Opening a Korean branch of an Indian company

Why Indian companies choose a branch

The Korea–India Comprehensive Economic Partnership Agreement (한-인도 CEPA, han-indo CEPA) has applied since 1 January 2010, and the two governments have been negotiating an upgrade for several years, with India pressing to narrow a trade deficit in Korea’s favour; two-way trade is in the region of USD 25 billion a year. Korean groups are major investors in India — Samsung, Hyundai, LG, Kia, POSCO — and Indian companies follow them back: IT services firms that build and run systems for Korean groups, engineering and design houses, pharmaceutical and chemical exporters, and Indian banks, several of which have long had branches in Seoul.

For the IT and engineering firms the branch is the natural form. Their Korean business is the parent’s own contract with a Korean client, performed partly offshore in India and partly onsite in Korea; the client wants the Indian company’s capability and balance sheet; and the Indian parent wants Korean revenue on its own books. Once engineers work in Korea for long enough, the Indian company has a permanent establishment in Korea under the treaty in any event, and registering a branch turns an uncertain tax position into an ordinary Korean taxpayer. Indian companies building a consumer or manufacturing business usually prefer a subsidiary; see branch or subsidiary.

What a Korean branch is

A branch is not a Korean company. It is the Indian company itself, registered to do business in Korea under Article 614 of the Commercial Act, which requires a foreign company that wants to trade in Korea to appoint a representative in Korea and either have one of its representatives domiciled in Korea or set up a business office (영업소, yeongeopso). In everyday Korean the result is called a branch (지점, jijeom) or domestic branch of a foreign company (외국기업 국내지사, oeguk gieop gungnae jisa). It has no share capital, no board and no shareholders of its own; it is registered at the court registry as an establishment of the foreign company, with the head office’s name, its governing law, its capital and its directors appearing on the Korean register. Contracts the branch signs bind the head office, and Korean creditors can pursue the head office and its assets for branch debts.

Until registration is complete the foreign company may not carry on business in Korea on a continuing basis: Article 616 of the Commercial Act makes the person who trades for it before registration jointly liable with the company. A one-off sale signed from abroad is not the problem; a Seoul office that negotiates, invoices and employs before registration is.

A branch differs from a liaison office (연락사무소, yeollak samuso) in what it may do. A liaison office supports the head office — research, sourcing, quality control, marketing support — and must not earn Korean income; a branch may sell, invoice, perform services and employ, and pays Korean tax on what it earns. It differs from a subsidiary in liability and in status: a branch’s operating fund is not foreign direct investment under the Foreign Investment Promotion Act, so it brings no foreign-invested-company registration, none of the incentives tied to it and no D-8 investor visa. In exchange it is quicker, needs no minimum capital, and lets the parent use Korean losses in its own home-country return in some systems. Our branch or subsidiary comparison sets the two side by side; the liaison office guide covers the lighter option.

Head-office documents from India

Indian corporate records are electronic and public through the Ministry of Corporate Affairs’ MCA21 portal, which helps: the Korean registry needs the company’s existence, capital, directors and representation, and the MCA’s master data shows directors and their DINs alongside the certificate of incorporation.

All with Korean translations; documents should normally be no more than three months old.

India has been a party to the Apostille Convention since 2005. The Ministry of External Affairs issues apostilles through its branch secretariats and outsourced centres; commercial documents are usually notarised first and then authenticated before the MEA apostille, with the exact pre-authentication depending on the document and the state. Allow two to three weeks, and order more originals than you think you need — Korean banks keep one set, the registry another. See apostille for Korea.

The board resolution does most of the work. It should state the decision to establish a branch in Korea, the branch’s activities, the operating fund, the Korean representative with passport details and address, and authority for named people to sign the Korean filings, and it should be certified as a true copy by a director or the company secretary. The Korean name of the branch — the Indian company’s name written in Hangul — is fixed at registration, so agree it with the group before the documents are drafted.

