South Korea has a high-tech industrial economy oriented toward foreign markets. World-famous corporations operate in the country, for example, Samsung, Hyundai Motor Company, SK Group, Korea Electric Power Corporation, LG Electronics, and many others. South Korean universities provide quality education and prepare qualified specialists who not only fill vacancies in the local labor market but also start successful businesses.
Salaries in South Korea in many industries are above the European average. The state has excellent infrastructure, transparent laws, and optimal conditions for entrepreneurs, including those from abroad.
Features of doing business in South Korea
Today, thousands of labor migrants seek to find work in South Korea, and some foreigners are interested in starting their own businesses. Of course, without the help of local specialists – lawyers, accountants, auditors – it is not at all easy to do this.
One of the main challenges is the language barrier, business culture, and mental differences among South Korean citizens. The adaptation process is rather difficult and takes a long time.
In addition, for the sake of objectivity, the well-being of the Republic of Korea should not be overly idealized. There are many problems in the country. For example, the internal political crisis of recent years, tensions with some neighboring countries, an aging population, an inflexible labor market, youth unemployment, the monopoly of large corporations, and a high dependence on exports, which account for about 40% of GDP. Plus the growing pressure from regional competitors – Japan and China.
South Korea attracts foreign businessmen around the world. Due to the comfortable business environment and tax system in the country.
This fact is partly confirmed by the well-known rating of the Doing Business agency, in which, as of 2020, South Korea ranks 5th out of 190 countries in terms of the availability of starting a business. This is the best result among all Asian countries after Singapore.
Business immigration to South Korea usually involves the preliminary opening of a special D-8 visa at the Korean diplomatic office. Within 90 days of arriving in South Korea, a foreigner registration card must be issued. The minimum investment for obtaining a visa is 100 million won, which is equivalent to 89 thousand dollars. Depending on the type of business, the D-8 visa is allowed to stay in South Korea for 2 to 5 years. In the future, you can obtain permanent resident status (F-5 visa).
Forms of ownership in South Korea
- Private businesses.
- Branch of a foreign company (Foreign Branch).
- Corporation (Corporations):
- General partnership. General Partnership (Hapmyeong Hoesa).
- Limited Liability Partnership. Limited Liability Partnership (Hapja Hoesa)
- Joint-stock corporation. Joint Stock Corporation (Chusik Hoesa).
- Limited Liability Corporation. Limited Liability Corporation (Yuhan Hoesa).
Taxes in South Korea in 2021
A number of free economic zones with a preferential tax regime and additional incentives for doing business have been created on the territory of South Korea. This is the most suitable option for overseas entrepreneurs planning to invest in the Korean economy or start a business from scratch. Very often, the local government even puts forward a prerequisite for foreigners to register companies in such zones.
Corporate income tax
Turnover up to 200 million won – 10%.
- Turnover from 200 million to 20 billion won – 20 million, plus 20% of the amount over 200 million won.
- Turnover from 20 billion to 30 billion won – 3.98 billion, plus 22% of over 20 billion won.
- Turnover over 30 billion won – 65.58 billion, plus 25% of over 30 billion.
- The annual income up to 12 million won – 6%.
- The annual income from 12 million to 46 million won – 720 thousand won, plus 15% of the amount over 12 million.
- The annual income of 46 million to 88 million won – 5.82 million won, plus 24% of over 46 million won.
- The annual income is between 88 million won and 150 million won – 15.9 million won, plus 35% of over 88 million won.
- The annual income of 150 million to 300 million won – 37.6 million won, plus 38% of over 150 million won.
- The annual income of 300 million to 500 million won – 94.6 million won, plus 40% of over 300 million won.
- The annual income is over 500 million won – 170.6 million won, plus 42% of over 500 million won.
Moreover, to national taxes, South Korea provides local taxes on corporate profits, as well as on the income and property of citizens. On average, the rates are around 10% of national taxes.
Business in South Korea for foreigners is an opportunity to enter large Asian markets and increase the competitiveness of their products.
In fact, for 20 years, the country has had a law “On Encouraging Foreign Investments” and local authorities are taking all necessary measures to attract foreign businessmen to their country.