Expanding a Chinese business into South Korea

Chinese companies come to Korea for different reasons: a battery-materials supplier follows its Korean customers; a cosmetics brand from Guangzhou wants a Korean entity for ‘K-beauty’ credibility; a cross-border e-commerce seller needs local stock and returns; a games publisher wants a Korean operating company; an individual entrepreneur wants to live in Seoul and run a business there. The Korean legal framework treats all of them like any other foreign investor. What differs is what has to happen in China before the money and the documents can leave.

This guide walks through the routes into Korea, the Chinese outbound investment and foreign exchange rules, the corporate and personal documents a Korean registry and bank will ask for — with their Chinese names — notarisation and apostille in China, the Korea–China FTA and tax treaty, Chinese tax on Korean profits, visas, banking and data. Chinese terms are given in simplified characters with pinyin; Korean terms in Hangul with romanisation.

The Korea–China framework

Three agreements shape the move. The Korea–China Free Trade Agreement (한-중 자유무역협정, han-jung jayu muyeok hyeopjeong), in force since 20 December 2015, removes or reduces duty on most industrial goods traded between the two countries; RCEP, in force for both since 2022, offers an alternative set of origin rules. The Korea–China double taxation agreement of 1994 — the tax treaty (中韩税收协定, Zhong-Han shuishou xieding) — limits Korean withholding on dividends, interest and royalties paid to Chinese residents. And since China joined the Hague Apostille Convention with effect from 7 November 2023, documents issued in mainland China reach Korean authorities with an apostille alone.

Money moves easily at the Korean end. Korea has a designated RMB clearing bank in Seoul, several Chinese banks operate branches there, and Korean banks handle RMB payments for trade. The constraints are on the Chinese side, where outbound investment remains a regulated activity.

Four ways in

1. A Korean distributor

The lightest option: a Korean importer buys and resells. No Korean entity and no Korean tax return for the Chinese company. The risk is that an agent who habitually concludes contracts in Korea for the Chinese company creates a permanent establishment (국내사업장, gungnae saeopjang) under Article 94 of the Corporate Tax Act and Article 5 of the treaty, with Korean corporate tax on the profits from those sales.

2. A liaison office

A liaison office (연락사무소, yeollak samuso) — the Korean counterpart of a 代表处 — lets the Chinese company place staff in Korea for sourcing, market research and after-sales support. It is reported to a designated foreign exchange bank under the Foreign Exchange Transactions Act and receives a unique tax number; it may not earn Korean income. Our guide to liaison offices covers the limits.

3. A branch

A branch is the Chinese company itself registered in Korea under Article 614 of the Commercial Act, with a representative in Korea. It can trade and employ, but the Chinese parent is liable for everything, and every change in China — a new 法定代表人, a new registered address, an amended 营业执照 — must be registered in Korea with notarised and apostilled documents.

4. A Korean subsidiary

Most Chinese businesses that intend to stay form a Jusik Hoesa (주식회사, jusik hoesa) — the Korean stock company, the counterpart of a 股份有限公司 in form though as light to run as a 有限责任公司. With at least KRW 100 million of capital it is registered as a foreign investment under the Foreign Investment Promotion Act, which guarantees remittance of dividends and opens the D-8 visa for the investor-director. Our guide to branch or subsidiary compares the two.

Before the money leaves China: ODI

Chinese outbound direct investment — ODI (境外直接投资, jingwai zhijie touzi) — by a mainland enterprise normally requires three steps before the capital can be remitted to Korea:

The usual ODI sequence for a non-sensitive investment. Sensitive countries, sectors or amounts need approval rather than filing.

For an ordinary investment in a Korean trading, technology or consumer business, these are filings rather than approvals, and a well-prepared file takes four to eight weeks in total. The application describes the Korean company, the amount, the source of funds and the business plan; the 企业境外投资证书 names the Korean company, so its proposed Korean name and capital should be settled first. Only after the bank completes the foreign exchange registration will it remit the capital — and only to the account designated in the Korean foreign investment notification.

