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The establishment and private registration of a local corporation is recognized as foreign investment under the Foreign Investment Promotion Act. However, the establishment of a domestic branch is not recognized as foreign investment, and is regulated by the Foreign Exchange Transactions Act.

 


■ Types of a Foreign Company’s Domestic Branch

There are two types of domestic branches: a branch and a liaison office. A branch undertakes sales activities in Korea to generate profit, whereas a liaison office does not conduct sales activities to create profit but instead carries out non-sales functions such as business contacts, market research and R&D. Liaison offices can carry out quality control, market surveys, advertising, and other incidental and supportive roles. However, they are limited in the scope of their activities since they are not permitted to sell products directly or to stock inventory for sale on behalf of the headquarters.

■ Procedure for Establishing a Foreign Company’s Domestic Branch