D8 Visa: Facilitating Business Establishment in South Korea

If you are considering establishing a business venture in Korea and obtaining a D8 Visa, it's crucial to navigate the intricacies of the business landscape and visa application process. This journey involves key steps, from selecting an appropriate business structure to adhering to legal requirements for registration and tax compliance. In this guide, we will walk you through the essential aspects of setting up a business in South Korea with a D8 Visa, providing insights into company formation, foreign direct investment, and the necessary procedures for a successful business endeavor in this dynamic market.

Selecting a Company Name

When initiating the company formation process in South Korea, the first crucial step is to choose an appropriate company name. It is essential to note that a Korean corporate name must be in Korean characters; the use of English alone is not allowed. Additionally, the chosen name should not resemble or match names of already registered entities and should avoid prohibited words. Ensuring compliance with these regulations and confirming name availability is a prerequisite, achieved through verification with the Korean Intellectual Property Office (KIPO).

Choosing a Business Structure

In the context of the South Korean business environment, companies have the freedom to select from various structures, each presenting distinctive legal and operational features. The decision regarding the structure is pivotal, significantly influencing the dynamics of business operations, ownership arrangements, and considerations related to taxation. Here are the primary business forms commonly embraced in South Korea, especially concerning the issuance of a D8 Visa:

1. Subsidiary Formation: The establishment of a subsidiary entails the creation of a distinct legal entity, whether partially or entirely owned by a parent company. Subsidiaries benefit from autonomy and limited liability, making them a preferred option for foreign businesses venturing into South Korea. This structure allows for separate management and financial control while capitalizing on support from the parent company.
2. Private Company (Yuhan Hoesa): Referred to colloquially as a Limited Liability Company (LLC), a private company extends limited liability protection to shareholders and is relatively straightforward to set up. Private companies offer versatility and flexibility in terms of management and taxation. In cases where foreign direct investment (FDI) of 100 million KRW or more originates from foreign individuals, private companies fall under the classification of foreign-invested companies as per the Foreign Investment Promotion Act. Despite this foreign investment, they are considered domestic corporations under South Korean commercial law.

Foreign Direct Investment (FDI) Declaration

What is Foreign Direct Investment (FDI)?

FDI refers to the act of foreign individuals investing in domestic corporations (including those in the establishment phase) to participate in management activities or establish sustained economic relationships. This can be done by acquiring 10% or more of the shares or investment stake, and the process can be handled by a Korean bank specializing in Foreign Direct Investment (FDI).

Foreign Investment Conditions

• Investment Amount: Each investor must contribute a minimum of 100 million KRW, with no upper limit.
• Investment Ratio: 10% or more of total voting shares or total contribution amount, but exceptions can be made if a foreigner is appointed as an executive or director.

Characteristics of Foreign Direct Investment

• Protection of Foreign Investors
• Guarantee of the disposal of investment stocks and external remittance of dividends
• Equal treatment with domestic individuals
• Declaration-based system, not a permit-based system

Foreign Direct Investment Process

• Acquisition of shares or equity of domestic companies
  • Acquiring newly issued shares or existing shares (existing shares)
  • Long-term subordinated loans (preconditions: capital injection by a foreigner must precede the provision of subordinated loans)
• Contribution to nonprofit corporations
  • Confirmation of capital injection by a foreigner is a prerequisite for providing subordinated loans

Setting Up an ESCRO Account, and Allocating Paid-Up Capital for Company Formation

Notify the bank about your business activities and initiate the establishment of an Escrow (ESCRO) account, ensuring a minimum deposit of 100 million KRW. This account plays a crucial role in financial arrangements during company formation and ongoing operations, guaranteeing the proper management of financial transactions. As part of this process, deposit the paid-up capital into the ESCRO account, with a minimum requirement of 100 million KRW, to fortify the financial infrastructure for initiating and sustaining your company. This step is essential for fulfilling regulatory requirements and demonstrating the financial stability of your business in South Korea.

Registration Process and Issuance of Certificate of Business Registration

Processing the Registration and Obtaining the Business Registration Certificate Navigate the company registration procedure at the Registry office while ensuring adherence to legal requirements. Furnish the required documents and details to the relevant authorities, facilitating the successful establishment of your business entity in South Korea. This registration process encompasses the acquisition of the business registration certificate.

Foreign Investment Company Registration

Required Documents:

• Certificate of foreign exchange purchase or declaration
  • Submit a foreign exchange declaration if carrying in person or a foreign exchange purchase certificate if the amount is received by remittance.
• Business registration certificate, corporate registry, and corporate seal certificate of the domestic company
  • For corporations, submit corporate registry and corporate seal certificate; for sole proprietors, these documents can be omitted.
• Identification of the domestic company's representative
  • If dealing through an agent, a power of attorney and identification of the agent are required.
• Shareholder registry
  • Submit a shareholder registry indicating the amount of investment for new investors.

Reference: KB Bank

D8 Visa Application Submission and Approval

Securing a D-8 visa involves the submission of necessary documentation to an overseas diplomatic mission or acquiring a confirmation certificate from the immigration control office. The visa is granted for a maximum duration of one year.

Required Documentation for D8 Visa Application

The documents necessary for assessment include:

• Dispatch order detailing employees sent to Korea
• Description of shareholders' modifications (original copy)
• Corporation registration certificate for the most recent quarter
• Copy of the registration certificate for the foreign-invested company
• Copy of the business registration certificate
• Certificate of tuberculosis examination for countries deemed high-risk
• Completed visa application or confirmation form
• Passport, passport photo, and associated service fees
• Employee's proof of employment for those sent to Korea
• Educational certificates for essential professionals
• Evidence of tax payment
• Proof of residence
• Introduction of investment funds
• Various documents specific to different investment types and amounts

Conclusion

In conclusion, establishing a business in South Korea, particularly with the aim of obtaining a D8 Visa, demands a strategic and meticulous approach. From the initial step of selecting an appropriate company name to navigating through the intricacies of business structures, foreign direct investment, and financial arrangements, each stage plays a crucial role in ensuring a successful business endeavor. Adherence to legal requirements, compliance with tax regulations, and the meticulous completion of necessary documentation are paramount in this dynamic market.

Pearson & Partners, a consulting firm specializing in aiding expansion into Korea, provides comprehensive services, including incorporation and tax accounting services, guiding clients through the entire process of visa issuance. Our expertise ensures a smooth and efficient journey in establishing and maintaining your business in South Korea. For tailored assistance and expert guidance, please do not hesitate to contact us.