Korea Branch Registry Abolition 2026: What Foreign Companies Need to Know

The year 2026 has brought a fundamental shift to how foreign companies operate in South Korea. The abolition of the branch registry system represents one of the most significant regulatory changes in recent years, affecting hundreds of foreign businesses currently operating through Korean branch offices.

If your company maintains a branch presence in Korea—or is considering establishing one—this change demands your immediate attention. The transition away from the legacy branch registry framework introduces new compliance requirements, altered tax treatment, and revised reporting obligations that will reshape how foreign entities conduct business on Korean soil.

Table of Contents

Understanding the Branch Registry System: What Changed

The Old Framework (Pre-2026)

Before 2026, foreign companies operating in Korea through branch offices were required to register with the Korean branch registry (외국회사 등기부). This system, established decades ago, served as the primary legal framework for tracking foreign business activities within Korea’s borders.

Under the previous regime:

• Branch offices filed separate registrations distinct from corporate entities
• The branch registry maintained independent records at district courts
• Foreign parent companies bore limited but distinct obligations for Korean branch activities
• Tax treatment often created grey areas between branch income and parent company liability

The New Reality (2026 Forward)

The Korea Company Establishment 2026 reform package eliminated the standalone branch registry. Foreign companies now navigate a streamlined—but fundamentally different—regulatory environment.

Key changes include:

1. Unified Corporate Registration Branch offices now register through the same system used by Korean subsidiaries, though with modified requirements acknowledging their non-independent legal status.

2. Enhanced Transparency Requirements The new framework demands more detailed disclosure of:

• Ultimate beneficial ownership
• Parent company financial standing
• Purpose and scope of Korean operations
• Expected revenue and employment figures

3. Revised Tax Nexus Rules Without the separate branch registry, tax authorities now assess permanent establishment (PE) status using more stringent criteria aligned with OECD standards.

Why the Change? Policy Motivations Behind the Reform

Understanding the “why” helps predict how authorities will interpret the new rules.

Addressing Regulatory Gaps

The old branch registry system created compliance blind spots. Foreign companies could establish multiple branches without consolidated oversight, making it difficult for Korean authorities to:

• Track cumulative foreign investment flows
• Assess aggregate tax obligations
• Monitor employment of foreign nationals
• Enforce labor and safety regulations consistently

International Standards Alignment

Korea’s admission to the MSCI Developed Market Index roadmap (announced in late 2025) requires regulatory harmonization with international norms. The branch registry abolition brings Korean rules closer to EU and US treatment of foreign branch operations.

Anti-Tax Avoidance Measures

The Ministry of Economy and Finance identified branch structures as a common vehicle for base erosion and profit shifting. By eliminating the separate registry, authorities gain better visibility into:

• Transfer pricing arrangements
• Royalty and management fee deductions
• Profit attribution between parent and branch

Practical Implications for Foreign Companies

For Existing Branch Offices

If your company currently operates a Korean branch, the transition period runs through June 30, 2026. Here’s what you must do:

Step 1: File Transition Notice (By March 31, 2026) Submit Form FDI-TR01 to the Korea Trade-Investment Promotion Agency (KOTRA) notifying them of your existing branch operation. This form requires:

• Certified copy of parent company incorporation documents
• Apostilled power of attorney for Korean representative
• Last 3 years of branch financial statements
• Updated business scope description

Step 2: Obtain New Business Registration Certificate (By June 30, 2026) Visit your local tax office to replace your old branch business registration with the new unified format. Bring:

• Completed transition notice receipt from KOTRA
• Original branch business registration certificate (for cancellation)
• Updated articles of association from parent company
• Bank account documentation

Step 3: Notify Contract Counterparties Inform your Korean clients, suppliers, and partners of your new business registration number. The old registration becomes invalid July 1, 2026, potentially voiding contracts that reference the obsolete registration details.

Failure to Complete Transition Missing the June 30 deadline doesn’t automatically dissolve your branch, but creates serious problems:

• Tax authority may treat branch as unlicensed business (retroactive penalties)
• Bank accounts may be frozen pending proper registration
• Existing contracts become legally ambiguous
• Immigration may question visa status of branch employees

For Companies Considering New Branch Establishment

The post-2026 environment makes branch establishment less attractive for many use cases. Consider these factors:

When a Branch Still Makes Sense:

• Short-term project-based work (construction, consulting)
• Representative office functions (no revenue generation)
• Testing market before full subsidiary commitment
• Parent company has strong preference for direct control

When a Subsidiary Is Now Preferable:

• Long-term operations with local revenue
• Plans to hire significant Korean workforce
• Access to government incentives (many now require subsidiary structure)
• Need for simplified tax treatment

The FDI Threshold Question Remember that Foreign Direct Investment (FDI) registration—granting access to favorable tax treatment and government support programs—requires minimum KRW 100 million investment. This threshold applies to subsidiaries, not branches.

