South Korea

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Local business incentives - Legal forms of companies - Registration and licensing procedures - Legal framework - Foreign exchange control - Regulations concerning equity investment - FDI inflows - Expertise of the political risk

Local business incentives

Whenever investors introduce high technology, they can be granted tax exemptions for 5 years after the creation of a company in Korea. Most incentives are tax exemptions. Free trade zones have been created, some of them are disappearing and others are under creation. A new zone should be established in Asan, in Chungchong's province, on a small surface, to attract foreign investors bringing high technology. These companies will be exempt from any governmental procedures to establish in the country and they will have free access to the local market to distribute their products.
The KOTRA is an investment promotion agency, which provides assistance and support for international investors.


Legal forms of companies

Form Number of partners/shareholders Minimum and/or maximum capital Liability Registration fee Release of financial documents
Yuhan Hoesa is a Private Limited Company. Minimum 2 partners. Maximum 50 partners. 10 million won Liability is limited to the amount contributed. Lower expenses as compared to a Chusik hoesa. No
Chusik hoesa is a Public Limited Company. Minimum 7 partners on registration, then this number can be reduced to 1. 50 million won Liability is limited to the amount contributed. About 2.4% of the capital in Seoul, Pusan, Taegu and Inchon. For other cities, about 0.48%. Yes
Hapcha Hoeasa is a limited partnership Two types of partners: the active partners and the sleeping partner No minimum capital. Liability of active partners is unlimited. Liability of sleeping partners is limited to the amount contributed when they do not take part in the company management. Lower costs than those for Chusik hoesa. No
Hapmyung Hoesa is a general partnership. Maximum 2 partners. No minimum capital. Liability is unlimited. Lower expenses as compared to a Chusik hoesa. No

Registration and licensing procedures
Status must be drawn up in Korean in a deed drawn up by a solicitor. Status must be registered with the Korean Court Registry. A notification must be published in a journal of legal advertisements.

Legal framework
The Foreign Investment Promotion Act (FIPA) came into force on November the 17th of 1998 and controls foreign investments in South Korea.

Foreign exchange control
Since April 1st 1999, there are no exchange controls on capital flows linked with foreign direct investment operations. Free conversion of currencies is carried out, as well as the right to transfer profits and capital with the application of the ruling rate.

Regulations concerning equity investment
Since the application of the Foreign Investment Promotion Act, foreign investors can hold a majority of the capital of a local company.  

Foreign Direct Investment inflows in South Korea

FDI inflows 2003 2004 2005 World rank (*)
FDI inflows (USD million) 3 892 7 727 7 198 114/141
Source : UNCTAD - World Investment Report
Note : (*) World Rank = UNCTAD Inward FDI Performance Index. It is a measure of the extend to which a host country receives inward FDI relative to its economic size. It is calculated as a ratio of the country's share in global FDI inflows to its share in global GDP.


Last modified in 2006 - ongoing update
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