TITLE : FAQ on FDI in Korea 2023 (Q41~Q45)
페이지 정보
본문
■ FAQ on FDI in Korea 2023 (Q41~Q45)
FDI Notification&Registration
Q41 Can the foreign currency funds remitted from a foreign country prior to notification of foreign investment be used in establishing a foreign- invested company?
A41 The Foreign Investment Promotion Act provides that a foreigninvestment made by a foreigner in the form of the acquisitionof new or existing stocks, etc. of a Korean corporation or acompany shall be notified prior to the investment. However,there is no specific regulation on the timing of introduction offunds used for the acquisition of the stocks.
- Therefore, in accordance with the Foreign Investment Promotion Act,if a foreigner opens a non-resident foreign currency account (externalaccount) before or after notification of FDI and deposits funds in theaccount, or if he/she deposits funds in a special bank account (reservedfor deposits for securities subscription), the funds can be recognized asinvestment funds.
- However, when the foreign currency funds deposited in a domestic bankaccount are converted into Korean won and used for other purposesor proceeds accrue as a result of such use (e.g., interest receivedfrom a bank deposit), it shall not be recognized as the amount offoreign investment. Therefore, the foreigner is advised to notify foreigninvestment as soon as possible and use the funds for foreign investmentimmediately
Q42 When a foreign investor does not remit or hand carry funds in person, and instead they are remitted under the name of a third party or hand carried by a third party, are those funds recognized as foreign investment funds?
A42 When investment funds are remitted under the name of,or hand carried by an agent or a third party, the foreigninvestor should submit documents certifying that the fundswere remitted or hand carried by an agent or a third partyon behalf of him/her, including documents proving that thefunds belong to the foreign investor (Article 17 (1) 1 of theEnforcement Rules of the Foreign Investment Promotion Act).
- When a foreign investor remits investment funds in person, he/shecan receive a certificate of the purchase (deposit) of foreign currencyverifying the remitter. When the foreign investor hand carries the foreigncurrency funds through customs in person, he/she can receive acertificate of the purchase (deposit) of foreign currency after declaringthe funds at the customs office and depositing the funds into a foreigncurrency account for non-residents at a domestic bank under theinvestor's name.
- When investment funds are remitted in the name of a third party orhand carried by a third party, whether the funds remitted or hand carriedbelong to the foreign investor or not cannot be confirmed. That thefunds are the foreign investment funds reported on [Date/Month/Year]by the foreign investor can be confirmed by the pertinent remittancestatement (“sent on [Date/Month/Year] on behalf of [Name of theForeign Investor]”), or by notarized documents certifying that the fundshand carried by a third party belong to the foreign investor him/herself.
Q43 Is partial registration of a foreign-invested company allowed when a foreigner notifies an acquisition of the existing stocks of a domestic company and pays for the stocks in installments?
A43 Under Article 21 (2) of the Foreign Investment Promotion Act,a foreign investor may partially register as a foreign-investedcompany before he/she has completed the payment for theobject of investment or the acquisition of stocks if the partialinvestment that he/she has executed satisfies the minimumrequirements for foreign investment (partial registration).
- In other words, if the partial investment is not less than KRW 100 millionand the ratio of the stocks acquired is not less than 10%, the actualamount paid (in KRW and USD) for the investment is indicated as theinvestment amount and the percentage of stocks corresponding tothe actual amount paid as the investment ratio on the certificate ofregistration of a foreign-invested company
- When a foreign investor is entitled by contract to receive the entirestocks before making a full payment, the investment ratio agreed bycontract can be partially registered as an exception. However, as longas a foreign-invested company remains in a state of partial registrationwhere the payment for the stocks has not been fully settled, a transfer ofstocks or a capital reduction shall not be recognized
Q44 How can investment funds be transferred if there is no bank account under the name of the company to be established?
A44 A foreign investor should notify foreign investment and usethe notification form as a basis to open a temporary accountat a domestic bank and remit funds to the account under his/her name.
- Or a foreign investor can open an international account (a non-residentforeign currency account) under his/her name in advance and remit funds to the account. This method is more complicated because severaldocuments are required by the bank.*
* Required documents: A certificate of nationality (a certificate of businessregistration for the foreign corporation, a certified copy of corporateregistration, a foreigner’s passport, etc.), a notarized power of attorney,the corporate seal of foreign corporation and an ID card of an agent, etc
- Transferring funds directly to a bank account under the name of adomestic corporation that has been established is not recommendedbecause the funds can be misappropriated for purposes other than sharesubscription payment. If a direct transfer to a domestic company’s bankaccount is inevitable (some governments require foreign investmentfunds to be transferred directly to a bank account of a domesticcompany) and if such transfer is made and can be verified (submissionof both a remittance statement certifying the investment and acertificate of purchase/deposit of foreign currency), such investmentcan be recognized as foreign investment
Q45 hould a foreigner disclose the source of the funds when transferring investment funds?
A45 In principle, the source of funds does not have to be disclosed.
- Exceptionally, however, a foreign-invested company may have to disclosethe source of funds when applying for a permission to establish a casinoin Jeju Special Self-Governing Province. According to Article 243 ofthe Special Act on the Establishment of Jeju Special Self-GoverningProvince and the Development of Free International City, the investmentfunds must not pertain to criminal proceeds in accordance with the finalruling of a trial following Article 2 (4) of the Act on the Regulation andPunishment of Concealment of Gains from Crimes.
- When a foreigner who is an individual living in a country that prohibitsforeign investment by individuals (e.g., China) hand carries investmentfunds instead of remitting them, he/she may not be able to submit apermit issued by his/her home country for carrying the funds out ofthe country. In this case, when issuing a foreign investor visa (D-8), theImmigration Office requires the foreigner to submit other documents (e.g., a bank statement for the account under his/her name in which thefunds were deposited for a considerable period of time) certifying that theforeigner is the owner of the funds.