The Korean side should be timed around this. The Korean foreign investment notification (외국인투자신고, oegugin tuja singo) can be filed with a Korean bank before the money arrives, and the Korean company is incorporated once the capital has been received and certified. We usually prepare the Korean documents in parallel so that incorporation follows within days of the remittance.

Individual investors from mainland China

An individual resident in mainland China faces a harder constraint. The annual personal foreign exchange facilitation quota (个人年度便利化额度, geren niandu bianlihua edu) of USD 50,000 is for current-account purposes such as travel, study and living costs; it may not be used for overseas investment, property purchases or securities. Splitting a remittance across family members’ quotas to fund a Korean company breaches the rules and is monitored by banks.

Individuals therefore usually invest from funds already lawfully held outside the mainland — income earned abroad, an existing overseas account — or through a Chinese company that completes ODI. Where a mainland resident establishes or controls an overseas company that will hold onshore Chinese assets or raise financing, SAFE Circular 37 (37号文, sanshiqi hao wen) registration may also apply. Korean banks receiving the capital ask where it came from, and a Korean D-8 application requires the investment to be traceable from the investor’s own account abroad.

In Korea the question is how much you invest. In China it is how the money is allowed to leave.

Voixa Korea

Company documents from China

When the investor is a Chinese company, Korean registries and banks need evidence that it exists, who represents it and that it decided to invest. The usual set, with the Chinese and Korean names you will see on checklists:

Typical documents for a Chinese corporate shareholder. Your list is confirmed before anything is notarised.

One point differs from what Chinese companies expect: Korean registries rely on the legal representative (法定代表人, fading daibiaoren) concept less than Chinese ones; they want the board or shareholder resolution that authorises the investment, and a power of attorney that names the Korean agent and lists each act — the foreign investment notification, subscription for shares, court registration, tax registration, bank accounts.

Personal documents from China

For an individual shareholder or director — and for a D-8 visa that follows — the personal documents are:

Typical personal documents. Korean immigration may request others.

Korean registries normally ask directors for a seal certificate (인감증명서, ingam jeungmyeongseo); a foreign director instead provides a notarised signature. The Chinese notary’s signature notarisation (签字公证, qianzi gongzheng) serves this purpose once apostilled.

Notarisation and apostille in China

Chinese documents reach Korea in two steps. A notary office (公证处, gongzhengchu) issues a notarial certificate (公证书, gongzhengshu) — certifying a copy, a signature or a fact such as kinship — usually bound with an English translation. The apostille (附加证明书, fujia zhengmingshu) is then issued by the Ministry of Foreign Affairs’ Department of Consular Affairs or by an authorised provincial foreign affairs office (外事办公室, waishi bangongshi). Since 7 November 2023 no Korean consular legalisation is needed for documents from mainland China.

Hong Kong and Macao were already parties to the Convention through their own arrangements; their documents are apostilled by the High Court in Hong Kong and the Macao authorities. Documents from Taiwan, which is not a party, are authenticated through the Korean Mission in Taipei.

Two practical points. Chinese notarial certificates are issued in Chinese with an attached translation; Korean authorities still require a Korean translation, which we arrange in Seoul. And Korean registries and banks expect certificates — business licence copies, criminal record certificates, household register extracts — to be recent, generally issued within three months. Order them last. Our guide to apostilles for Korea covers the rules.

Names, chops and signatures

Chinese and Korean corporate cultures share the seal. A Chinese company’s official chop (公章, gongzhang) and a Korean company’s registered seal (법인인감, beobin ingam) play similar roles, and Korean counterparts will expect documents from a Chinese parent to carry both the legal representative’s signature and the chop. The Korean subsidiary registers its own seal at incorporation.

Names need care. Korean registries record names in Hangul. A Chinese person’s name can be written by the Korean reading of the characters — 张伟 as 장위 — or by Mandarin pronunciation — 장웨이 — and the passport’s pinyin, ZHANG WEI, sits beside both. Choose one form and use it consistently on every document, account and visa application; mismatches between registry, bank and immigration records cause delays later. The Korean company’s own name is registered in Hangul; a Chinese brand name can be rendered by sound or by Sino-Korean reading, and the choice is worth making with the Korean market, not only the registry, in mind.