Opening the branch, step by step

1. Prepare the head-office documents. A board resolution to open the Korean branch and appoint its representative, the company’s registration certificate and articles, and a power of attorney for the people filing in Korea — notarised, apostilled and translated into Korean.
2. Report the branch to a designated foreign exchange bank. Under the Foreign Exchange Transactions Act and Chapter 9 of the Foreign Exchange Transaction Regulations the branch is reported to the Korean bank that will handle its money, on the prescribed report of establishment of a domestic branch of a foreign company (외국기업 국내지사 설치신고서, jisa seolchi singoseo), with the head-office papers and a short business plan. Banks usually accept it within one or two business days. Branches in finance — lending, securities, insurance and similar regulated businesses — report to the Ministry of Economy and Finance instead and need their sector licence. Indian banks with Seoul branches can be convenient for a parent that already banks with them; any Korean foreign exchange bank can take the report.
3. Bring in the operating fund. The head office remits the operating fund (영업기금, yeongeop gigeum) through the designated bank, which records it against the branch report. Its confirmation is later evidence for remittances and visas.
4. Register the branch at the court registry. Within three weeks of setting up the office, the representative registers the business office (영업소, yeongeopso) at the district court registry for its address. The filing adds the representative’s notarised acceptance of appointment, passport and seal report, and the accepted bank report. Registration licence tax is modest — roughly KRW 48,000 per registration, about three times that inside the Seoul metropolitan overcrowding control zone — and a judicial scrivener typically charges KRW 0.8–1.2 million. The registry takes three or four business days.
5. Register with the tax office. The branch obtains its business registration number (사업자등록번호, saeopja deungnok beonho) within 20 days of starting business, filing the registry extract, an opening balance sheet and a lease in the branch’s name. See the business registration number.
6. Open the operating account, hire and invoice. With the registration number the branch opens its won account, enrols in the four social insurances when it hires, issues electronic tax invoices and begins filing VAT. See opening a Korean business account.

A well-prepared branch is usually trading three to four weeks after the documents arrive in Korea.

Two things slow most branches: a lease the tax office will accept — often solved with a serviced office; see commercial leases and virtual and serviced offices — and inconsistent names, addresses or directors across the apostilled documents, the bank report and the registry application.

FEMA rules for an overseas branch

Indian foreign exchange law treats an overseas branch separately from overseas direct investment. Under Regulation 5(B) of the Foreign Exchange Management (Foreign Currency Accounts by a Person Resident in India) Regulations, 2015, an Indian company may open and maintain a foreign currency account abroad in the name of its overseas branch, funded by remittances from India, for the normal business operations of the branch. Total remittances in an accounting year are capped: for initial expenses, 15% of the company’s average annual sales, income or turnover over the last two financial years, or 25% of its net worth, whichever is higher; for recurring expenses, 10% of sales, income or turnover in the last financial year. Remittances from the company’s EEFC account, and branches of export-oriented and technology-park units within two years of establishment, are outside the limits.

The Master Direction on overseas investment adds the boundary: remittances to a branch are for normal business operations only, and no remittance may be made to a branch for making any overseas investment — so the Korean branch must not buy shares in Korean companies with money from India. Office equipment and assets for normal operations are not treated as capital account transactions, but acquiring immovable property abroad, other than leases of up to five years, falls under the separate rules for property outside India. The overseas account must be closed if the branch is not set up within six months, and its balance repatriated to India within a month of the branch closing. Your AD bank will want the board resolution, the Korean registration and evidence that the remittances fit within the limits.

The operating fund

There is no minimum operating fund for a branch in general commerce. The amount is a business decision: enough to pay the deposit on the lease, salaries and running costs until Korean revenue covers them, and enough to make a credible case to immigration if staff will be seconded from head office. It comes in through the designated bank and is recorded as the branch’s capital; more can follow the same way. Money sent outside that channel causes problems later, because remittances are checked against what was properly brought in.

Korea does not accept internal interest charged by a non-financial head office on a “loan” to its own branch as a deductible cost. If the branch needs more money, send more operating fund. A branch that borrows from a Korean bank pays deductible interest in the ordinary way, usually with a head-office guarantee.

