- A Korean branch is the Japanese kabushiki kaisha itself, registered under Article 614 of the Commercial Act; the parent is liable for all Korean obligations.
- The order is: Japanese certificates and apostilles, a report to a Korean foreign exchange bank, the operating fund, court registration within three weeks, then tax registration.
- Under Japan’s FEFTA, branch funding is outward direct investment; outside five listed sectors only a post-payment report is needed for payments above JPY 30 million.
- The branch pays Korean corporate tax at 10–25% plus local tax; Japan taxes the same profit at about 30% with a foreign tax credit.
- Korean branch losses reduce Japanese taxable income — a reason to start as a branch and consider a subsidiary once profitable.
- Staff posted from Japan stay in Japanese pension for up to five years under the 2005 agreement; Korean health insurance still applies.
Why Japanese companies use branches in Korea
Korea and Japan have no bilateral free trade agreement; their first common trade agreement is RCEP, in force for Korea since 1 February 2022, which phases out tariffs between them on a long schedule. Two-way trade runs at roughly USD 75 billion a year, and after the two governments restored each other to their export-control white lists in 2023, commercial ties have deepened again in semiconductor materials and equipment, batteries, chemicals, tourism and content. Japanese companies in Korea divide between Korean subsidiaries — the usual form for manufacturing, retail and consumer brands, covered in our comparison of Korea, Singapore and Japan and company registration — and branches.
The branches are a recognisable group. Japan’s megabanks and several regional banks operate licensed branches in Seoul; Japanese airlines and shipping lines sell through Korean branches; general trading houses and machinery makers have used branches for sales and after-sales service; engineering and construction groups register branches for Korean projects. What they share is that the Japanese company is the counterparty Korean customers want, the Korean business is an extension of the parent’s own trade, and the parent’s balance sheet is part of the offer.
What a Korean branch is
A branch is not a Korean company. It is the Japanese 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 Japan
Japanese corporate records suit the Korean registry well, because the Japanese commercial register — kept by the Legal Affairs Bureau — records most of what Korea needs: name, head office, purpose, capital, directors and the representative director. The certificate of all registered matters (履歴事項全部証明書) is the core document, supported by the articles, board minutes and the representative director’s seal certificate.
| Document | Japanese | Korean use | Treatment |
|---|---|---|---|
| Certificate of all registered matters | 履歴事項全部証明書 | Existence, capital, directors, representative | Apostille (public document) |
| Articles of incorporation | 定款 | Governing rules, purpose | Certified copy, notarised + apostille |
| Board minutes or resolution | 取締役会議事録 | Opening the branch, representative, operating fund | Notarised + apostille |
| Seal certificate | 印鑑証明書 | Confirms the representative director’s seal on the minutes | Apostille (public document) |
| Power of attorney | 委任状 | Authority for the Korean filings | Notarised + apostille |
| Korean representative’s acceptance and ID | — | Korean registry | Notarised; passport copy |
With Korean translations. Certificates are expected to be issued within about three months of filing.
Japan is a long-standing member of the Apostille Convention. Certificates issued by the state — the registered matters certificate and the seal certificate — can be apostilled directly by the Ministry of Foreign Affairs. Private documents such as minutes and powers of attorney are first notarised by a Japanese notary (公証人), then certified by the Legal Affairs Bureau and apostilled; in Tokyo, Osaka and several other prefectures the notary can obtain the apostille in one visit. See apostille for Korea.
Two details matter. The minutes should name the Korean representative with passport details and address, state the operating fund and approve the branch’s Korean name — Korean registries write a Japanese company’s name in Hangul, either phonetically or by translating its parts, and the version chosen is fixed. And the representative director’s registered seal on Japanese documents does not carry over: the Korean representative files a seal report in Korea and signs or seals Korean documents with a Korean registered seal (인감, ingam).
Opening the branch, step by step
- 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.
- 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. Japanese megabanks’ Seoul branches can handle the report for clients that already bank with the group, which often speeds up know-your-customer checks; any Korean foreign exchange bank can do it.
- 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.
- 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.
- 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.
