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Permalink Reply by Daniel on October 13, 2011 at 10:03am

Hello Kent,

 

I was curious about what a professional like yourself thinks about the Korea-US free trade agreement. Obama is expected to sign the bill by tomorrow and send it our way for Korean litigation. I hear the democratic wing is opposed to this deal while the republican wing is for it. The Democrats are the minority party, so my question is, Can legislation be passed with a simple majority rule in Korea? And if this law passes, how will it influence international trade in Korea?

I'm keeping an eye on Korean news to watch for any blue house civil wars. I'm already seeing a few NO FTA (no free trade agreement) protests on the news.

 

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Permalink Reply by Kent Wong on October 14, 2011 at 1:18pm

I realize Korean opinion toward the KORUS FTA  is somewhat divided, by sector. 

I believe that for the long term the FTA will, if ratified, increase economic growth, foreign investment and competition in Korea.  Given that the EU-Korea FTA came into effect in July this year, it has created more pressure for the KORUS FTA.  FTAs knock down tariff and non-tariff barriers, which is great for bilateral trade.

The legal market will open up (in staggered steps), as US and European law firms look to have a presence in Korea.  Korean domestic law firms have been preparing (and bracing themselves) for the reality of this for some time.  

 

 

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Permalink Reply by Steven S. Bammel on October 17, 2011 at 9:36am

Daniel - Interesting that you ask about whether the legislation can be passed with a simple majority rule. I think the answer to that is "yes", but those opposed to a unilateral passage of the bill in the legislature are threatening as much extra-ballot resistance as possible. In the past, both parties have engaged in various shenanigans, including blocking access to meeting venues or the podium in the legislature, as well as scheduling unannounced meetings behind closed doors which the other party doesn't find out about in time. One way or the other, it seems the ruling party is determined to get this passed no matter what the political costs, such as the embarrassment of physical altercations that end up on the front pages of the newspaper.

As for those opposed to the FTA, those are mainly the same folks who were in favor of it until certain provisions got renegotiated late last year. They are now calling for re-renegotiation. In principle, most of the Korean political spectrum appears to be in favor of a free trade agreement; those opposed just want better conditions for Korea.

For more information, I encourage you to check out this page on KBC with links to various FTA-related content both on our site and elsewhere: http://www.koreabusinesscentral.com/page/free-trade-agreements

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Permalink Reply by Steven S. Bammel on October 17, 2011 at 9:41am

BTW, here is recent posting by Kent on the Korea Expert Witness blog run by Don Southerton:

• Korean Commercial Code - An Update for Foreign Investors

 

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Permalink Reply by Lim Seng Chong on April 2, 2012 at 11:24pm

Why must I pay tax on my remittances to my Korean company for share capital?

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Permalink Reply by Kent Wong on April 3, 2012 at 6:11pm

Seng Chong,

This forum is not the right venue to discuss policy reasons for tax.

First, are you sure it was an actual tax and not some type of registration fee (which everyone pays in order to increase share capital)? 

Secondly, if it was a tax, which authority did you have to make payment? 

FInally, do you have the Korean description of said tax?

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Permalink Reply by Lim Seng Chong on April 4, 2012 at 10:13am

Thank you!
If it is a share registration fee is it fixed at 10% ad valorem?
Does it impact on future dividend payments by my company?

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Permalink Reply by Kent Wong on April 5, 2012 at 11:21am

Were you taxed at 10%?  It seems too high to be a registration fee.

Please help me to help you by answering my initial questions.

Thanks,

Kent

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Permalink Reply by Lim Seng Chong on April 5, 2012 at 8:30pm

Dear Kent,

I am still trying to get clarification from the accountants in Seoul and will revert to you as soon as I get them.
Thank you!



Rgds: Lim S C

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Permalink Reply by Joseph E Flack IV on February 14, 2013 at 6:37am

Hello Kent,

I have two questions for you regarding foreign online businesses.

(1) Firstly, do you think it is possible to work around the 50,000,000won foreign investment (now 300,000,000 I think) requirement, by somehow setting up the legal status of my business activities as a "branch" of my online business which is registered in the US? We have less than 5 employees and we're all foreigners.

(2) Do you think it would be legally OK to cooperate with another Korean business, to handle online transactions? I could keep my online business as a US LLC, but payments would go through a Korean friend's business merchant account. And we would pay him a commission for acting as the go-between and essentially "leading consumers" to purchases on my site. He would receive full payment from the customer, and then would remit to us most of the cash. Might there be any legal problems with this?

Thanks for your time,

Joseph Flack

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Permalink Reply by Steven S. Bammel on February 17, 2013 at 11:37am

I would suggest that you make an investment to do it right; you don't need W50 million to set up a sole proprietorship, but you will need the big bucks for a corporation and visas. If there's five if you, you're not going to be able to do it on the cheap in Korea.

To avoid the paperwork in Korea, you could set up a corporation overseas, live overseas and receive payment through PayPal, but as soon as you start taking payments in Korea, you're going to face a lot of issues.

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Permalink Reply by Kent Wong on March 2, 2013 at 1:25pm

Hi Joseph,

(1) I regularly advise foreign SMEs who want to build their local presence in Korea to start out small.  They can do this by setting up a branch and then, when things begin to take off, establishing a local subsidiary.  So, to answer your question, it is possible.  However, you should note that you will:

(a) need to file a report of such branch establishment with a designated foreign exchange bank in Korea;

(b) also need to register the branch with a court registry office in Korea; and 

(c) need to obtain a business tax ID number from the competent tax office in Korea.  

If you want a visa and plan to rep the office in Korea, you will still be subject to D-7 work permit requirements and relevant immigration laws.

(2) On the basis of what you have explained to me, you shouldn't have any problems with this kind of arrangement, provided that you and the Korean business partner follow the relevant foreign exchange control regulations (i.e. rules that regulate the inward flow of capital and outward flow of earnings) in Korea and have paid any applicable taxes.  Though, if you intend to set up a branch office as in (1), you (or the Korean partner) will need to remit any profits you've made through the same foreign exchange bank in Korea (where you filed the report), with the appropriate branch documents (audit report, tax payment certificate, balance sheet etc.).

Going through PayPal poses a separate set of potential problems.  From my own personal experience, I will never touch PayPal again, given its arbitrary "case resolution" and random locking or freezing of funds, fees, scams, fraud etc (e.g., see some of the horror stories at www.PayPalSucks.com).

I hope this helps.  Feel free to contact me if you should have any further questions.

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