Title1
A foreign company intending to establish a branch in Korea
(hereinafter referred to as ¡°the foreign company¡±) is required
to perform the following procedures:
| File an application for the establishment
of a branch with a designated foreign exchange bank
in Korea. Upon obtaining the bank¡¯s acceptance of the
application, the foreign company shall have the branch
registered with the bank. (Hereinafter referred to as
¡°Bank Registration¡±). |
| Once the branch is registered with
a bank, the foreign company shall register the branch
with a court. (Hereinafter referred to as ¡°Court Registration¡±). |
| Upon completion of the two steps
above, the foreign company shall report establishment
of a branch to a tax office and have the branch registered
with the tax office for taxation purposes. (Hereinafter
referred to as ¡°Tax Registration¡±). |
It takes approximately one and a half week to complete all
the branch establishment procedures provided that all required
documentation is made available to us. |
|
Each of the four steps summarized in the foregoing chapter
requires various forms of documentation. Some of the documents
are required to be submitted to several different authorities.
These documents will be reproduced by us and submitted to
the relevant authorities. Therefore, the foreign company is
only required to provide us with one copy of each of the required
documents.
All of the required documents and information should be prepared
in English by the foreign company. We will be responsible
for translating all required materials into Korean for submission
to the concerned authorities in Korea.
The required documents may be classified into two categories,
i.e., documents that should be prepared by the foreign company
and documents that should be prepared by our firm ("Lian")
based on the information provided by the foreign company as
listed below:
Documents to be prepared by
the foreign company
| A certificate of corporate resolution
regarding establishment of the Korea Branch and nomination
of the Branch Representative by the foreign company
(for Bank and Court Registration); |
| A certificate of information on
the foreign company (for Court Registration); |
| Acceptance of election as Branch
Representative (for Court Registration); |
| A certificate of corporate nationality
(for Court Registration); |
| An application for registration
of the Korea Branch¡¯s seal impression (for Court Registration); |
| Powers of attorney (for Bank, Court
and Tax Registration); |
| A certified copy of the resident
registration of the Representative of the Korea Branch
if the representative is a Korean national, or a copy
of a valid passport (the page with photo) if the representative
is a foreign national (for Court Registration); |
| A copy of the Articles of Incorporation
of the Head office; |
| A copy of the lease agreement of
the Branch office (for Bank and Court Registration).¡Ø¡Ø
Address of the branch should be presented in various
applications to be filed with the concerned authorities
including a bank, a court, a tax office and Korea Foreign
Trade Association. Therefore, the Korea Branch is required
to have a fixed place of business (i.e., a fixed address)
prior to filing of the establishment-related applications. |
Documents to be prepared by
Lian
| An application for registration
of a branch (for Bank Registration); |
| Plan of business activities (for
Bank Registration); |
| A report on Branch establishment
(for Court Registration); |
| A copy of a bank¡¯s acceptance of
Branch establishment (for Court Registration); |
| A certified copy of court registration
of the Branch (for Tax Registration); |
| Beginning balance sheet of the Branch
(for Tax Registration); |
| A sketch of Branch office location
(for Tax Registration); |
| A certificate of registered seal
impression (for Tax Registration); |
| Translation of the Exhibits in Korean
(for Bank, Court and Tax Registration) |
In addition to the above listed documents, various other documentation
will be prepared by Lian based on the information to be provided
by the foreign company as summarized in the following chapter.
Therefore, the foreign company is required to provide Lian
with the information in a timely and precise manner. |
|
| Information that should be provided by the foreign
company to Lian |
Information regarding the
foreign company
| Corporate (or trade) name |
| Date of incorporation |
| Representative¡¯s name |
| Corporate address |
| Major business |
| Paid-in capital (number of shares,
par value, etc.) |
| Law under which the company was
incorporated |
| Sales volume for the most recent
year |
| Details of transactions made with
Korea (e.g., export to or import from Korea, if any) |
| Other pertinent information on the
foreign company, if specifically requested by us |
Information regarding the proposed
Korea Branch
| Name of the Korea Branch |
| Representative¡¯s name, address,
passport (or residence certificate) number and nationality |
| Purpose of establishing the Korea
Branch (A broad definition of the scope of business
intended to be carried out in Korea) ; |
| Description of assets, if any |
| Fiscal year |
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Title1
| Tax Liability of a Branch Office |
| 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. |
|
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. |
|
| 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. |
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