7 things to know about doing business in South Korea
- South Korea is in an excellent location. Not only does the location provide its own opportunities, it is also near China (the fourth-largest consumer market in the world) and Japan (the world’s third-biggest economy). It also provides access to many Asian countries (North Asia is home to 25 percent of the world’s population and generates 22 percent of its GDP. This is forecasted to increase to 30 percent by 2020).
- Companies need a local presence within the country to establish and maintain strong business relationships. If you do not plan to have a location in the country, retain a manufacturer’s representative or distributor, name a registered trading company as an agent, or establish a field sales office.
- The U.S.-Korea trade agreement, which went into effect March 15, 2012, provides U.S. exporters with more opportunities to sell American-made goods and services to Korean customers. The tariff cuts associated with this agreement are projected to increase export of American goods by $10 billion to $11 billion and secure tens of thousands of American jobs supported by these exports.
- The South Korean tax system is fairly simple. Under the corporate taxation system, for a tax base of less than 200 million won (approximately $175,000), the tax rate is 11 percent of tax base. For more than 200 million, the tax rate is 20 million won plus 22 percent of the amount exceeding 200 million won. Composite income tax rates vary from 6 to 38 percent, depending on the tax base. There is also a value-added tax, securities transaction tax, education tax, gross real estate tax and customs duty. Locally, there is an acquisition tax, registration license tax, resident tax, local income tax and property tax.
- Foreigners should obtain a visa before entering the country, although those who enter without a visa can receive an entry inspection at the port of entry to obtain sojourn status. Short-term sojourns of less than 90 days are typically issued immediately, while long-term visas can take longer. Business investment visas are issued to essential professionals engaged in management, business administration, production or technology of a foreign-based company. Employees hired in Korea, general administrators or engineers and service providers who can be replaced by domestic human resources are not considered essential professionals.
- In South Korea, foreign workers have equal status with Korean workers and are protected by labor laws. The workweek is eight hours per day, 40 hours per week. Legal holidays/leaves include weekly holidays, Labor Day, monthly leave, annual leave, menstruation leave and maternity leave. Agreed holidays/leaves may include public holidays, company foundation anniversaries, summer leave, and congratulatory and condolence leave.
- South Korean companies are typically hierarchical. Major decisions are made at the highest level and then delegated down through the ranks. In addition, South Koreans value authority, age and seniority, treating individuals with these qualities with the utmost respect. Individuals of the same rank should meet with each other; sending a person of lower rank to meet with a person of higher rank is a sign of disrespect. Women typically do not have senior positions in South Korea, although Western women are usually accepted.