If your projected Korean operation will generate substantial revenue or require significant local investment, the subsidiary structure now offers clearer advantages than the legacy branch model.

Tax Treatment Changes: What You’ll Pay

The branch registry abolition fundamentally alters tax calculation and compliance.

Corporate Tax Rate Structure

Korea restored progressive corporate tax brackets in 2024. As of 2026, the rates are:

For Branch Operations: Tax calculation now requires functional separation analysis. The Korean tax office will assess which parent company functions should be attributed to Korean PE, potentially capturing:

• Portion of global R&D expenses
• Allocated corporate overhead
• Share of parent company debt interest

This marks a departure from the old regime, where branches typically paid tax only on Korea-source income with minimal allocation of parent expenses.

Permanent Establishment (PE) Risk

Without the branch registry’s safe harbor, more foreign companies face PE determination audits.

Automatic PE Triggers:

• Fixed place of business in Korea for more than 6 months
• Employee or agent with authority to conclude contracts
• Construction/installation projects exceeding 6 months
• Provision of services through employees for more than 6 months in any 12-month period

New Risk Areas:

• Digital service provision (potentially creates PE even without physical presence)
• Commissionaire arrangements (previously safe, now scrutinized)
• Shared service centers (allocation questions)

Value-Added Tax (VAT) Registration

Branch offices face the same VAT registration requirements as subsidiaries:

• Mandatory if annual revenue exceeds KRW 80 million
• 10% standard rate on most supplies
• Quarterly filing requirement

The abolition of the branch registry doesn’t change VAT mechanics, but eliminates the previous administrative distinction between branch and subsidiary VAT numbers.

Employment and Immigration Considerations

Work Visa Requirements for Branch Employees

The registry change affects visa processing for foreign nationals working at Korean branch offices.

D-8 Visa (Corporate Investment) Previously, branch offices could sponsor D-8 visas with relatively light documentation. The new framework requires:

• Proof of minimum KRW 100 million parent company investment into Korean operation
• Detailed business plan showing local job creation
• Evidence of executive/specialized skill role

E-7 Visa (Specially Designated Activities) Many branch operations now use E-7 visas instead, requiring:

• College degree + relevant experience
• Korean company sponsorship
• Occupation on the E-7 designated activities list

The practical difference: E-7 ties the employee to specific role and employer, while D-8 provides more flexibility for entrepreneurs and executives.

Labor Law Compliance

Korean labor law applies equally to branch and subsidiary employees. Common compliance issues include:

Severance Pay (퇴직금) Mandatory after 1 year of employment. Set aside 1/12 of annual salary as severance reserve.

Working Hours

• Maximum 40 hours/week regular time
• Maximum 12 hours/week overtime (with employee consent)
• Overtime paid at 1.5x regular rate

Employment Contracts Must be in writing, in Korean language, specifying:

• Job duties
• Workplace
• Working hours
• Wages and payment method
• Leave policies

Step-by-Step: Registering a Branch Under the New System

For foreign companies establishing a new Korean branch in 2026, follow this process:

Phase 1: Pre-Registration (2-4 weeks)

1. Obtain Apostilled Documents From your home country, prepare:

• Certificate of incorporation
• Board resolution authorizing Korean branch establishment
• Power of attorney for Korean representative
• Parent company financial statements (last 2 years)

Documents must be apostilled under the Hague Convention or, for non-Convention countries, authenticated by Korean consulate.

2. Designate Korean Representative The representative must:

• Hold valid residency status in Korea (F-series or D-series visa)
• Have physical address in Korea (not P.O. box)
• Not be currently restricted from serving as corporate representative

3. Secure Office Space You’ll need a physical office address for registration. Virtual offices are acceptable for representative office functions, but if the branch will:

• Generate revenue
• Employ staff
• Maintain inventory

…then a legitimate commercial space is required. Obtain a lease agreement (임대차계약서) with the landlord’s seal.

Phase 2: Registration Filing (1-2 weeks)

4. File with District Court Visit the district court covering your office location to file:

• Foreign Company Branch Registration Application (외국회사 지점 등록 신청서)
• Apostilled parent company documents
• Power of attorney for representative
• Lease agreement copy
• Business scope description

Filing fee: KRW 112,500

5. Obtain Business Registration Certificate Within 20 days of court registration, visit local tax office with:

• Court registration confirmation
• Representative’s ID
• Office lease agreement
• Bank account opening documentation (see below)

Phase 3: Post-Registration Setup (2-4 weeks)

6. Open Korean Bank Account With your new business registration certificate, approach Korean banks for corporate account. Requirements vary by bank, but expect:

• Minimum deposit (typically KRW 10-50 million)
• In-person visit by representative
• Detailed business plan in Korean
• Parent company financial documents

Major foreign-friendly banks: Shinhan, KB, Hana, Industrial Bank of Korea (IBK)

7. Register with National Pension Service If employing staff, register with NPS within 14 days of first hire. Both employer and employee contribute 4.5% of salary.