Setting up the Korean company

On the Korean side the process is the one every foreign investor follows. The investment is notified to a Korean foreign exchange bank under Article 5 of the Foreign Investment Promotion Act; the capital is wired from the Chinese company’s account, in RMB, US dollars or another currency, and the bank issues a certificate of receipt; the company is registered with the court; and the tax office issues the business registration number (사업자등록번호, saeopja deungnok beonho). The foreign investment registration certificate follows. With documents ready, the Korean part takes two to four weeks.

A Jusik Hoesa with capital under KRW 1 billion can have a single director, who need not be Korean or resident in Korea. Directors serve terms of up to three years under Article 383 of the Commercial Act, renewed by registration — unlike a Chinese 有限责任公司, where a director’s term is set in the articles but registration changes are fewer.

Restricted sectors and technology protection

Most sectors are open to Chinese investment on the same terms as any other foreign investment. A short list — broadcasting, telecoms, air transport, some agriculture and energy — has ownership caps or bans under the Foreign Investment Promotion Act and sector laws, and the Act allows investments to be restricted on national security grounds.

Acquisitions are where Chinese investors meet the most scrutiny. Under the Industrial Technology Protection Act, a foreign acquisition of a Korean company holding a national core technology (국가핵심기술, gukga haeksim gisul) — in semiconductors, displays, batteries, shipbuilding and other strategic fields — requires government approval or reporting, and greenfield companies that later develop or license such technology may become subject to the rules. A new subsidiary formed to sell, distribute or provide services is rarely affected.

Trade under the Korea–China FTA

Goods of Chinese origin can enter Korea at reduced or zero duty under the Korea–China FTA or RCEP, whichever gives the better result, if the Korean importer holds valid proof of origin. Under the Korea–China FTA that proof is a certificate of origin (原产地证书, yuanchandi zhengshu) issued by Chinese customs or the China Council for the Promotion of International Trade (中国国际贸易促进委员会, Zhongguo guoji maoyi cujin weiyuanhui). The importer claims preferential duty under the FTA Customs Act and must be able to support the origin in a later verification.

Korean tax and the Korea–China treaty

The Korean subsidiary pays corporate tax at 10% to 25% plus local income tax of one-tenth, under Article 55 of the Corporate Tax Act — 11% on the first KRW 200 million — and 10% VAT on Korean sales. Payments to the Chinese parent bear Korean withholding, reduced by the treaty:

Domestic rates include Korean local income tax. Check the current treaty text before relying on a rate.

To claim the treaty rate, the Chinese company files a limited tax rate application (제한세율 적용신청서, jehan seyul jeogyong sincheongseo) with the Korean payer before payment, under Article 98-6 of the Corporate Tax Act, attaching a Chinese tax residence certificate (中国税收居民身份证明, Zhongguo shuishou jumin shenfen zhengming) from its local tax bureau. Without it, 22% is withheld and a refund must be claimed. Our guide to dividend withholding covers the procedure.

Chinese tax on Korean profits

China taxes its resident enterprises on worldwide income under the Enterprise Income Tax Law (企业所得税法, qiye suodeshui fa). Dividends received from a Korean subsidiary are taxable in China at 25%, but Articles 23 and 24 of the law give credit for foreign tax: the Korean withholding tax directly, and the Korean corporate tax underlying the dividend indirectly, where the Chinese company holds at least 20% — through up to five tiers of companies under the 2017 rules. Because Korean tax on a small company’s profit plus 5% withholding is well below 25%, the Chinese parent typically pays a top-up in China when profit is distributed.

Undistributed profit raises a separate issue. Under Article 45 of the Enterprise Income Tax Law, profit retained without reasonable business need in a controlled foreign company (受控外国企业, shoukong waiguo qiye) in a jurisdiction with an effective tax rate below 12.5% can be deemed distributed and taxed in China. Korea’s standard rates are well above that threshold, but a small Korean company paying 11% on its first KRW 200 million of profit is not, and Korea is not on China’s CFC white list. A Korean subsidiary that keeps profits for real business reasons — working capital, investment, expansion — should document them; one that simply accumulates cash should expect questions.

