality

All of the above documents must be issued or certified by the competent public authorities where the corporation is incorporated. If those procedures are not available, the Korean Court may accept the document certified by a notary public if either :

a) the notary is a public authority or
b) the documents are authenticated by a certificate from a public authority.

As a matter of practice, the court registration officials also request that the document be confirmed by a Korean Consul in the Country where the corporation is incorporated.

Registration with Tax office

No later than twenty(20) days following the registration with the court, the following documents should be submitted to the appropriate tax office to get the tax code number.

Application in designated form
Certificate of Court registration
Registration Certificate of foreign company
opening balance sheet with details of accounts
Others, if requested

Tax Liability of a Branch Office

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.