How the branch is taxed in Korea

A Korean branch is a domestic place of business (국내사업장, gungnae saeopjang) of a foreign corporation and pays corporate tax on the Korean-source income attributable to it under Article 91 of the Corporate Tax Act, at the same rates as a Korean company: 10% on the first KRW 200 million, 20% to KRW 20 billion, 22% to KRW 300 billion and 25% above, plus local income tax at a tenth of the corporate tax — 11%, 22%, 24.2% and 27.5% in total. The return is due three months after the year end. Head-office charges incurred solely for the Korean branch are deductible, and a reasonable share of common head-office costs — management, IT, regional overheads — may be allocated, but the branch must file a report of the allocation computation with its return, and the allocation must follow an allocation key that holds up under the Adjustment of International Taxes Act.

The branch charges and files VAT at 10% like any Korean business, withholds income tax and social insurance on salaries, and issues electronic tax invoices. Its accounts follow Korean accounting standards and are kept in won; it does not need a statutory audit unless a bank or the tax office asks for audited statements, which happens mainly around profit remittance. Korea can charge a branch profits tax on top of corporate tax only where the treaty allows it, under Article 96 of the Corporate Tax Act. The Korea–India treaty is not among the treaties usually cited as allowing it, so an Indian company’s branch normally pays corporate tax and local income tax only — confirm against the treaty text before you rely on it. See Korean corporate tax rates and VAT for foreign companies.

Sending profits home

A branch does not pay dividends. After its corporate tax return, it remits after-tax profit to the head office through the designated bank, reporting the remittance under the foreign exchange rules with the tax return, proof of tax paid and the financial statements. Korea does not withhold tax on the remittance itself. Where the remittance is large — practitioners cite remittances above about KRW 100 million, or net profit at or above 100% of the operating fund — the bank can ask for audited financial statements, so branches that plan to send serious money home usually budget for an audit from the first full year. Remittances of the operating fund itself, rather than profit, are a return of capital and are handled on closure or reduction of the fund.

Closing a branch

A branch is closed by a head-office resolution, deregistration of the business office at the court registry, closure of the business registration with a final VAT and corporate tax return, a report to the designated bank and remittance of the remaining fund. Employees are owed severance, unused leave and notice under Korean labour law, and the lease must be surrendered on its terms. Unlike a Korean company there is no liquidation procedure for the branch itself — the head office remains liable for whatever is left — which makes closure faster but means that unresolved Korean claims follow the parent home. See closing a business in Korea.

From withholding to a branch

Indian IT and engineering firms often start by invoicing Korean clients directly from India. Korea then withholds tax on fees for technical services and royalties at the treaty rate of 10%, plus local income tax of a tenth of that — 11% of the gross fee — under Article 98 of the Corporate Tax Act, provided the treaty application is filed before payment; without it, 22%. That works while engineers visit briefly. When they stay — on a project for months, or in a rotation that adds up — the Indian company risks a permanent establishment under the treaty, and Korean tax on the profit attributable to it, with penalties if it was never declared.

A registered branch resolves the position. Income attributable to the branch is taxed on a net basis in its corporate tax return, Korean clients pay the branch against Korean tax invoices with 10% VAT, and the branch withholds and pays Korean tax and social insurance on salaries paid in Korea. Work performed offshore in India and invoiced from India stays outside the branch, but the split between onshore and offshore work must be documented and priced at arm’s length — it is the first thing a Korean tax audit of an Indian IT branch examines.

Indian tax on the branch’s profit

An Indian resident company is taxed on its worldwide income, so the Korean branch’s profit is part of the parent’s Indian total income every year. Most Indian companies now use the concessional regime at 22% plus a 10% surcharge and 4% cess — 25.17% in all; others pay 25% or 30% plus surcharge and cess. Korean corporate tax and local income tax are credited against Indian tax on the same income under the treaty and the foreign tax credit rules, up to the Indian tax on that income; India does not carry excess credits forward. Since 1 April 2026 the Income-tax Act, 2025 has replaced the 1961 Act, renumbering the provisions but keeping the credit, and the claim still depends on filing the prescribed statement with proof of Korean tax by the due date — a step Indian companies miss more often than any other.

