FETA Compliance for Foreign Investors: Korea's Foreign Exchange Reporting Requirements (2026)

If your Korean business involves any cross-border transactions—whether receiving payments from overseas customers, paying foreign suppliers, or remitting profits to parent companies—you must comply with Korea’s Foreign Exchange Transaction Act (FETA).

Non-compliance isn’t just a paperwork problem. It can result in:

• Blocked remittances – Banks will refuse to process your foreign currency transactions
• Criminal penalties – Including fines and potential imprisonment
• Investment registration cancellation – Your FDI status may be revoked
• Tax complications – Unreported transactions trigger automatic audits

This guide provides a comprehensive overview of FETA compliance requirements for foreign investors operating in Korea in 2026.

Table of Contents

Understanding FETA: Korea’s Foreign Exchange Framework

What Is FETA?

The Foreign Exchange Transaction Act (외국환거래법) is Korea’s primary legislation governing cross-border financial transactions. Originally designed to protect Korea’s foreign exchange reserves during economic crises, FETA has evolved into a comprehensive regulatory framework for international capital flows.

Key regulatory objectives:

1. Monitor and manage Korea’s balance of payments
2. Prevent money laundering and terrorist financing
3. Ensure tax compliance on international transactions
4. Maintain foreign exchange market stability

FETA vs. FIPA: Understanding the Difference

Many foreign investors confuse FETA with FIPA (Foreign Investment Promotion Act). Here’s how they differ:

Bottom line: Even if you’re registered under FIPA as a foreign investor, you still must comply with all FETA reporting requirements for your day-to-day international transactions.

Who Must Comply with FETA?

Covered Entities

FETA applies to:

✅ Foreign-invested companies – Any Korean entity with foreign ownership
✅ Korean companies conducting international trade – Import/export businesses
✅ Foreign individuals residing in Korea – For business or investment transactions
✅ Korean branches of foreign companies
✅ Foreign companies without Korean presence – When transacting with Korean entities

Covered Transactions

All transactions involving:

• Transfer of foreign currency into/out of Korea
• Receipt of foreign currency from abroad
• Payment of foreign currency to foreign recipients
• International trade in goods or services
• Cross-border investments or loans
• Foreign currency deposits exceeding reporting thresholds

Core FETA Reporting Requirements

1. Foreign Currency Inbound Remittance Reporting

When you receive money from abroad, different reporting requirements apply based on amount and purpose.

Action steps when receiving foreign currency:

1. Notify your bank in advance – Provide purpose of funds, sender information
2. Prepare supporting documentation – Invoice, contract, or other proof of legitimate business purpose
3. Ensure sender includes transaction details – Reference number, invoice number, or FDI notification number
4. Complete bank’s foreign exchange form – Typically provided at time of transfer
5. Retain confirmation documents – Keep bank-stamped reports for at least 5 years

Common mistake: Receiving funds without proper documentation, then scrambling to explain the purpose retroactively. Banks may freeze the funds until proper documentation is provided.

2. Foreign Currency Outbound Remittance Reporting

When you send money abroad, reporting requirements vary based on purpose and amount.

Documentation required for outbound remittance:

• Commercial invoice or service agreement
• Tax payment certificate (withholding tax for service payments)
• Board resolution (for dividend payments or large transfers)
• Proof of original inbound investment (for profit repatriation)
• Contract or agreement justifying payment

Critical rule: You cannot remit funds exceeding your legitimate business purpose. For example, if you received USD 100,000 as foreign investment capital, you cannot immediately remit USD 100,000 abroad as “business expenses” without substantial documentation.

3. Export/Import Declaration Requirements

For Goods

All exports and imports of physical goods must be declared to Korea Customs Service, regardless of value.

Export declaration process:

1. Obtain customs clearance code (통관고유부호) from customs
2. Submit export declaration before shipment
3. Classify goods using HS code (Harmonized System code)
4. Receive export declaration acceptance
5. Ship goods within validity period (typically 30 days)
6. Receive payment from foreign buyer
7. Report receipt of payment to bank (if USD 10,000+)

Import declaration process:

1. Foreign supplier ships goods
2. Receive shipping documents (B/L, invoice, packing list)
3. Submit import declaration to customs
4. Pay customs duties and VAT
5. Clear customs and receive goods
6. Pay foreign supplier
7. Report payment to bank

Common pitfall: Undervaluing imports to reduce customs duties. Korean customs uses advanced data analytics to detect valuation discrepancies. Penalties include fines up to 5 times the evaded duties plus criminal prosecution.

