Investment Guide
Investment Guide
  • Staff
  • 승인 2009.09.08 15:29
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The first installment in a seven-part Investment Guide

A Series Schedule
1. FDI System in Korea
1-1 Foreign Direct Investment
1-2 Foreign Investment Promotion Act
1-3 Foreign Investment Promotion and Control
2. FDI Procedures
3. Corporation Establishment
4. FDI Incentive
5. FDI Related Law

1. FDI System in Korea
1-1 Overview of FDI System

Foreign Direct Investment, as prescribed in the Foreign Investment Promotion Act (FIPA), includes acquisition of shares or equity of a domestic corporation or business, provision of long-term loans to invested domestic corporations, a contribution to a non-profit organization etc.

Acquisition of Shares or Equity of a Domestic Business

In order for FDI to comply with the Foreign Investment Promotion Act (FIPA), both the amount of the foreign investment and the stock ratio must be satisfied as prescribed in the Act.

- Minimum Foreign Investment Amount: 50 million won
- Foreign Investment Ratio: 10% or more of the voting stocks or total invested capital
If the relevant investors are 2 or more, each shall meet the same conditions as above. The foreign investment ratio is equal to the ratio upon the completion of the foreign investment. However, when a foreign investor from a registered foreign-invested company makes an additional investment, the above ratio limit does not apply.

Exceptions may be allowed for the foreign investment ratio. That is, even if the foreign investment ratio is less than 10% with the amount of the foreign investment being 50 million won or more, the investment may be qualified as FDI exceptionally in one of the following cases:

- A contract that allows dispatch or assignment of executives;
- A contract for the delivery or purchase of raw materials or products for a minimum of 1 year; or,
- A contract for provision or import of technologies, or joint R&D

 Long-Term Loans

An investment is recognized as FDI if the foreign parent company of the foreign-invested company, a foreign investor, or a business under a capital investment relationship* with the relevant foreign parent company and the foreign investor provides a loan with a maturity of 5 years or more for the relevant foreign-invested company (on the basis of the loan period stipulated at the initial loan contract).

• A company which has a capital investment affiliation with the parent company
• A company that owns 50 percent or more of the total issued shares or equity investment of its foreign parent company
• A foreign-invested company of which 50 percent or more of its total issued shares or equity investment is owned by its foreign parent company and qualifies for the following:
- A company that owns 10 percent or more of the total issued shares or equity investment of its foreign parent company
- A company of which 50 percent or more of its total issued shares or equity investment is owned by its foreign parent company
- A company of which 50 percent or more of its total issued shares or equity investment is owned by a company that owns 50 percent or more of the foreign parent company's total issued shares or equity investment.
• A company of which 50 percent or more of its total issued shares or equity investment is owned by a foreign investor that owns 50 percent or more of the foreign invested company's total issued shares or equity investment.

Contribution to a Non-Profit Organization (NPO)

A contribution to an NPO is recognized as a foreign investment when the NPO has independent research facilities in the field of science and technology, and meets certain conditions.

Courtesy of Invest Korea, an affiliate of Korea Trade-Investment Promotion Agency

 


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