A guide to foreign investment in Korea

For foreign companies and individual investors considering entry into the Korean market, a clear understanding of Korea’s foreign investment framework is essential. While Korea offers a relatively open and business-friendly environment, the applicable procedures and regulatory requirements vary by investment form and business nature. Early planning and structural decisions, therefore, play a critical role in a successful market entry.

Legal framework for entering the Korean market Foreigners may enter the Korean market through several structures, including the establishment  of a local subsidiary, operation as an individual entrepreneur, or the establishment of a branch or liaison office.  The Foreign Investment Promotion Act governs investments made through a subsidiary or by an individual entrepreneur, while branches and liaison offices are subject to the Foreign Exchange Transaction Act. Each entry option carries different legal, tax, and operational implications, particularly with  respect to business scope, liability, and compliance obligations. Selecting the appropriate structure  at the outset is therefore a strategic decision rather than a purely administrative one.

Foreign investment restrictions and ownership limits

Although Korea’s investment regime is largely open, certain industries remain restricted due to public interest or national policy considerations. Foreign investment restrictions are broadly divided into prohibited business activities and partially restricted business activities.

Prohibited activities include sectors with strong public interest characteristics, such as postal services, banking, securities trading, public education, and radio and television broadcasting. In the agricultural sector, rice and barley farming are also restricted. In total, more than 60 business categories are closed to foreign investment.

Partially restricted activities generally allow foreign participation, but foreign ownership is typically capped at 50 percent. These industries also tend to have public or strategic importance and include fishing, newspaper and magazine publishing, beef cattle farming and distribution, domestic transportation, telecommunications, electronic network businesses, and power generation, excluding nuclear power. When investing in these sectors, careful consideration must be given to shareholding structure and control arrangements.

Business entry options for foreign investors

Foreign individuals who invest KRW 100 million or more and own at least 10% of the total voting shares or capital contribution in Korea and operate a business in their own name are regarded as foreign investors under the Foreign Investment Promotion Act. Operating as an individual entrepreneur offers procedural simplicity, particularly with respect to business closure. However, foreign entrepreneurs may face challenges in securing financing or recruiting stable personnel, as foreign individuals are often assigned relatively low credit ratings in Korea.

The most common form of market entry is the establishment of a subsidiary through foreign direct investment. A subsidiary established by a foreign investor is treated as a domestic corporation and is subject to both Korean commercial laws and the Foreign Investment Promotion Act. For this Act, a foreigner includes an individual of foreign nationality, a corporation established under foreign law, or an organization carrying out economic development cooperation on behalf of a foreign government. To qualify as a foreign investor, a minimum investment of KRW 100 million and ownership of at least 10% of the total voting shares or capital contribution is required.

Most subsidiaries in Korea are incorporated as stock companies; however, private limited companies may also be suitable, depending on the investor’s objectives and governance preferences. Incorporation generally provides greater business continuity, credibility, and stability in dealings with customers, counterparties, and financial institutions.

Foreign companies seeking to conduct revenue-generating activities directly in Korea may also establish a branch. A branch is considered an extension of the foreign head office and must be established in accordance with the Foreign Exchange Transaction Act, including court registration and the appointment of a local representative. Because a branch conducts business activities that generate income in Korea, it is treated as a permanent establishment for tax purposes, and Korean-source income is subject to corporate income tax at the same rates applied to domestic corporations.

By contrast, a liaison office is not permitted to engage in commercial or revenue-generating activities. Its role is limited to non-business, auxiliary functions in support of the head office. A liaison office does not require court registration and needs only to obtain a unique business number from the relevant tax office. Permitted activities include communication with the head office, market research, research and development, quality control, advertising, and data collection. Direct sales, invoicing, or the holding of inventory for sales purposes are not allowed, as the liaison office may not generate domestic-source revenue.

Key considerations when choosing a market entry structure Korea’s foreign investment regime clearly differentiates between entry structures in terms of applicable laws,  permitted activities, and tax treatment. Foreign investors should therefore assess their business objectives,  anticipated revenue model, tax exposure, staffing plans, and long-term growth strategy before selecting an entry route. With a thorough understanding of the regulatory environment and appropriate professional advice at an early stage, foreign investors can establish a compliant and efficient presence in Korea while minimizing regulatory and operational risks.

This article has been prepared based on selected content from the foreign investment section of our guide ‘Doing business in Korea 2026.’