For Services

Service trade (cross-border provision of services) has separate reporting requirements.

Service categories requiring reporting:

• Manufacturing services (contract manufacturing, processing)
• Maintenance and repair
• Transportation services
• Travel services
• Construction services
• Insurance and financial services
• Intellectual property licensing
• Telecommunications, computer, and information services
• Business services (legal, accounting, consulting, advertising)
• Personal, cultural, and recreational services

Reporting threshold: USD 10,000+ per transaction (or cumulative if related)

Reporting deadline: Within 1 month of payment/receipt

Reporting channel: Through your foreign exchange bank’s online portal or Bank of Korea’s service trade reporting system

4. Foreign Investment Reporting (FIPA + FETA Combined)

Foreign direct investment involves dual reporting under both FIPA and FETA.

Three-stage reporting process:

Stage 1: Pre-Investment Notification (Before capital transfer)

• File FDI notification (투자신고) with authorized foreign exchange bank or KOTRA
• Receive FDI acceptance number
• This satisfies both FIPA and FETA requirements

Required information:

• Investor details (name, nationality, address)
• Investment amount and currency
• Percentage of shares to be acquired
• Business purpose and industry sector (KSIC code)
• Planned use of invested capital

Processing time: 1-2 business days (standard cases)

Stage 2: Capital Inflow and Investment Registration (After capital transfer)

• Transfer capital from abroad with FDI acceptance number in remittance details
• Bank verifies receipt of funds
• Submit investment registration (투자등록) application
• Receive investment registration certificate

Deadline: Within 60 days of capital inflow

Stage 3: Business Commencement Reporting

• After company begins actual business operations
• Report business commencement to KOTRA
• Required for accessing certain FDI benefits and tax incentives

Deadline: Within 30 days of commencing business

5. Ongoing Compliance Reporting

Even after initial setup, foreign-invested companies have continuing FETA obligations.

Annual reports:

Change reports (within 30 days of event):

• Change in investment amount (capital increase/decrease)
• Change in foreign investor (share transfer)
• Change in business scope
• Change in company name or address
• Merger, acquisition, or dissolution

FETA Compliance by Transaction Type

Scenario 1: Receiving Payment for Export of Goods

Your situation: You manufacture products in Korea and export to a US customer.

FETA compliance steps:

1. Before shipment:

   • Prepare commercial invoice, packing list
   • Submit export declaration to customs
   • Obtain export declaration acceptance number

2. At shipment:

   • Ship goods with proper documentation
   • Ensure shipping documents reference export declaration number

3. When receiving payment (if USD 10,000+):

   • Notify bank of expected incoming payment
   • Provide copy of export declaration and invoice
   • Bank reports inbound remittance to Bank of Korea
   • Ensure payment is received within 1 year of export declaration (or request extension)

4. Record-keeping:

   • Maintain export declaration, invoice, B/L, and payment confirmation for 5 years

Scenario 2: Paying Foreign Supplier for Imported Services

Your situation: You hire a foreign consultant or software vendor.

FETA compliance steps:

1. Before making payment:

   • Execute service agreement with foreign provider
   • Ensure contract specifies scope, deliverables, and payment terms

2. At payment (if USD 10,000+):

   • Calculate and withhold appropriate tax (typically 20% withholding for non-treaty countries; reduced rates for tax treaty countries)
   • File withholding tax return with NTS
   • Remit net amount to foreign provider
   • Provide bank with:
     • Service agreement
     • Tax payment certificate
     • Service trade report form

3. Within 1 month after payment:

   • Submit service trade report to bank or directly to Bank of Korea

4. Year-end:

   • Issue Form 1042-S equivalent (foreign income payment statement) to service provider if applicable

Common mistake: Paying foreign providers without withholding tax, then facing NTS penalties and inability to deduct the expense for corporate tax purposes.

Scenario 3: Repatriating Profits (Dividend to Foreign Shareholder)

Your situation: Your Korean subsidiary generated profit and you want to remit dividends to the foreign parent company.

