Branch Office | Liaison Office | |
Overview | - A branch office in Korea is an extension of the parent company and can conduct business activities to generate profits.
- This includes engaging in sales, transactions, and other revenue-generating operations. | Its primary purpose is to carry out non-commercial activities such as market research, advertising, and coordination with the head office. |
Capital Requirement | At least 1 billion KRW (Foreign Investment Promotion Act) | None |
Composition of Executives | - If capital is 1 billion KRW or more: At least three directors and one auditor
- If capital is less than 1 billion KRW: Fewer than three directors, auditor appointment optional | At least one branch representative |
Legal Liability | Limited to the local Korean corporation | Extended to the head office |
Independence | Legally independent | Subordinate to the head office |
Domestic Borrowing (Financing) | Possible depending on the creditworthiness of the local Korean corporation | Nearly impossible |
Establishment Procedure | 1. Foreign investment notification at a domestic bank 2. Court registration
3. Business registration | Same as left |
Legal Reserve | 10% of the dividend amount must be retained as a legal reserve within the company when paying cash dividends to shareholders | No obligation |
Accounting and Taxation | Books must be recorded and maintained in accordance with Korean corporate accounting standards, and corporations with total assets exceeding 10 billion KRW
or total liabilities exceeding 7 billion KRW and total assets of 7 billion KRW, or with 300 or more employees and total assets of 7 billion KRW or more, must undergo an external audit by an accounting firm. | Books must be recorded and maintained according to Korean tax laws, with no obligation for external auditing |
Corporate Tax Rate | 11% on the tax base up to 200 million KRW, and 22% on amounts exceeding 200 million KRW (including resident tax) | Same as left |
Taxable Income | All revenue generated by the local corporation is aggregated | Aggregate of domestic source income from the domestic branch |
Tax Reduction or Exemption | Various tax reductions are granted for high-tech businesses and small and medium-sized enterprises | Little to no tax reduction |
Remittance of Profits Abroad | Dividend income tax must be paid at the tax rate under the tax treaty | Non-taxable |
Value-Added Tax | Generally 10%, but a 0% rate applies to exports | Same as left |
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