Royalties, interest and service fees from Korea are taxable in China with credit for Korean withholding. Service fees charged by the Chinese parent must be supported in Korea under the Adjustment of International Taxes Act; Korean tax offices disallow charges without evidence that a service was received.

Staff and visas

Chinese nationals need a visa for business travel to Korea; the short-term business visa, C-3-4 (단기상용, dangi sangyong), covers meetings, market research and contract negotiation, and is applied for through the Korea Visa Application Centres in China. Working in Korea requires a long-term visa under the Immigration Act.

A Chinese shareholder-director who invests at least KRW 100 million into the Korean company and manages it applies for the D-8 corporate investment visa (기업투자 비자, gieop tuja bija), with the 无犯罪记录证明 and family documents described above; our guide to D-8 requirements covers the file. Employees transferred from the Chinese parent come on a D-7 intra-company transfer or an E-7 professional visa. Korean immigration looks closely at whether the business is real — premises, staff, revenue — at renewal.

Local staff are employed under the Labour Standards Act, with written terms, a national minimum wage, four social insurances and severance after one year. Korea and China have a social security agreement covering pension contributions for seconded employees for a limited period; Korean health insurance still applies. Our guide to hiring in Korea sets out the 2026 rates.

Banking and payments

The Korean bank that receives the capital usually opens the company’s won and foreign currency accounts after registration, with the director attending in person. Several Chinese banks have Seoul branches and Korean banks employ Chinese-speaking staff, which helps with documents; the Korean company’s main account should still be with a bank that can provide full domestic services — payroll, tax payments, card acquiring. RMB accounts are available, and trade can be invoiced and settled in RMB.

Protect the brand

Korea is a first-to-file (선출원주의, seonchurwonjuui) trademark system under Article 35 of the Trademark Act, as is China. Chinese companies know the risk from home; it applies equally in Korea. File with the Korean Intellectual Property Office, directly or through the Madrid system, before appointing a distributor or launching marketing, and consider registering the brand in Hangul as well as in Latin letters and Chinese characters.

A worked example

深圳某电子科技有限公司, a Shenzhen electronics company, supplies components to Korean manufacturers through an agent. It decides to form a Seoul subsidiary to hold stock and provide technical support. It completes NDRC and MOFCOM filings and the bank’s foreign exchange registration in six weeks, while its 营业执照, articles, board resolution and power of attorney are notarised in Shenzhen and apostilled by the Guangdong foreign affairs office. The Korean company is incorporated with KRW 300 million of capital, notified as a foreign investment, and its general manager, a Chinese engineer, moves to Seoul on a D-8 visa as representative director.

Components imported from the parent enter Korea at zero duty under the FTA with CCPIT certificates of origin; import VAT is reclaimed quarterly. In its third year the Korean company makes KRW 400 million of profit, pays KRW 66 million of Korean corporate tax including local tax, and pays a dividend with 5% Korean withholding plus local income tax under the treaty. In Shenzhen the dividend is taxed at 25% with credit for the Korean tax, direct and indirect, and a modest top-up is paid.

Mistakes we see

1. Wiring capital before ODI is complete, or through personal quotas, and having the Korean bank question the source of funds.
2. Notarised copies sent without the apostille, or time lost on consular legalisation that is no longer needed.
3. Inconsistent Hangul names for the same person across registry, bank and visa records.
4. A power of attorney that names only the 法定代表人’s authority and not the specific Korean acts.
5. No treaty forms before the first dividend.
6. Retaining profits in Korea without a business reason, inviting a Chinese CFC question.
7. Announcing Korean plans before registering the trademark.

Korean terms you will meet

Chinese terms you will meet

Questions readers ask

About the author

Alexander Baranov

Founder of the BCA Group · cross-border corporate and tax adviser since 2008

Alexander advises foreign founders and groups on company formation, tax structuring and corporate law in more than 40 jurisdictions across Europe, the Gulf, Asia and Latin America. He is the author of nine books on international business and tax and writes regularly for professional finance and tax journals. He works in English, German, Spanish and Russian.

This guide is based on the Korean statutes cited in the text and on our own filings. It is reviewed when the law or official rates change.

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