Establishing a Branch Office in Korea

Setting up branch offices offers companies a strategic advantage by establishing a business presence in Korea without needing a local head office. This approach allows companies to exercise their rights under South Korean jurisdiction and aids in property development. The registration fees for a Korean branch vary based on the parent company's authorized share capital, with higher capital leading to higher costs.

Branches engage in profit-generating activities independently in Korea, without local incorporation, and are not categorized as direct foreign direct investment. Head offices and their foreign branches operate as a single legal entity, sharing accounting and settlement processes. Unlike liaison offices, branches are authorized and encouraged to participate in sales activities, operating as independent legal entities responsible for their debts and liabilities. The process of forming a branch is simpler and less formal than that of establishing a local corporation, with lower registration fees. This setup is ideal for limited operations, with the option for foreign companies to transition to a local subsidiary if necessary.

Procedure for Establishing a Branch Office

A. Commercial Act Definitions: The Commercial Act recognizes business establishments as branches, requiring registration when foreign companies conduct business in Korea.

B. Registration Process:

1. A company representative residing in Korea must submit the application.
2. The registration must be completed within three weeks of establishing the business office.
3. Registration documents should include the delegate's name and address in Korea, business type, and compliance with relevant incorporation laws.
4. Required attachments include certification of the representative's qualifications, meeting minutes, proof of the headquarters' existence, and documentation of the company's category or incorporation instruments.
5. The application form should include the company name in Korean, head office details, Korean business office address, registration purpose, and other relevant information.
6. Register the business with the local tax office in Korea.

C. Required Documentation for Branch Formation:

• Verification of the head office's business operations (e.g., certificate of incorporation registration)
• Proof of qualification as a branch representative in Korea
• Certified articles of incorporation from the relevant government authority
• Certificate of approval, if applicable
• Korean translations of the above documents
• Proof of tax payment
• Sealed impression transcript of the branch representative in Korea (a notarized sealed signature is required for foreign nationals)
• Written consent from the branch representative
• Address documentation for foreign nationals
• Branch Establishment Notification Form

Notification of Branch Establishment

A notification for establishing a branch must be submitted to a foreign exchange bank. In specific cases, this notification must be directed to the Ministry of Finance and Economy. Such cases include financial activities beyond traditional banking, securities and insurance ventures, business activities not sanctioned by Korean laws, and those that could compromise public morals and order.

When notifying the Foreign Exchange Bank, the required documents include an official statement, the head office's incorporation instruments, a certificate appointing a local branch manager, a power of attorney, and a copy of the company's registration certificate or business license.

Conclusion

To conclude, establishing branch offices in Korea provides a strategic avenue for companies to establish a business presence without needing a local head office. This strategy ensures compliance with South Korean jurisdiction and aids in property development. Registration fees depend on the authorized share capital of the parent company, with higher capital leading to higher fees. Branches operate independently in profit-making activities without local incorporation and contribute to foreign direct investment, forming a unified legal entity with shared accounting processes. Unlike liaison offices, branches are encouraged to engage in sales activities and act as independent entities accountable for their financial activities.

Pearson & Partners specializes in facilitating business expansion into Korea, offering comprehensive support with branch formation, incorporation, and tax accounting. For expert guidance on legal requirements and strategic decisions, contact us.