Foreign investors may come across with diverse challenges, caused by political and economic situations of a country in which they operate, besides normal business risks. Given the risks, Korea has implemented regimes to protect foreign investors and their business. Meanwhile, Regulations on Foreign Investment and Technology Introduction prescribes the restraints and restricted businesses.
- Liberalization of Foreign Investment
- Except as otherwise prescribed by the Acts of the Republic of Korea, a foreigner may conduct, without restraint, various activities of foreign investment in the Republic of Korea. Foreigners are restricted from foreign investment in the following cases: where it threatens the maintenance of national safety and public order; where it has harmful effects on public hygiene or the environmental preservation or is against Korean morals and customs; and where it violates the Acts and subordinate statutes of the Republic of Korea.
- Protection of Foreign Investment
- Protection of foreign direct investment has become stronger than that of indirect investment such as investment in securities and bonds, as prescribed by the Foreign Investment Promotion Act.
- Guarantee of Remittance to Foreign Countries
- With respect to the proceeds that come from the stocks, etc. acquired by a foreign investor, proceeds from the sales of stocks, etc., the principal, interests, and service changes paid in accordance with the loan contract as prescribed by the Foreign Investment Promotion Act, and the compensation paid in accordance with a license agreement, their remittance to foreign countries shall be guaranteed in accordance with the details of the permission or report of the foreign investment contract or the license agreement at the time when the said remittance is made.
- Exceptions to the Safeguard Clause on Foreign Currency Transactions
- The Minister of Strategy and Finance may temporarily suspend or restrict foreign exchange transactions, if such measures are deemed inevitable on account of the outbreak of natural calamities, war, conflicts of arms, grave and sudden changes in domestic and foreign economic conditions, or other situations equivalent thereto (Article 6 (1) ~ (3) of the Foreign Exchange Transactions Act). However, such measures shall not apply to foreign investment as provided for in the Foreign Investment Promotion Act (Article 6 (4) of the Foreign Exchange Transactions Act).
- National Treatment
- Except as otherwise prescribed by the Acts of the Republic of Korea, foreign investors and foreign-invested companies shall be treated in the same way as nationals of the Republic of Korea and Korean corporations in respect of their business operation.
- Equal Application of Tax Abatement Regulations, etc.
- Except as otherwise prescribed by the Acts of the Republic of Korea, the provisions concerning the abatement or exemption of taxes from among the tax laws applied to nationals of the Republic of Korea or Korean corporations shall also apply to foreign investors, foreign-invested corporations, persons who have extended loans as prescribed by the Foreign Investment Promotion Act, and persons who have provided technology thereto.
- Restrictions and Prohibitions on Foreign Investment
- Out of a total of 1,145 categories of business under the Korean Standard Industrial Classification (KSIC), foreign investment is not permitted in 60 categories of business including public administration, diplomacy, and national defense (unpermitted category of business), while foreign investment is partially permitted in 29 categories of business (restricted category of business), as prescribed by the Foreign Investment Promotion Act.
- Unpermitted Category of Business
- Categories of business in which foreign investment is not permitted have public features, hence difficulties in applying the Foreign Investment Promotion Act. The prohibition of foreign investment in the said categories is notified by Regulations on Foreign Investment and Technology Introduction and Consolidated Public Notice for Foreign Investment.
- Unpermitted Category of Business
- Postal services, central banking, individual mutual aid organizations, pension funding, administration of financial markets, activities auxiliary to financial service activities, etc.
Legislative, judiciary, administrative bodies, foreign embassies, extra-territorial organizations and bodies
Education (pre-primary, primary, secondary, higher education, universities, graduate schools, schools for the handicapped, etc.)
Artists, religious, business, professional, environmental advocacy, political, and labor organizations
- Restricted Category of Business
- Foreign investment is not permitted in restricted categories of business as well in principle. However, when there are standards for permission, foreign investment is partially permitted. The restriction of foreign investment is notified by Regulations on Foreign Investment and Technology Introduction and Consolidated Public Notice for Foreign Investment.
No foreigner shall make an investment in any company concurrently running both a category of business in which foreign investment is not permitted and a category of business in which foreign investment is only partially permitted. And where intending to make an investment in any company running not less than two categories of business in which foreign investment is only partially permitted, a foreigner shall be prohibited from making an investment in the company in excess of the ratio of foreign investment in the category of business in which the ratio of permissible foreign investment is lowest.
- Restricted Category of Business (As of March 8, 2010)
|Growing of cereal crops and other crops for food (01110)||
|Farming of beef cattle (01212)||
|Inshore and coastal fishing (03112)|
|Manufacture of other basic inorganic chemicals (20129)||
|Manufacture of other smelting, refining and alloys of non-ferrous metals (24219)|
|Nuclear power generation (35111)||
|Hydroelectric power generation (35112) Fire power generation (35113) Other power generation (35119)||
|Transmission and distribution of electric power (35120)||
|Disposal of radioactive waste (38240)||
|Wholesale of meat (46312)||
|Coastal water passenger transport (50121) Coastal water freight transport (50122)||
|Scheduled air transport (51100) Non-scheduled air transport (51200)||
|Publishing of newspapers (58121)||
|Publishing of magazines and periodicals (58122)||
|Radio broadcasting (60100)||
|Over-the-air broadcasting (60210)||
|Program distribution (60221)||
|Cable networks (60222)||
|Broadcasting via satellite and other broadcasting (60229)||
|Wired telecommunications (61210)||
|Mobile communications (61220)|
|Satellite communications (61230)|
|Other electronic communications (61299)|
|News agency activities (63910)||
|Domestic commercial bank (64121)||