FETA compliance steps:

1. Board and shareholder approval:

   • Hold board meeting to approve dividend distribution
   • Document decision in board minutes
   • Hold shareholder meeting if required by articles of incorporation

2. Tax compliance:

   • Calculate dividend withholding tax (typically 20%; reduced to 5-15% under tax treaties)
   • File dividend tax return with NTS
   • Pay withholding tax to tax office

3. Before remittance:

   • Prepare dividend remittance application
   • Provide bank with:
     • Board minutes approving dividend
     • Shareholder register confirming foreign ownership
     • Tax payment certificate
     • Proof of original FDI registration
     • Financial statements showing profit

4. Remittance:

   • Bank reviews documentation
   • Bank processes remittance and reports to Bank of Korea
   • Foreign investor receives net dividend (after tax)

5. Record-keeping:

   • Update FDI registration if this is first dividend (some banks require)

Important limitation: You can only remit dividends from legitimate business profits. You cannot disguise capital repatriation as dividends.

Scenario 4: Overseas Investment by Korean Company

Your situation: Your Korean company wants to establish a subsidiary abroad or acquire shares in a foreign company.

FETA compliance steps:

1. Determine if approval is required:

   • Investments under USD 100,000: Bank reporting only
   • Investments USD 100,000 - USD 10 million: Bank of Korea approval
   • Investments over USD 10 million: Ministry of Economy and Finance approval + BOK approval

2. Application for approval (if required):

   • Submit overseas investment application to designated foreign exchange bank
   • Provide:
     • Business plan for overseas entity
     • Financial statements of Korean investor
     • Articles of incorporation of target foreign company
     • Investment agreement
     • Proof of funding source

3. After approval:

   • Remit investment capital within 2 years of approval date
   • Report actual investment to bank after remittance

4. Ongoing reporting:

   • Annual overseas investment performance report
   • Report changes in investment amount or equity structure

Penalty for unapproved investment: Investment may be deemed illegal; authorities may order repatriation of funds and impose fines.

Understanding Reporting Thresholds

USD 10,000 Threshold

This is the most common threshold in FETA regulations.

Why USD 10,000?

• Aligned with international AML standards (FATF recommendations)
• Balances regulatory oversight with business efficiency
• Adjusted periodically based on economic conditions

Applies to:

• Service trade reporting (import/export of services)
• Gift/inheritance reporting
• Certain investment reporting

Important: The threshold is per transaction, but related transactions may be aggregated. Splitting transactions to avoid reporting (called “structuring”) is illegal.

USD 50,000 Threshold

Applies to:

• Foreign borrowing (receiving loans from abroad)
• Certain personal remittances
• Advance payment for imports (in some cases)

No Threshold (Full Reporting Required)

Applies to:

• Foreign direct investment (all amounts)
• Export/import of goods (all amounts)
• Real estate transactions involving foreign parties
• Inheritance or gift of foreign assets

Common FETA Violations and Penalties

Violation 1: Unreported Capital Inflow

Scenario: Receiving foreign currency without proper reporting.

Penalty:

• Administrative fine: Up to 40% of the unreported amount
• Criminal penalty: Imprisonment up to 1 year or fine up to KRW 100 million
• Funds frozen: Bank may freeze the funds until reporting is completed

Violation 2: Structuring (Splitting Transactions to Avoid Reporting)

Scenario: Receiving a USD 15,000 payment as three separate USD 5,000 transfers to avoid the USD 10,000 reporting threshold.

Penalty:

• Criminal offense: Treated as money laundering
• Imprisonment: Up to 3 years or fine up to KRW 50 million
• Account suspension: Bank may close your account

Violation 3: False or Misleading Reporting

Scenario: Reporting a payment for “imported goods” when it’s actually a personal remittance.

Penalty:

• Fine: Up to KRW 30 million
• Tax implications: Unreported income may trigger back taxes + penalties
• Loss of FDI benefits: Cancellation of tax incentives or FDI registration

Violation 4: Late Reporting

Scenario: Filing service trade report 45 days after payment (deadline is 30 days).

Penalty:

• Administrative fine: KRW 1-5 million (depending on delay length)
• Increased audit risk: Late filings trigger automatic review

Violation 5: Unauthorized Overseas Investment

Scenario: Investing USD 200,000 in a foreign company without obtaining Bank of Korea approval.

Penalty:

• Fine: Up to 30% of the investment amount
• Mandatory repatriation: Order to bring funds back to Korea
• Criminal prosecution: Possible imprisonment for large amounts

Best Practices for FETA Compliance

1. Maintain a Transaction Log

Create a simple spreadsheet to track all cross-border transactions:

2. Build a Relationship with Your Bank’s FX Team

Korean banks have dedicated foreign exchange departments. Cultivate a relationship:

• Request direct contact information for the FX team
• Inform them in advance of large or unusual transactions
• Ask for guidance when uncertain about reporting requirements
• Request confirmation in writing for complex transactions

3. Automate Reminders for Reporting Deadlines

Most violations occur due to missed deadlines, not intentional evasion.

