Korea Company Incorporation: Tax, Visas, and Employment Regulations

Starting a business in South Korea involves thorough planning and understanding of taxation, employment, and regulatory requirements. From determining corporate tax rates to selecting suitable visas for foreign employees, navigating these processes is essential for a smooth business setup. Despite these considerations, South Korea’s strong economy and expanding market make it a prime destination for foreign investors.

Taxation Essentials

Businesses in South Korea are required to comply with the local tax laws. Domestic companies are taxed on their worldwide income, while foreign entities, such as branch offices, are taxed only on profits earned within South Korea. All companies are obligated to file annual audited tax returns.

Corporate tax rates vary based on the company’s profits, beginning at 10% for earnings up to KRW 200 million. Higher profit margins are subject to higher rates, reaching 25% for profits exceeding KRW 300 billion. The South Korean government provides numerous incentives to attract foreign investment, including financial assistance, tax exemptions, and streamlined immigration procedures, all of which are designed to ease the business incorporation process.

Employment and Visa Options

Foreign workers in South Korea are classified into two primary groups: migrant laborers with E-9 visas, typically employed in industries like construction or manufacturing, and skilled professionals holding E1-E7 visas, often working in areas like education, research, or specialized industries.

The E-9 visa allows non-professional workers to be hired under the Employment Permit System, while the H-2 visa is available for overseas Koreans seeking similar employment opportunities. This system helps maintain a stable labor supply while safeguarding local employment.

For foreign investors and skilled professionals, the following visa categories are relevant:

• D-7 (Intra-company Transfer) Visa: Designed for employees being transferred to a Korean branch after at least one year of service with a foreign company.
• D-8 (Corporate Investor) Visa: Issued to individuals investing a minimum of KRW 100 million in a South Korean company. Setting up a local corporation, which generally takes around two weeks, is a prerequisite.
• E-7 (Special Ability) Visa: Available to skilled professionals in specialized fields. Applicants need a bachelor's degree and relevant professional experience, or at least five years of work experience in the field.

For E-7 visa holders, companies typically must employ a minimum of five Korean nationals. However, certain industries, especially those related to IT, may be granted exceptions.

Key Considerations for Incorporation

Establishing a business in South Korea also requires determining the corporate structure, including the number of shareholders and directors. Although there’s no strict minimum capital requirement, it’s important to account for registration fees and any necessary initial capital deposits in a local bank. Generally, the process for incorporating a company in South Korea takes about two weeks to complete.

Despite challenges such as limited natural resources and high population density, South Korea ranks among the world’s largest economies, standing at 15th in nominal GDP and 12th in purchasing power parity (PPP). As a global leader in exports and imports, the country offers a favorable environment for international investors.

Conclusion

South Korea provides foreign investors with significant opportunities for growth. With a stable and flourishing economy, understanding the core aspects of corporate taxation and employment laws is essential for success. The government's pro-investment policies, including tax incentives and simplified processes, further enhance South Korea's attractiveness as a business destination.

Contact us for expert assistance with every step of the Korea company incorporation process, from initial consultations to managing compliance and registration. Our team is committed to ensuring a smooth and efficient business setup for your company.