Three Options for Foreign Companies in Korea
Foreign companies entering the Korean market can choose from three main presence structures. Each represents a different trade-off between setup speed, commercial capability, legal liability, and ongoing compliance burden.
- Liaison Office (연락사무소): Non-commercial presence for market research and coordination. Registered with KOTRA. No revenue rights.
- Branch Office (지사): Commercial extension of the foreign parent. Registered at the Commercial Registry court. Can earn revenue. Not a separate legal entity.
- Subsidiary (법인, FDI company): Separate Korean legal entity. Registered at court + KOTRA FDI. Full commercial rights, limited liability, investor D-8 visas.
Full Comparison Table
| Feature | Liaison Office | Branch Office | Subsidiary (법인) |
|---|---|---|---|
| Revenue in Korea | No | Yes | Yes |
| Legal entity | No | No (parent's extension) | Yes (separate entity) |
| Parent liability | Full | Full | Limited to investment |
| Registration body | KOTRA | District Court (상업등기) | Court + KOTRA (FDI) |
| Setup time | 1–2 weeks | 3–5 weeks | 6–12 weeks |
| Minimum capital | None | None | KRW 100M (for D-8) |
| Corporate tax | None | Yes (PE) | Yes |
| VAT registration | No | Yes (if selling) | Yes (if selling) |
| Manager visa type | D-7-2 | D-7-1 | D-8 (investor) / E-7 (employee) |
| Can hire Korean staff | Admin only | Yes, all roles | Yes, all roles |
| Bank account | Yes (operating account) | Yes (corporate) | Yes (corporate) |
| KOTRA annual renewal | Yes | No | Yes (FDI report) |
| Path to PR for manager | D-7-2 → 5yr F-5-1 | D-7-1 → 5yr F-5-1 | D-8 → 1yr F-5-5 (if KRW 500M) |
| Annual compliance cost | Low | Medium | Medium–High |
Decision Framework: Which Is Right for You?
Quick Decision Guide
Setup Timelines
| Step | Liaison | Branch | Subsidiary |
|---|---|---|---|
| Document preparation | 1–2 weeks | 2–3 weeks | 2–4 weeks |
| KOTRA registration | 3–5 days | N/A | 3–5 days |
| Court registration | N/A | 5–10 days | 5–10 days |
| Tax office registration | N/A | 2–3 days | 2–3 days |
| Capital remittance (FDI) | N/A | N/A | 1–2 weeks |
| Bank account opening | 1–2 weeks | 1–2 weeks | 1–2 weeks |
| Visa processing (D-7/D-8) | 2–4 weeks | 2–4 weeks | 2–4 weeks |
| Total (approximate) | 3–5 weeks | 4–7 weeks | 6–12 weeks |
Tax & Compliance Overview
| Obligation | Liaison | Branch | Subsidiary |
|---|---|---|---|
| Corporate income tax | None | Yes (annual) | Yes (annual) |
| VAT returns | None | Yes (quarterly) | Yes (quarterly) |
| Payroll withholding | Yes (Korean staff) | Yes | Yes |
| Year-end tax reconciliation | Yes (Korean staff) | Yes | Yes |
| Annual financial report | KOTRA renewal | Court / NTS | NTS + KOTRA FDI report |
| Statutory auditor | No | No (unless large) | Yes (if assets >KRW 5B) |
Phased Entry Strategy
Many successful foreign companies enter Korea in phases, using the structure that fits each stage:
Phase 1: Market Research (Liaison Office)
Establish a liaison office to conduct market research, meet potential Korean partners, and evaluate the market without committing to commercial operations. Duration: 6–24 months. Cost: low.
Phase 2: Commercial Launch (Branch or Subsidiary)
Once the market opportunity is confirmed, establish a branch office (if you want simplicity and the parent company retains direct responsibility) or a subsidiary (if you want liability protection, multiple investors, or the D-8 investor visa path).
Phase 3: Scale & Permanent Status
After sustained operations, the managing director can pursue F-5 permanent residency. Investors with KRW 500M in the subsidiary can apply for F-5-5 after 1 year of D-8. Managers on D-7-1/D-7-2 can apply for F-5-1 after 5 years.
Frequently Asked Questions
Which structure is best for a foreign company's first entry into Korea?
For market research with no revenue, a liaison office is fastest and cheapest. For commercial operations without creating a separate legal entity, a branch office. For long-term commitment with limited liability and potential for investor permanent residency, a subsidiary.
Can a liaison office later be converted to a branch or subsidiary?
There is no automatic conversion — you register the new entity separately and close the liaison office. Many companies follow this phased approach: liaison → branch or subsidiary as commitment deepens.
What is the fastest structure to establish in Korea?
A liaison office: KOTRA registration takes 3–5 business days once documents are ready. Total time including banking: 3–5 weeks. Branch: 4–7 weeks. Subsidiary: 6–12 weeks.
Does a foreign company need a Korean resident director?
Not strictly required for all structures. The liaison office representative typically lives in Korea on D-7-2. For subsidiaries, a sole foreign director can serve as representative director without Korean residency, though a registered Korean address is required. Practical operations generally require someone present.
How do I choose between a branch and a subsidiary for Korea operations?
Choose branch if: parent retains full responsibility, simpler governance, no need to raise Korean capital. Choose subsidiary if: you want liability limitation, multiple investors, Korean bank financing, or the fastest investor PR path (D-8 → F-5-5).
What are the annual maintenance costs for each Korea entity type?
Liaison: minimal (rent, staff, KOTRA renewal). Branch: corporate tax + VAT + payroll, accounting fees KRW 500K–2M/year. Subsidiary: same as branch plus shareholder meetings and KOTRA FDI annual report, total KRW 1–5M/year.
