Foreign companies looking to set up a company in Korea must understand the legal, tax, and labor requirements before entering the Korean market. Whether you choose to establish a subsidiary or a branch office for your business to set up a company in Korea, proper planning will save time and reduce compliance risks. This guide explains the essential steps for foreign investors to set up a company in Korea, including payroll, social security, and labor law obligations.
📑 Table of Contents
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Subsidiary vs. Branch in Korea
Understanding how to set up a company in Korea involves knowing the essential differences between a subsidiary and a branch office.
Understanding the differences between a subsidiary and a branch office is crucial. For instance, a subsidiary allows for greater operational autonomy, which may appeal to companies looking to develop distinct market strategies in Korea. On the other hand, a branch office may be beneficial for companies aiming for lower setup costs and simpler compliance requirements. Engaging with local experts can provide tailored insights that align with your specific business objectives.
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Hiring Foreign Employees in Korea
When you set up a company in Korea, hiring foreign employees is a critical aspect to consider as well.
In addition to securing work visas, companies should also consider cultural integration for foreign employees. Offering language classes and cultural orientation can enhance employee satisfaction and productivity. Understanding workplace norms is key to fostering a harmonious work environment.
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Payroll & Social Security Contributions
Ensuring you have the right payroll structure in place is vital when you set up a company in Korea.
Payroll systems in Korea are designed to ensure that both employer and employee contributions are accurately calculated and reported. It’s advisable to use reliable payroll software or services that adhere to Korean regulations. Regular audits can help prevent errors and ensure compliance.
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Labor Law Requirements
As you set up a company in Korea, familiarizing yourself with labor laws is crucial to ensure compliance.
Furthermore, understanding labor law compliance requires staying informed on changes in legislation. Participating in workshops and training can equip business owners with the necessary tools to navigate the complexities of labor laws in Korea.
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Tax & Ongoing Compliance
Tax considerations are also critical when you set up a company in Korea, as they can significantly impact your business operations.
Tax compliance extends beyond just filing; it involves strategic financial planning to minimize liabilities. Consulting with tax professionals can uncover potential savings and benefits associated with operating in Korea.
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Costs of Company Registration
Understanding the costs involved as you set up a company in Korea can help in effective budgeting.
When it comes to costs, it’s essential to budget for unforeseen expenses that may arise during the registration process. This includes potential fees for legal advice or assistance with documentation, which can significantly affect your overall budget.
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Ongoing Support Services
Ongoing support services may also include IT infrastructure setup and management, which is critical for modern businesses. Ensuring your technological capabilities are robust can provide a competitive edge in the market.
1. Subsidiary vs. Branch in Korea
Choosing the right structure helps when you set up a company in Korea and navigate the local market.
For example, a foreign company in the tech industry might prefer a subsidiary to tailor its products for the Korean market, while a consulting firm may opt for a branch to leverage existing networks and resources quickly.
There are two main structures for foreign companies:
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Subsidiary (foreign-invested corporation) – A separate legal entity under Korean law. It requires paid-in capital and provides more independence.
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Branch office – An extension of the parent company, simpler to register but less flexible in tax and liability planning.
👉 Choosing between a Korean subsidiary and branch depends on your business strategy, tax goals, and long-term plans.
2. Hiring Foreign Employees in Korea
To employ foreign nationals, companies must secure proper work visas such as the D-8 Investor Visa or E-7 Specialist Visa.
⚠️ At Korea Tax Expert, we do not directly process visas, but we can introduce trusted immigration law firms who specialize in visa sponsorship and work permits. For official information, you can also refer to Invest Korea – Business Setup Guide
3. Payroll & Social Security Contributions
All employers must register employees in the Four Major Insurances:
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National Pension – 4.5% each (employer and employee).
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National Health Insurance – Around 3.5% each, plus long-term care contribution.
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Employment Insurance – Employer and employee share, depending on company size.
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Industrial Accident Compensation Insurance – Fully paid by the employer.
👉 For more details on contribution rates, see the National Pension Service (NPS) website.
4. Labor Law Requirements
Korean labor law requires:
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Written employment contracts
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Compliance with minimum wage (KRW 10,030/hour in 2025)
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Standard working hours: 40 hours/week, with regulated overtime
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Severance pay after 1 year of service
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Monthly income tax withholding and filing
👉 Employers should review the Korean Labor Standards Act for up-to-date regulations.
5. Tax & Ongoing Compliance
Tax planning becomes necessary to ensure profitability as you set up a company in Korea.
Understanding the implications of the taxation system in Korea can lead to better financial outcomes. Engaging with a local tax advisor can help you navigate the complexities of tax laws and identify applicable deductions.
Once established, foreign companies in Korea must:
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File VAT returns quarterly
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File corporate income tax (CIT) annually
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Maintain proper bookkeeping and annual financial statements
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Hold an annual shareholders’ meeting
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Report shareholder and director changes to the authorities
We provide full Korean tax compliance and bookkeeping services to help businesses stay compliant.
6. Costs of Company Registration in Korea
Budgeting correctly can alleviate unexpected costs when you set up a company in Korea.
Costs for registration can also vary significantly based on the industry. For example, technology companies may face different regulatory hurdles compared to retail businesses, influencing their overall registration costs.
Our service fees for company establishment start from USD 3,000.
The final cost depends on:
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Subsidiary vs. branch setup
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The amount of paid-in capital invested
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Complexity of shareholder structure and required documents
⚠️ Small-capital entities often face stricter government reviews, making the process more time-consuming and challenging.
7. Ongoing Support Services
Support services offered can ease your journey as you set up a company in Korea.
Moreover, ongoing support services can include market entry strategies and business development assistance that can significantly ease the transition into the Korean market.
After incorporation, we provide:
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Payroll & HR administration
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Bookkeeping & tax filing (VAT, CIT, payroll taxes)
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Labor compliance advisory
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Referrals to visa & immigration specialists
This ensures foreign businesses in Korea stay fully compliant while focusing on growth.
✅ Conclusion
In conclusion, knowing how to set up a company in Korea is essential for foreign investors.
To successfully set up a company in Korea, foreign investors must carefully consider structure, payroll, tax, and compliance obligations. With expert guidance, the process becomes smooth and predictable.
Additionally, leveraging local networks and engaging with business communities can provide insights and opportunities that facilitate a smoother setup process
Finding reliable support can be beneficial when you set up a company in Korea.
At Korea Tax Expert, we offer end-to-end support for foreign companies—from incorporation to payroll and tax compliance.
We also offer tailored consulting services to address specific challenges faced by foreign investors, ensuring that every aspect of your company’s establishment in Korea is addressed efficiently.
👉 Contact us today to discuss your Korea company registration project.
Our team is dedicated to helping you navigate the complexities of establishing your presence in Korea, providing you with the tools and knowledge necessary to thrive in this dynamic market
In navigating this process, the key goal remains to set up a company in Korea successfully.
