Benefits and problems of registering a company in South Korea

Press the link headings below to read detailed, relevant, up to date information.

  • Benefits and problems

    Benefits of South Korea company registration

    Doing business in South Korea

    South Korea business registration agreement

    • A limited liability company can be incorporated within two weeks, with a minimum of one shareholder and one director of any nationality. Our Client will not need to travel to South Korea for completing the registration process;
    • There are no restrictions on foreign currency accounts or the repatriation of capital and earnings;
    • To attract foreign direct investment (FDI) on South Korea offshore company, the Korean government passed the Foreign Investment Promotion Act in 1998. The Act opened up 99.8 percent of Korea’s industries to foreign investment and provided significant protection for investor interests. Under the Act, foreign investors also receive incentives including tax breaks and cash grants.
    Free Economic Zones
    • Foreign enterprises registered within Korean economic free zones are exempted from corporate tax for a period of five years. Currently, there are eight main free economic zones including Incheon, Busan-Jinhae and Gwangyang bay area;
    • Within these free zones, there are no import tariffs for three years for the South Korea free zone company;
    • The Free Zone tax exemption only applies to foreign companies with a minimum investment of i) at least US$10m in manufacturing and tourism business and ii) at least US$5 million in logistics and medical fields.
    • South Korea boasts high skilled labour with a literacy rate of above 97% and a technologically advanced rate of 60%. Labour survey shows that 80% of adults aged 25-64 have a university degree;
    • South Korea has the world’s highest estimated national IQ, with leading rankings in mathematics, science, problem solving and reading, as declared by the OECD (Organization for Economic Co-operation and Development).
    Ideal location for manufacturing and high-technology companies
    • South Korea is one of the leading nations in manufacturing of electronic products such as semi-conductor chips, flat-screen TVs and mobile phones;
    • The country has an excellent IT infrastructure including having the highest i) broadband penetration in the world and ii) 3G mobile phone usage;
    • The country exposes the companies to a huge and dynamic domestic consumers market of approximately 50 million people. Further, it also gives these companies an access to the ASEAN, European and African markets.

    Problems with South Korea company registration

    • Foreign directors and members of the company are required to furnish legalized/apostilled documents prior to registration of the company. The same results in 2 weeks delay in the company registration process;
    Business costs
    • South Korea’s labour costs are high. The average monthly salary per skilled worker is US$3,700 excluding bonus;
    • To employ a foreign national, it is necessary to have a minimum paid up share capital of US$100,000;
    • Before the business registration process is completed, a lease agreement for a local office must be signed by the foreign investors. Healy Consultants provides shared office space for our Clients at US$950 per month;
    • Renting an office in South Korea is expensive. The average office rental per month in South Korea is around US$60 per sq. ft.;
    • Renting industrial space in key business areas in South Korea will be expensive, thereby adding to the cost of business registration. In South Korea, the average industrial space rent per month amounts to around US$55 per sq. ft.
    Language Barrier
    • Only 10% of the South Korean population speaks English fluently, consequently language will be a barrier when conducting business;
    • The official business language in South Korea is also Korean. Consequently, entrepreneurs will be required to translate all documents from English to Korean when registering the company. Furthermore, this problem will persist when as all documents will be in the local language.
    Government restrictions
    • The South Korean government prohibits foreign investment in certain industrial sectors including power generation, certain agriculture industries, news broadcasting and some farming activities;
    • Government tenders tend to favour either i) South Korean nationals or ii) companies with South Korean nationals;
    • Employee unions are strong and there are frequent strikes impacting public service;
    Stiff competition from local competitors
    1. Foreign entrepreneurs are likely to face tough competition from their fellow domestic competitors in most of the sectors in South Korea. Further, most of them are required to lower their prices to be at-par with the local firms;
    2. There has also been a steep rise in the wages of the domestic labour market in South Korea. As a result, an additional financial burden has been imposed on foreign employers;
    3. The Chaebols in the country have a monopoly in many diverse sectors such as energy, manufacturing and technology of the South Korean market. Therefore, foreign entrepreneurs often find it difficult to expand and grow in the country.
  • Best uses for a South Korea company

    Infrastructure and location

    1. South Korea is ideally located between China and Japan, two of the world’s biggest economies. International trade between these economies is seamless and thus, it is a strategic location to incorporate in South Korea;
    2. South Korea boasts a technologically advanced air, land and sea transport network, allowing quick delivery of goods and raw materials within the country;
    3. Incheon International Airport is a leading logistics and transportation hub in Northeast Asia, equipped with state-of- the-art facilities. Entrepreneurs can expect to have their customs clearance time cut by 50%;
    4. Over the coming 5 years, South Korea will invite tenders from foreign construction companies to help develop infrastructure spending of US$300bn on airports, roads and railways by 2020.

Contact us

For additional information on our company registration services in South Korea, please contact our in-house country expert, Ms. Chrissi Zamora, directly:
client relationship officer - Chrissi