Essential Post-Incorporation Compliance for Foreign Companies in Korea

Establishing a company in South Korea is just the beginning of your entrepreneurial journey. After incorporation, foreign businesses must navigate a series of post-incorporation compliance requirements to maintain legal standing and avoid penalties. This guide outlines the essential obligations that foreign companies should be aware of to thrive in the Korean market.

1. Obtaining a Business Registration Certificate (사업자등록증)

After your company is incorporated, securing a Business Registration Certificate from the National Tax Service (NTS) is crucial. This document must be obtained within 20 days of incorporation.

Why is it Important?

The Business Registration Certificate is essential for issuing tax invoices, hiring employees, and conducting business operations legally in South Korea.

2. Understanding Tax Compliance and Filing Obligations

Korean tax regulations are stringent, and adhering to them is vital for your business’s longevity. Key tax obligations include:

• Corporate Income Tax: Rates range from 9% to 24%, with a combined top rate of approximately 26.4% when local surtax is included.
• Value Added Tax (VAT): A standard rate of 10% applies to most goods and services.
• Filing Deadlines:
  • VAT returns are due quarterly.
  • Corporate income tax returns must be filed annually, typically within three months after the fiscal year ends.

Pro Tip

Maintain accounting records based on Korean GAAP to mitigate the risk of audits and ensure compliance with local tax laws.

3. Enrollment in Social Insurance Programs

Any business that hires employees in Korea is required to enroll them in four mandated social insurance programs:

• National Pension Service (NPS)
• National Health Insurance (NHIS)
• Employment Insurance
• Industrial Accident Compensation Insurance

Important Note

Failure to comply can lead to significant fines and the obligation to make back payments, so it’s essential to prioritize this aspect of your business operations.

4. Conducting Annual General Meetings (AGM) and Reporting

For Joint Stock Companies (JSC), holding an annual general meeting and filing audited financial statements is a legal requirement. Limited Liability Companies (LLCs) have less rigid requirements, but proper internal records must still be maintained.

Compliance Tip

Regardless of your company size, it’s advisable to prepare meeting minutes and keep financial documentation organized to ensure compliance with local regulations.

5. Adhering to Labor Laws

South Korea has stringent labor laws that protect employees. Key labor regulations include:

• A maximum workweek of 52 hours.
• Severance pay equal to one month’s wages for each year of service after one year of employment.
• Detailed regulations surrounding termination and employee rights.

HR Support Recommendation

If your company lacks in-house human resources expertise, consider outsourcing HR functions or using Employer of Record (EOR) services to ensure compliance.

6. Industry-Specific Licensing Requirements

Depending on your industry, you may need to obtain or renew specific licenses for operations (e.g., food and beverage, fintech, healthcare).

Compliance Reminder

Always verify if industry-specific regulations apply to your business beyond initial registration, as non-compliance can lead to serious consequences.

7. Ongoing Compliance Checklist

To maintain compliance, consider the following ongoing obligations:

• Timely filing of corporate taxes and VAT returns.
• Renewing licenses as necessary.
• Keeping accounting records aligned with Korean GAAP.
• Conducting AGMs if applicable.
• Ensuring HR, payroll, and social insurance practices are compliant.

Conclusion: The Importance of Compliance for Long-Term Success

For foreign investors, the incorporation of a business in South Korea marks the start of a more extensive journey. Success relies on meeting ongoing compliance requirements ranging from tax filings to labor law adherence. At StartCompanyKorea, we specialize in assisting companies not only with seamless registration but also with maintaining compliance year after year.

Ready to Enter the Korean Market?

Book a free consultation today to gain insights into both business registration and post-incorporation compliance. Our team is dedicated to ensuring you navigate the complexities of operating in Korea with confidence.

Additional Resources

For a comprehensive overview of setting up your business, check out our Pillar Guide to Korea Company Registration. For inquiries about specific topics, don’t hesitate to reach out to us.