Branch losses are part of the Indian computation, so a loss-making Korean branch reduces Indian tax in the early years. Align the branch’s Korean financial year with the Indian April–March year where you can: Korea lets a branch choose its accounting period, and a matching year makes the Indian credit claim straightforward instead of an apportionment exercise.

The comparison with a subsidiary is stark. Dividends from a Korean subsidiary bear Korean withholding of 15% under the treaty plus local income tax — 16.5% — and in India they are taxed at the company’s full rate since the concessional 15% rate for dividends from substantial foreign holdings ended; credit is given for the withholding, not for the Korean corporate tax behind it. On a fully distributed profit, a subsidiary can cost close to 40% in total against about 25% for a branch. The Indian deduction for dividends passed on to the Indian company’s own shareholders softens the result for groups that distribute; it does not remove it.

Engineers, visas and social security

Indian citizens need a visa for Korea, including for business visits, which use the C-3 short-term business visa. A manager or engineer seconded from India to the branch applies for the intra-company transferee visa (주재 비자 (D-7), jujae bija), which requires, broadly, at least a year of prior employment with the Indian company and a branch that is operating; immigration looks at the operating fund brought in, and figures around USD 200,000 are commonly cited in practice — check the current guideline and plan the FEMA remittance accordingly. Specialists hired directly by the branch use the E-7; see the E-7 guide. Engineers cannot perform paid project work in Korea on a business visitor visa, however short the assignment.

The Korea–India Social Security Agreement (한-인도 사회보장협정, han-indo sahoe bojang hyeopjeong), in force since November 2011, covers pensions. An employee posted from India for up to five years stays in the Indian system — the EPFO’s provident fund and pension scheme — with a certificate of coverage and is exempt from the Korean National Pension; extensions are possible by agreement. It is a totalisation agreement, so periods in both countries count towards a pension, and Indian nationals who leave Korea can claim a lump-sum refund of Korean pension contributions. Korean health insurance and industrial accident insurance apply to everyone; see Korean social insurance.

Branch or subsidiary for an Indian company

For an Indian parent the branch usually costs less tax; the subsidiary gives limited liability and Korean status.

The subsidiary still wins in some cases: where the Korean business will hold Korean licences or approvals, take a Korean partner, build a large local team, or needs to ring-fence liability — a branch exposes the Indian parent to every Korean claim. A subsidiary that retains and reinvests its profit in Korea also avoids the dividend cost until it pays out.

A worked example

A Bengaluru IT services company runs application maintenance for two Korean groups, with eight engineers rotating through Seoul. Its board resolves to open a Seoul branch with an operating fund of KRW 150 million — well inside its FEMA limit — and appoints its Korea delivery head, employed for seven years, as representative. The certificate of incorporation, MOA and AOA, MCA master data, resolution and power of attorney are notarised in Bengaluru and apostilled by the Ministry of External Affairs; the AD bank remits the fund to the designated Korean bank.

In Seoul the bank report, fund, registration and tax registration take about four weeks. The engineers move to D-7 visas with EPFO certificates of coverage; the branch adopts an April–March financial year. Korean clients now pay the branch, with VAT, instead of paying India with 11% withholding. In its second year the branch earns KRW 500 million: Korean corporate tax of KRW 80 million plus KRW 8 million local tax. India taxes the same profit at 25.17% — about KRW 126 million — less the KRW 88 million credit. As a subsidiary paying out its after-tax profit, the group would have paid the same Korean tax, about KRW 68 million of withholding and about KRW 36 million of further Indian tax: roughly KRW 192 million against KRW 126 million.

Mistakes we see

1. Engineers working onsite for months on business visas, with no branch and no Korean filing.
2. Remitting beyond the FEMA branch limits, or using the branch to buy Korean shares.
3. A board resolution without the operating fund or the representative’s details.
4. Trading through the Seoul office before registration.
5. Onshore and offshore work not separated in contracts and transfer pricing.
6. Mismatched financial years that complicate the Indian credit claim.
7. Missing the foreign tax credit filing in India.
8. Choosing a subsidiary by default, then paying close to 40% on distributed profit.

Korean and Indian 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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