South Korea is a country well-known for its domestic economic prosperity. However, over the past decades, Korea has opened up to foreign investors and international business. In fact, Korea now has dedicated visas designed for foreign residents looking to start their own business in Korea. Depending on your nationality, there may be no constraints to the type of business you can start, or your business may have to fit within the 4 leading industries for global business: technology, construction, media and food. Ready to start your own business in Korea? Read on…
Before you Start Your Own Business in Korea
Checks and Balances
If you’re interested in starting your own business in Korea, you should note that it will almost certainly be completely different from in your own country. Notably, the Korean government has heavy involvement in domestic businesses, whether headed by Korean or foreign residents. Therefore, expect to deal with a lot of admin and paperwork. Additionally, there are several rules to adhere to when it comes to trading across one of Asia’s leading economic nations.
In order to set up a business in Korea as an immigrant, you will need to obtain a business visa. You can apply for a business visa via the Korean Embassy in your home country, or through the Foreign Immigration office if you are already in Korea. The business visa is an extremely coveted visa, and so you’ll need to do a lot of preparation in order to apply.
Things to Consider
Before applying for a business visa in Korea, there are many things you’ll want to consider first.
Economic & Bureaucratic Factors
Depending on the nature of your business, you may offer a service or sell a product. If you are selling a product, you’ll need to consider how it fits into the Korean market, as well as the necessary customs regulations.
Will you be importing and/or exporting your product and its components? As an international business, you will almost certainly be involved in at least one of the aforementioned processes. Be sure to research the Korea customs laws and I would recommend consulting a specialist as well, just to be safe.
Free Economic Zone (FEZ)
One of the great advantages of setting up a business in Korea is that you will have access to the Free Economic Zone (FEZ). Businesses within the FEZ are subject to tax reductions and other incentives, in order to promote the local economy. However, in order to benefit from these perks, the business owner or even investors must be present within the FEZ.
As a foreign businessperson, you will have to pay tax on domestic resources, where other Korean citizens do not. However, if you naturalize as a Korean, these rules may change. Tax is deducted at the time of purchase and paid into the local governing or authority. Furthermore, it is advised that products subject to Value-Added Tax (VAT) should enlist a duty specialist within 20 days of launch. VAT rate remains steady at 10% on all goods and services.
Culture and Social Etiquette
It is always important to think about cultural differences when moving abroad. Korea is not a hugely diverse nation, as such, most of the people you cross paths with will be Korean. While this may leave you feeling left out sometimes, it is an opportunity to get to know another culture and reach out to others. Additionally, be mindful that social etiquette is different here too, from bowing in place of handshakes to overt respect for those older than you.
Korea’s international popularity has seen Seoul become an easy city to live in, even when you cannot speak Korean. However, learning the native language won’t be anything other than beneficial to you, both as a resident in Korea and as a business owner.
You can rest assured that most global business will be carried out in English, a lot of the official reports and documents from the government and other offices will be in Korean. If learning Korean is not on the cards for you, bear in mind that you’ll either need a Korean staff member, or to consult a translator.
Types of Business in Korea
There are 3 major types of business that foreigners can set up in Korea. Each type features a unique business structure, requirements, pros and cons.
International Korean-based Company
In order for an international business to set up in Korea, they must have a minimum of 100 million won’s worth of investments at any given time, in order to qualify for a standard business visa.
Korean Branch of Foreign-based Business
A branch of a pre-existing foreign company can expand their business in Korea with a visa that allows them to establish a branch of their business in the country. Branches are not subject to the investment limit restriction, but are still considered solitary institutions.
A liaison office or consultancy firm carries out functional tasks, rather than generate business. For example, the office may conduct research, surveys and aid international collaboration with domestic businesses. Although they do not need to enroll as organizations, they must still report to the Korean trade bank and pay tax.