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Foreign investors may face various difficulties caused by the political and economic circumstances of a country in which they operate, besides the normal business risks. Given the risk factors, Korea has implemented various schemes to protect foreign investors. Meanwhile, the Regulations on Foreign Investment and the Integrated Public Notice of Foreign Investment prescribe details on businesses restricted from foreign investment.


 
 
■ Liberalization of Foreign Investment

Except as otherwise prescribed by the Acts of the Republic of Korea, a foreigner may conduct, without restraint, various activities of foreign investment in the Republic of Korea. Foreigners are restricted from foreign investment in the following cases: where it is deemed to threaten the maintenance of national security and public order; where it is deemed to have harmful effects on public hygiene or environmental preservation or run counter to Korean morals and customs; and where it violates the laws and subordinate statutes of the Republic of Korea

■ Protection of Foreign Investment

Foreign direct investment is protected stronger than indirect investment such as investment in securities and bonds, as prescribed by the Foreign Investment Promotion Act.

  • Guarantee of Remittance to Foreign Countries

With regard to the proceeds from stocks, etc. acquired by a foreign investor; proceeds from the sale of stocks, etc.; and the principal, interest and service charges paid in accordance with the loan contract as prescribed by the Foreign Investment Promotion Act (Article 2 (1) 4 (b)), their remittance to foreign countries shall be guaranteed in accordance with the details of the notified or authorized foreign investment at the time when the said remittance is made.

  • Exceptions to the Safeguard Clause on Foreign Exchange Transactions

The Minister of Strategy and Finance may temporarily suspend or restrict foreign exchange transactions, if such measures are deemed inevitable on account of the outbreak of a natural calamity, war, conflicts of arms, grave and sudden changes in domestic and foreign economic conditions, or other situations equivalent thereto (Article 6 (1) to (3) of the Foreign Exchange Transactions Act). However, such measures shall not apply to foreign investment as provided for in the Foreign Investment Promotion Act (Article 6 (4) of the Foreign Exchange Transactions Act).

  • National Treatment

Except as otherwise prescribed by the Acts of the Republic of Korea, foreign investors and foreign-invested companies shall be treated in the same way as the nationals of the Republic of Korea and Korean corporations in respect of their business operations.

  • Equal Application of Tax Abatement Regulations, etc.

Except as otherwise prescribed by the Acts of the Republic of Korea, the provisions concerning the abatement or exemption of taxes from the tax laws applied to the nationals of the Republic of Korea or Korean corporations shall also apply to foreign investors, foreign-invested corporations, persons who have extended loans as prescribed by the Foreign Investment Promotion Act, and persons who have provided technology thereto.

■ Restrictions and Prohibitions on Foreign Investment

Out of a total of 1,145 categories of business listed under the Korean Standard Industrial Classification (KSIC), foreign investment is not permitted in 61 categories including public administration, diplomacy, and national defense (unpermitted categories of business), while foreign investment is partially permitted in 28 categories (restricted categories of business), as prescribed by the Foreign Investment Promotion Act.

  • Unpermitted Categories of Business
  • The categories of business in which foreign investment is not permitted generally have public features, hence the difficulties in applying the Foreign Investment Promotion Act. The prohibition of foreign investment in the said categories is prescribed by the Regulations on Foreign Investment and the Integrated Public Notice of Foreign Investment.

    Unpermitted Categories of Business

    - Postal services, central banking, individual mutual aid organizations, pension funding, administration of financial markets, activities auxiliary to financial service activities, etc.

    - Legislative, judiciary, administrative bodies, foreign embassies, extra-territorial organizations and bodies

    - Education (pre-primary, primary, secondary, higher education, universities, graduate schools, schools for the disabled, etc.)

    - Artists, religious, business, professional, environmental advocacy, political, and labor organizations

     

  • Restricted Categories of Business
  • In principle, foreign investment is also prohibited in certain restricted categories of business. However, when there are standards for permission, foreign investment is partially permitted. The restriction of foreign investment is prescribed by the Regulations on Foreign Investment and the Integrated Public Notice of Foreign Investment.

    No foreigner shall be permitted to make an investment in any company concurrently running both a category of business in which foreign investment is not permitted and a category of business in which foreign investment is only partially permitted. And, when intending to invest in any company operating two or more categories of business in which foreign investment is only partially permitted, a foreign investor shall be prohibited from investing in the company in excess of the ratio of foreign investment in the category of business in which the ratio of permissible foreign investment is the lowest.

    Growing of cereal crops and other food crops (01110), Farming of beef cattle (01212), Manufacture of other basic inorganic chemicals (20129), Manufacture of other smelting, Industry and Energy refining and alloys of nonferrous metals (24219), Nuclear power generation (35111), Hydroelectric power generation (35112), Fire power generation (35113), Other power generation (35119), Transmission and distribution of electric power (35120), Disposal of radioactive waste (38240), Wholesale of meat (46312), Coastal water passenger transport (50121), Coastal water freight transport (50122), Regular air transportation (51100), Non-regular air transportation (51200), Other Supporting Air Transport Activities (52939), Publication of newspapers (58121), Radio broadcasting (60100), Over-the-air broadcasting (60210), Program distribution (60221), Cable networks (60222), Broadcasting via satellite and other forms of broadcasting (60229), Wired telecommunications (61210), Mobile communications (61220), Satellite communications (61230), Other electronic communications (61299), News agency business (63910), Domestic commercial bank (64121)

    * Numbers indicated in the (   ) refer to KSIC code.