8. Obtain Employment Insurance Register with local Employment Center. Premium is approximately 1.05-1.25% of total payroll, split between employer and employees.

Common Compliance Mistakes to Avoid

Mistake #1: Using Obsolete Branch Registry Documents

Foreign companies that established branches before 2026 must update all corporate materials:

• Business cards showing old registration number
• Contracts referencing obsolete branch registry
• Website footer with old business registration details

Fix: Conduct full audit of external-facing materials by March 2026. Use the transition period to update letterhead, website, contracts, and marketing materials.

Mistake #2: Misunderstanding PE Consequences

Many foreign companies assume branch = automatic PE. Not true. PE status depends on substance test:

• Is there a fixed place of business?
• Does Korean office have authority to bind parent company?
• What’s the duration and nature of activities?

Fix: Obtain PE determination ruling from National Tax Service before commencing operations. Form: Application for Advance Tax Ruling on PE Status.

Mistake #3: Neglecting Korean Accounting Standards

Branch offices must maintain books according to Korean Generally Accepted Accounting Principles (K-GAAP), not IFRS or parent company standards.

Fix: Engage Korean accounting firm for:

• Monthly bookkeeping
• Quarterly VAT returns
• Annual financial statement preparation
• Corporate tax filing

Mistake #4: Improper Transfer Pricing

Under the new framework, tax authorities scrutinize:

• Management fees charged by parent to branch
• Royalties for IP usage
• Cost allocations for shared services

Fix: Document transfer pricing methodology using OECD guidelines. Obtain Local File and Master File prepared by tax professionals. File Advance Pricing Agreement (APA) if transaction volumes are significant.

Mistake #5: Immigration Status Confusion

Branch representative must hold appropriate visa. Common errors:

• Tourist visa holder serving as representative
• E-7 visa for ownership role (requires D-8)
• Expired visa status

Fix: Verify representative’s visa eligibility before filing branch registration. If representative lacks proper status, either:

• Designate different representative with valid visa, or
• Have intended representative obtain D-8 visa first (requires proof of investment)

The Subsidiary Alternative: When to Consider Incorporation

Given the increased complexity of branch operations post-2026, many foreign companies are opting for full subsidiary incorporation instead.

Advantages of Korean Subsidiary

Limited Liability Protection Subsidiary creates legal separation between parent and Korean entity. Parent’s exposure limited to invested capital.

FDI Registration Benefits KRW 100 million minimum investment qualifies for:

• FDI tax incentives (reduced corporate tax, VAT exemption on imported equipment)
• Access to government support programs
• Simplified visa sponsorship for executives

Clearer Tax Treatment Subsidiary pays Korean corporate tax only on Korean income. No transfer pricing attribution of parent company expenses.

Easier Banking Korean banks prefer subsidiary structure. Account opening is faster, credit lines more accessible.

When Branch Still Makes Sense

Despite the hurdles, branch structure offers advantages in specific scenarios:

Short-Term Projects Construction, consulting, or other project-based work with defined end date (< 2 years).

Representative Office Only No revenue generation, purely market research and relationship building.

Parent Company Control Subsidiary requires minimum one shareholder (can be parent company) and registered capital. Branch is direct extension of parent, offering tighter operational control.

Exit Flexibility Closing a branch is simpler than liquidating a subsidiary (which requires creditor notification, tax clearance, and formal dissolution process).

Looking Ahead: Future Regulatory Developments

The branch registry abolition is part of broader regulatory modernization. Watch for:

Digital Services Tax Korea is considering DST on foreign companies providing digital services to Korean customers. This could create PE even without physical presence.

Beneficial Ownership Registry Proposed legislation would require disclosure of ultimate beneficial owners for all foreign-invested entities, including branches.

Enhanced Country-by-Country Reporting Large multinational enterprises (revenue > KRW 1 trillion) will face more detailed reporting requirements for Korean operations.

MSCI Developed Market Inclusion If Korea achieves MSCI DM status (target: 2027), expect further regulatory alignment with US and European norms.

Need Help Navigating the New Framework?

The abolition of Korea’s branch registry system is more than an administrative change—it represents a fundamental shift in how Korean authorities regulate foreign business activity. Whether you’re transitioning an existing branch or considering new establishment, the complexity demands local expertise.

At SMA Lawfirm, we specialize in Korean corporate law for foreign clients. Our team provides:

• Branch-to-subsidiary conversion advisory
• Transition notice filing and registration assistance
• PE risk assessment and advance tax rulings
• Employment and immigration coordination
• Ongoing compliance and accounting services

We work with clients from North America, Europe, Southeast Asia, and beyond—handling everything from initial registration to ongoing tax and labor compliance.

📩 Contact us today: sma@saemunan.com

Our bilingual team is ready to help you navigate Korea’s new regulatory landscape with confidence.

Disclaimer: This article provides general information only and does not constitute legal advice. Specific situations require professional consultation. Contact a qualified Korean attorney before making corporate structure decisions.