Exporting from Korea through your own Korean company

The foreign-owned export company is one of Korea’s quiet success stories. A Kazakh entrepreneur ships Korean cosmetics to Almaty; a French founder supplies Korean skincare to European retailers; a Dubai trader buys Korean auto parts for the Gulf; a Vietnamese company sources machinery for its home market; a German engineer buys battery components for European plants. In each case a Korean company owned by the foreigner sits between Korean manufacturers and foreign buyers, often the owner’s own company abroad.

This guide is the mirror image of our guide to importing into Korea. It covers the structures, VAT and refunds, drawback, export controls and sanctions, FTA origin for buyers in partner countries, corporate tax and transfer pricing, payments, visas and the risks that sink export businesses.

Three structures

1. Trading company (buy-sell exporter)

The Korean company buys goods from Korean manufacturers or wholesalers, takes title, files the export declaration in its own name and sells to foreign buyers. It pays 10% VAT on purchases, charges none on exports, and reclaims the difference. It earns a trading margin, taxed in Korea. This is the default structure, and the only one that gives the Korean company its own export record — which matters for banks, export insurance, KOTRA programmes and, for founders, visas.

2. Sourcing agent

The Korean company does not buy or sell goods. It finds suppliers, negotiates for the foreign buyer, inspects quality and arranges logistics, and charges the buyer a commission or service fee. The Korean supplier exports directly to the foreign buyer. The agent’s fees from a foreign buyer with no Korean permanent establishment, paid in foreign currency through a Korean bank, can be zero-rated (영세율, yeongseyul) under Article 24 of the VAT Act. Agents carry less risk and need less capital, but earn only the fee; and an agent who in fact negotiates and concludes purchase contracts in the buyer’s name raises the question whether the buyer has a Korean PE.

3. Liaison or buying office

A foreign importer that only needs eyes in Korea — finding suppliers, checking quality — can open a liaison office (연락사무소, yeollak samuso), which may purchase for its head office but not sell or earn Korean income. See liaison offices. It is cheap and simple; it cannot become a trading company without converting.

The three ways to run exports from Korea.

VAT: zero rate and refunds

Exports of goods are zero-rated under Article 21 of the VAT Act. The evidence is the export declaration accepted by Korea Customs, filed in the Korean company’s name; the tax office matches it automatically with the VAT return. The company charges no VAT to its foreign buyer but reclaims all VAT on its purchases — the goods from Korean suppliers, packaging, inland transport, forwarding, warehousing, rent.

An exporter therefore usually has a VAT refund every period. Ordinary refunds are paid within 30 days of the final return deadline under Article 59; exporters can file monthly or quarterly early refund (조기환급, jogi hwangeup) returns and receive the money within 15 days of the deadline. For a trading company with thin margins, the speed of VAT refunds is a working-capital question, and early refunds are worth the extra filings.

The first large refunds attract scrutiny, and export trading is a sector the tax office watches for fake invoicing (가공세금계산서, gagong segeum gyesanseo) — refunds claimed on purchases that never happened, or on goods that never left. Expect questions about suppliers, payments, warehousing and the foreign buyer. Buy only from suppliers whose business registration is active on HomeTax, pay them by bank transfer, keep shipping documents and photographs, and make sure the goods on the export declaration match the purchase invoices.

Export VAT refunds are fast for real exporters and slow for everyone who looks like a fake one. Keep the paper trail that proves you are real.

Voixa Korea

Duty drawback

Korea refunds customs duty paid on imported materials when the goods made from them, or the goods themselves, are exported within two years, under the Act on Special Cases concerning the Refund of Customs Duties Levied on Raw Materials for Export. A pure trading company that buys Korean-made goods rarely needs it; a company that imports components, assembles or repackages in Korea and re-exports does. Small and medium exporters can use a simplified fixed-rate drawback without tracing each imported input. Claims are filed through a customs broker after export.

Export controls and sanctions

This is the area where foreign-owned export companies take the largest risks, often without knowing it.

Strategic goods. Exports of strategic items (전략물자, jeollyak mulja) — dual-use goods, technology and software on the international control lists — need an export licence under Article 19 of the Foreign Trade Act. Many ordinary-looking products are controlled: machine tools, some chemicals, sensors, encryption, drones and their parts, high-performance electronics. The exporter must classify each product; the Korea Security Agency of Trade and Industry (KOSTI) runs the online classification and licensing system. Exporting a controlled item without a licence is a crime, regardless of intent.

Catch-all controls. Even uncontrolled items need a licence if the exporter knows or is told that they may be used for weapons of mass destruction or other prohibited purposes.

Russia and Belarus. Korea bans in principle the export of a long list of items to Russia and Belarus — 1,159 items after an expansion effective 24 February 2024, including batteries, construction equipment, machinery, aircraft parts and passenger cars with engines of 2,000cc and above — with exceptions only by ministry approval. Exports routed through third countries to evade these restrictions are pursued by Korean customs and attract the attention of foreign regulators as well.

Other sanctions. UN sanctions and Korean measures apply to North Korea, Iran and listed persons. Korean banks screen payments against Korean, UN, US and EU lists, and will refuse or freeze transfers that touch sanctioned parties.

