{"id":36979,"date":"2014-09-11T02:31:38","date_gmt":"2014-09-11T06:31:38","guid":{"rendered":"https:\/\/www.escapeartist.com\/?p=36979"},"modified":"2020-08-03T07:34:04","modified_gmt":"2020-08-03T11:34:04","slug":"foreign-direct-investment-in-south-korea","status":"publish","type":"post","link":"https:\/\/www.escapeartist.com\/blog\/foreign-direct-investment-in-south-korea\/","title":{"rendered":"Foreign Direct Investment in South Korea"},"content":{"rendered":"
Foreign Direct Investment (FDI) refers to an investment made by a foreigner for the purpose of establishing a continuous economic relationship with a corporation of the Republic of Korea or a company run by a national of the Republic of Korea, and is regulated by the Foreign Investment Promotion Act and other related laws. FDI differs from a portfolio investment, which means the purchase of stocks or bonds by foreigners with a view to realizing a short-term financial return.<\/p>\n
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FDI, as prescribed in the Foreign Investment Promotion Act, includes acquisition of shares or stocks of a Korean corporation or a company run by a national of the Republic of Korea, supply of a long-term loan to a foreign-invested corporation, a contribution to a non-profit corporation, etc.<\/p>\n
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Acquisition of share or stocks of a domestic company refers to a case where a foreigner purchases shares or stocks of a Korean corporation (including a Korean corporation in the process of being established) or a company run by a national of the Republic of Korea, for the purpose of establishing a continuous economic relationship with and participating in the management of the said Korean corporation or company.<\/p>\n
Under the Foreign Investment Promotion Act, FDI should meet the following conditions.<\/p>\n
The amount of investment should be 100 million won or more.<\/p>\n
A foreigner should own 10 percent or more of either the total number of voting stocks, or the total equity investment. (Foreign Investment Promotion Act 2-2)<\/p>\n
If the number of relevant investors is 2 or more, each should meet the above conditions. The foreign investment ratio is measured when the investment is completed. (Foreign Investment Promotion Act 2-3) However, when a foreign investor of a registered foreign-invested company makes an additional investment, there is no limitation in the amount and ratio. The investment, stated in the foregoing sentence, shall include the possession of shares by a foreign investor, following the capitalization of legal reserves by a foreign-invested company. (Article 2 (3) of the Enforcement Decree of the Foreign Investment Promotion Act, taken into effect on October 6, 2010)<\/p>\n
Although there are no exceptions in regard to the investment amount, exceptions may be allowed for the foreign investment ratio. Even if the foreign investment ratio is less than 10% with the amount of the foreign investment being 100 million won or more, the investment may be exceptionally qualified as FDI in one of the following cases.<\/p>\n
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FDI includes loans with maturity of not less than five years, which is supplied to a foreign-invested company by an overseas parent company of the foreign-invested company, a foreign investor, or an enterprise with capital investment relationship with the investor in an overseas parent company of the foreign-invested company or a foreign investor (based on the period for loan specified in the loan contract that has been made for the first time).<\/p>\n
(Foreign Investment Promotion Act 2-4,5)<\/p>\n
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A contribution to a non-profit corporation is recognized as a foreign investment when the non-profit corporation has independent research facilities in the field of science and technology, and meets one of the following conditions:<\/p>\n
The scale of regular employment of full-time research staff is five persons or more, consisting of persons with master’s degree or higher in the field of science and technology, or persons with a bachelor’s degree in the field of science and technology having not less than three years of research career; or,<\/p>\n
Research and development activities are conducted for a project which accompanies high technology pursuant to the Restriction of Special Taxation Act.<\/p>\n
Other contributions to a non-profit corporation by a foreigner, the amount of which is not less than 50 million won, which falls under any of the following subparagraph, and which the Foreign Investment Committee recognizes as a foreign investment, are recognized as a foreign investment.<\/p>\n
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