Your Korean Business Compliance Checklist
Rising
overseas trade has been the driving force behind Korea’s out of the ordinary
economic boom. No wonder, since it signed its first Free Trade Agreement (FTA)
with Chile in the April of 2004, Korea has seen consistent growth in its
network of FTA’s, all over the world. This is why Korea has become a major FTA
nation that has a huge FTA network across the world.
Korea
is one of its kind country in the world that has FTAs
with all of the key economic alliances around the globe, as well as the United States,
the European Union, the ASEAN (Association of South-East Asian Nations) and
China. Therefore as an entrepreneur, you get to benefit from an FTA privileged
duty rate when bringing in goods and services into Korea from almost every principal
export nation.
Taking
into account this remarkable growth, the Korea department of customs and similar
laws have changed a lot and compliance requirements actually mean business do
to business in Korea.
Legal and Compliance
Checklist for Korean Companies
1. Prior
to the conclusion of formalities for incorporating a company in Korea, it is
mandatory to get the lease agreement for office premises reviewed and approved by
the Korean Government. A corporate services provider offering an entire range of services at a single
window is the best solution you can have.
2. An
experienced corporate services provider can provide all the needed assistance
and guidance by the company for all corporate and South Korea banking issues.
3. Every
fund amount that is deposited into a Korean bank account needs to be approved
by the bank.
4. The
FIPA (Foreign Investment Promotion Act) is configured in a way to govern
investment in South Korea. According to this Act, foreign investors are
required to file a report with the government if they intend to invest in Korea
by way of a merger or by procuring a company.
5. To
start a new business in Korea, you must get it registered by the Government,
though this is applicable in select sectors.
6. Every
South Korean firm is required to file a VAT report every quarter and a tax
return every year to comply with the regulation of the Republic of Korea’s
Company Law.
7.
Every establishment is required
to file an interim tax return with the Korean Government. This is inclusive of,
(i) balance sheet (ii) income statement and (iii) a trial balance.
Compliance Obligations
Company Information
Disclosure and Withholding Provisions
In the
case of domestic employment income earners, employers must withhold payroll
taxes once in every month, decide upon the employee’s due taxes and release a
payroll tax settlement certificate on the closure of the tax period.
Companies
do not have to withhold taxes at the time of paying the foreign employment
income.
Safeguarding Compliance
and Mitigation
In
South Korea, corporations are liable to be legally penalized only in cases
where laws clearly have provisions for vicarious liability. The Criminal Code has
no say in the matters of vicarious liability. Therefore, an enterprise cannot
be brought to book according to the Criminal Code.
At
the same time, Article 4 of the FBPA and other specific bylaws that govern certain
sectors (for instance, the Medical Devices Act, the Pharmaceutical Affairs Act,
the Framework Act on the Construction Industry and the Housing Act) take care
of the vicarious liability for corrupt practices.
Despite
the fact that vicarious liability is specifically taken care of by the
appropriate regulations, corporations cannot be considered accountable for the activities
of their workers. This is true only if the enterprise can prove that it did
what it was supposed to do to sufficiently monitor those employees.
Hence,
on a practical level, a compliance program that works best may be effective to
a certain extent in putting up a defense corresponding to liability claims
against corporations for the doings of their workforce.
The
Criminal Code has no clear provisions for any safety against extortion, pressure
or fear of corruption wrongdoings. Hypothetically, in case an economic advantage
is offered as a result of a squeeze and not with respect to the recipient’s
responsibilities, then there is no proof of bribery.
Practically
speaking, it is improbable that the courts will recognize such a plea as a defense
to a local bribery misdoing, in line with the Criminal Code.
The
FBPA excludes compensations to foreign state authorities that are legal as per the
appropriate regulations of the other country and foreign bribery wrongdoing within
the FBPA
A Korean Compliance Checklist is meant to offer
just a fundamental outline of what is required to comply with the law and keep
yourself safe from shareholders’ charges. It is strongly advised that a compliance
audit be carried out– if you have not completed a compliance audit of your
Korean business in the past or recently.
Conclusion
Accountability is a prerequisite for going
global; notification and registration, in terms of compliance requisites, are
going to stay here for the times to come and are likely to mushroom as the days
go by.
Foreign companies with a good presence in Korea
are strongly recommended to maintain a good compliance checklist. With a
checklist in hand (that acts like a compliance monitoring system) foreign enterprises
are as safe as home in Korea and their businesses will benefit when a universal
audit and government inquiries take place.
A successful compliance checklist directly results
in reducing noticeable and indefinable losses by avoiding occurrences and insufficiencies
by way of early rectification and maximizes the company’s mid-term as well as
long-term profits.
Alternatively, in a roundabout way, it
enriches the reputation of the organization by lowering the desire in employees
to engage in any kind of fraud. At the same time, it helps carry out proactive preventive
measures.
Also, it’s extremely important that stakeholders understand
this fact of business, formalize this new reality and ensure adherence to all
such requisites. The inability to do so can bring global commerce to a dead halt for
any company that fails to demonstrate compliance. Contact us for more information on Korea company compliance criteria.