Screen every new buyer, end user and destination. Ask buyers for end-use statements for sensitive goods. Watch for warning signs: payments from third parties, unusual routing, buyers unwilling to say where goods will be used, prices far above market. A Korean trading company is a Korean exporter: Korean law, Korean customs and Korean banks hold it responsible.

Origin for buyers in FTA partner countries

A foreign buyer gets preferential duty on Korean goods only if the Korean exporter provides valid proof of origin. Korea issues it in two ways under the FTA Customs Act: certificates of origin (원산지증명서, wonsanji jeungmyeongseo) issued by the Korea Chamber of Commerce and Industry or Korea Customs, for agreements that require them, and origin declarations by the exporter itself, for agreements that allow self-certification. An exporter that ships regularly can become an approved exporter (원산지인증수출자, wonsanji injeung suchulja) under Article 12, which allows it to certify origin on its own invoices.

A trading company that buys Korean goods from manufacturers needs the manufacturer’s origin confirmation (원산지확인서, wonsanji hwaginseo) to certify origin itself — ask for it in the purchase terms.

Main destinations for foreign-run Korean exporters.

Destination rules matter as much as origin. Cosmetics for the EU need a responsible person and a product notification; food for the US needs FDA registration; goods for the Eurasian Economic Union need EAC conformity; many Gulf and Southeast Asian buyers require halal certification for food and cosmetics. The Korean company should know what its buyers need before it buys stock.

Corporate tax and transfer pricing

The Korean exporter pays corporate tax on its margin at 10% to 25% plus local income tax under Article 55 of the Corporate Tax Act — 11% on the first KRW 200 million. When the foreign buyer is the owner’s own company abroad, the export price is a related-party price and must be at arm’s length under the Adjustment of International Taxes Act. A Korean trading company that buys, holds stock, arranges logistics and bears credit risk should earn a trading margin consistent with those functions; one that sells to its parent at cost, leaving all profit abroad, is an audit target. A sourcing agent is usually remunerated on a cost-plus basis.

Profits reach the foreign owner as dividends, with Korean withholding at 22% or the treaty rate. Where the owner lives in a country with no treaty — several Central Asian and Gulf trading partners have treaties with Korea, but not all — the 22% applies. Our guide to withholding by country covers the rates.

Getting paid

Export proceeds are received through the Korean company’s foreign exchange bank, normally in dollars, euros or the buyer’s currency. The bank matches receipts against export declarations and invoices; payments from parties other than the buyer, or amounts that do not match, prompt questions and may need a report under the Foreign Exchange Transactions Act. Netting export receivables against import payables, or receiving payment through a third country, must be cleared with the bank first.

Credit risk is the exporter’s to manage. Letters of credit and documentary collections remain common in Korean trade; open-account sales can be insured with the Korea Trade Insurance Corporation (K-SURE), which covers foreign buyers’ non-payment and political risk and works with foreign-owned Korean exporters. Korean banks finance export receivables more readily once the company has a track record.

Registrations an exporter needs

• Business registration with wholesale and trade codes; see business registration numbers.
• Customs clearance code (통관고유부호) from Korea Customs.
• Trade business code (무역업고유번호) from the Korea International Trade Association — free, and used for trade statistics, export support and some electronic trade documents.
• Strategic goods classification for each product through KOSTI.
• Approved exporter status for regular FTA exporters.
• Destination-market registrations — EU responsible person, FDA, EAC — as the products require.

Visas for exporters

A foreign owner who invests at least KRW 100 million in the Korean company and manages it can apply for the D-8 corporate investment visa (기업투자 비자, gieop tuja bija); see D-8 requirements and whether you need KRW 100 million at all. Korea also has a trade management visa (무역경영 비자, muyeok gyeongyeong bija), the D-9, for foreigners who run trading businesses in Korea; it is assessed on the company’s trade registration and export performance under criteria set by immigration, and is worth considering once the company has a record. Immigration looks closely at export companies at renewal: real suppliers, real shipments, real buyers, real payments.

Risks that sink export businesses

1. Uncontrolled exports of controlled items — dual-use parts shipped without classification.
2. Sanctions exposure through intermediaries in third countries.
3. Refunds frozen because a supplier turned out to be a missing trader, or documents did not match.
4. Export declarations in the supplier’s name, leaving the trading company without the zero rate on its sale.
5. No origin confirmation from suppliers, so FTA buyers lose preference.
6. Sales to the owner’s company at cost, then transfer pricing adjustments in Korea.
7. Payments from third parties that banks cannot match to exports.
8. Destination rules ignored, with goods rejected at the buyer’s border.

A worked example

A Kazakh entrepreneur forms a Seoul Jusik Hoesa with KRW 150 million of capital to export Korean cosmetics and household goods to Kazakhstan and Uzbekistan, where there is no FTA. The company obtains its customs code and trade code, classifies its products — none are strategic items — and screens its buyers. It buys from Korean brands under purchase confirmations, so most purchases carry no VAT; the rest it reclaims in monthly early refunds. Goods leave Incheon with export declarations in the company’s name and non-preferential certificates of origin; EAC conformity for the Eurasian market is arranged with the brands. Buyers pay in dollars to the company’s Korean account against invoices, and larger shipments are insured with K-SURE. The founder, as representative director, holds a D-8 visa. The company pays 11% corporate tax on its margin; dividends to the founder bear Korean withholding at the Korea–Kazakhstan treaty rate.

Korean 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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