Solution:

• Set calendar reminders 1 week before reporting deadlines
• Use accounting software with FX tracking features
• Assign a dedicated staff member to monitor compliance

4. Standardize Documentation

Create templates for common scenarios:

• Export payment receipt template – Include all info banks require
• Service import payment template – Pre-calculate withholding tax
• Dividend remittance checklist – Ensure all documents are ready

5. Conduct Quarterly Self-Audits

Every quarter:

• Review all foreign exchange transactions
• Verify that all required reports were filed
• Confirm deadlines were met
• Identify any discrepancies or missing documentation
• Correct any errors with bank or authorities

FETA Compliance Tools and Resources

Official Government Resources

Bank of Korea Foreign Exchange Portal

• Website: https://www.fxreserve.go.kr (Korean)
• Service trade reporting system
• FX regulation updates
• Q&A database

Ministry of Economy and Finance

• FETA regulations and amendments
• Approval applications for large transactions

Korea Customs Service

• Export/import declaration systems
• HS code classification
• Customs clearance code application

Private Sector Solutions

Accounting Software with FX Tracking

• Counted, Freewill (Korea-specific)
• Integration with bank accounts for automatic transaction import
• Alerts for reporting thresholds

FX Compliance Consulting Firms

• Specialize in FETA compliance reviews
• Useful for companies with complex international operations
• Typical cost: KRW 500,000-2 million per year

Bank Services

Most major Korean banks offer:

• Dedicated FX advisory services
• Online FX reporting portals
• Email/SMS alerts for deadlines
• English-language support (varies by bank)

FETA Compliance Checklist for Foreign Investors

Initial Setup:

• Open corporate foreign currency account
• Register for online FX reporting portal with bank
• Obtain customs clearance code (if importing/exporting goods)
• Designate internal compliance officer
• Create transaction tracking system

Before Each Inbound Remittance:

• Determine reporting requirement based on amount and purpose
• Notify bank in advance
• Prepare supporting documentation
• Ensure sender includes proper transaction reference

Before Each Outbound Remittance:

• Verify purpose is legitimate business expense
• Calculate and withhold applicable taxes
• Prepare documentation (invoice, contract, tax certificate)
• Submit to bank with FX application form

Monthly:

• Reconcile FX transactions with bank statements
• Verify all reports were filed
• Update transaction log

Quarterly:

• Review compliance status
• File any quarterly reports (if required)
• Conduct self-audit

Annually:

• File foreign investment business performance report
• Review and update internal procedures
• Train staff on FETA requirements

When to Seek Professional Assistance

Consider hiring an FX compliance specialist if:

• Your company conducts 20+ cross-border transactions per month
• You operate in highly regulated industries (finance, gambling, forex trading)
• You plan to make overseas investments over USD 1 million
• You’ve received a compliance inquiry from Bank of Korea or customs
• Your business model involves complex supply chains with multiple countries

Cost-benefit analysis:

• Specialist consulting: KRW 1-3 million/year
• Cost of one major FETA violation: KRW 10-100 million + potential criminal penalties

Conclusion: FETA Compliance as Business Enabler

While FETA reporting requirements may seem burdensome, proper compliance actually enables smoother international business operations:

✅ Faster transaction processing – Banks approve compliant transactions immediately
✅ Access to better FX rates – Compliant companies may negotiate better rates
✅ Reduced audit risk – Proper reporting minimizes tax and customs scrutiny
✅ Easier profit repatriation – Clear documentation trail simplifies dividend remittances
✅ Business credibility – Compliance signals professionalism to partners and customers

In 2026, with enhanced government database integration and automated compliance monitoring, there’s no room for “informal” FX practices. The good news: once you establish proper systems and habits, FETA compliance becomes routine.

Need Expert FETA Compliance Support?

At SMA Lawfirm, we help foreign-invested companies navigate Korea’s complex foreign exchange regulations, including:

• FETA compliance reviews and gap analysis
• FX reporting preparation and filing
• Customs and trade compliance
• Remediation of past violations
• Ongoing compliance monitoring

📩 Contact us at sma@saemunan.com for a consultation.

Last updated: February 2026. FETA regulations are subject to change. This guide provides general information only and does not constitute legal advice. Consult with qualified professionals for your specific situation.