Concept of Foreign Direct Investment (FDI)
Foreigners owning stocks or a stake in domestic corporations in Korea or companies owned and operated by Koreans for the purpose of establishing continuous economic relationship with such companies, or overseas parent company, etc., giving a long-term loan of more than 5 years to foreign investment company.
Types of FDI
- (Type 1) Acquisition of stock or shares in domestic company
- (New stock) Acquisition of newly issued stock, etc. (e.g.: establishment of new corporation and paid-in capital increase, etc.)
- (Existing stock) Acquisition of stocks or shares already issued
In the event the investment amount is more than 100 million Won (based on the acquisition cost) per person, and at the same time, acquisition of more than 10% of the total stocks with voting right or total capital per person.
- (Acknowledgement of exemptions) Even when the investment proportion is less than 10%, it is recognized as FDI if a foreigner is dispatched or appointed as an executive of the corresponding domestic company.
- (Type 2) Long-term loan of more than 5 years to domestic company (foreign invested company)
- Loan can be provided only if capital investment by foreigner has been made in advance
Loan with period of more than 5 years given to the foreign invested company by the overseas parent company of the domestic company (foreign invested company), foreign investor (individual) or company with capital investment relationship stipulated under Presidential Order with overseas parent company and foreign investor (individual)
- (Type 3) Acquisition of stock or shares through merger, etc.
- Ex post facto reporting + reporting within 60 days
- Capital increase without consideration (transfer of capital including reserve capital and re-evaluation reserves, etc.)
- Corporate merger and division, and comprehensive stock exchange and transfer
- Purchases, inheritance, bequest and bestowal by foreigner
- Investment of earnings (cash dividend and stock dividend)
- Conversion of convertible bond, exchangeable bond and depositary certificate into stock
- (Type 4) Investment into non-profit corporation
- In the event of having fulfilled prescribed requisites including non-profit corporation corresponding to research personnel facility in the area of science and technology, and foreign investment amount of more than 50 million Won accounting for more than 10/100 of the total
Key FDI work flowchart
- 1 STEP
Step 01. Report foreign direct investment
- 2 STEP
Step 02. Open account for reception of investment capital (virtual account)
- 3 STEP
Step 03. Report foreign direct investment
- 4 STEP
Step 04. Payment of capital
- 5 STEP Court of law or registry
Step 05. Court of law or registry Registration of incorporation (or capital increase)
- 6 STEP Initial reporting institution
Step 06. Initial reporting institution Apply registration of foreign investment company