- 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.
| Step | Where | Typical time | Cost guide |
|---|---|---|---|
| Notarise, apostille, translate | Home country, then Korea | 1–3 weeks | Apostille and translation fees per document |
| Branch report | Designated FX bank | 1–2 business days | No fee |
| Operating fund | Designated FX bank | Same day to a few days | Bank charges |
| Court registration | District court registry | 3–4 business days | ≈ KRW 48,000 tax (×3 in the overcrowding zone) + scrivener |
| Business registration | District tax office | 2–7 business days | No fee |
| Bank account, insurances | Bank, NHIS / NPS / COMWEL | 1–2 weeks | — |
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.
Japanese outbound rules for funding a branch
Japan’s Foreign Exchange and Foreign Trade Act (外為法) defines outward direct investment in Article 23 to include the payment of funds to establish or expand a branch, factory or other place of business abroad. For most industries no prior notification is needed: only five sectors — fisheries, leather and leather products, weapons, weapons-production equipment and narcotics — require notification to the Minister of Finance through the Bank of Japan two months in advance. Everyone else funds the branch freely and files a post-payment report on payments to or from non-residents above JPY 30 million under Article 55, within 20 days, normally through the remitting bank.
That makes the Japanese side unusually light. The points to watch are internal: a board decision that matches what is filed in Korea, a remittance labelled as the operating fund of the Korean branch, and a treasury arrangement that keeps the branch funded through the designated Korean bank rather than ad hoc transfers. Japanese groups that run a cash pool should keep the Korean branch outside it unless the Korean bank and the foreign exchange rules have been checked, because cross-border pooling of a branch’s won balances is not straightforward.
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–Japan treaty is not among the treaties usually cited as allowing it, so a Japanese company’s branch normally pays corporate tax and local income tax only — confirm against the treaty text before relying 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.
Japanese tax on the branch’s profit
A Japanese corporation is taxed on its worldwide income, so the Korean branch’s result is part of the parent’s Japanese taxable income every year. Combined national and local corporate taxes give an effective rate of roughly 30% for a large company, a little higher with the defence special corporate tax for years beginning on or after 1 April 2026. Korean corporate tax and local income tax are credited under the foreign tax credit (外国税額控除), up to the Japanese tax on the branch’s foreign-source income, computed with income attributed to the branch on arm’s-length principles; excess credits and excess limits carry forward three years.
Two consequences follow. While the branch is profitable, Korean tax of 11% to 22% leaves a Japanese top-up to about 30%: the group pays the higher of the two rates. While it is losing money, the losses reduce Japanese taxable income immediately — the opposite of the Chinese rule — which makes the branch attractive for a Korean business that will take time to break even. A Korean subsidiary works the other way: its losses stay in Korea, but its profits bear only Korean tax, because dividends from a foreign company held at least 25% for six months are 95% exempt in Japan. Korea withholds 5% on such dividends under the treaty, and that withholding is neither creditable nor deductible in Japan. Japan’s controlled foreign company rules can tax a subsidiary’s income where its effective rate is below 20% and it fails the economic activity tests; a Korean company with a real business normally passes, even in the 11% first bracket.
Start as a branch, convert later?
Many Japanese groups ask whether to open as a branch, use the losses in Japan and convert to a subsidiary when Korea turns profitable. It can be done, but conversion is a transaction, not a formality. The subsidiary is incorporated, ideally as a foreign-invested company; the branch’s business, contracts, staff and assets are transferred to it; and the branch is closed. Transferring assets from the branch to the subsidiary can realise gains in Korea and Japan, employees must consent to the transfer or be rehired with their service recognised, and customer contracts and licences must be novated. The earlier the conversion, the less there is to move.
For large groups in scope of the global minimum tax — both Korea and Japan apply the income inclusion rule — the choice matters less for the minimum tax itself, because a branch and a subsidiary in Korea are blended in the Korean jurisdictional rate. It still matters for Japanese corporate tax and for losses.
People, visas and social insurance
Japanese citizens can visit Korea for short business trips without a visa, subject to Korea’s electronic travel authorisation rules for the period of travel. A manager or specialist seconded from the head office 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 head office 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. Directly hired specialists use the E-7; see the E-7 guide. A branch cannot sponsor the D-8 investor visa.
The Korea–Japan Social Security Agreement (한일 사회보장협정, hanil sahoe bojang hyeopjeong), in force since April 2005, covers pensions only. An employee posted from Japan for less than five years stays in the Japanese Employees’ Pension Insurance and National Pension with a certificate of coverage and is exempt from the Korean National Pension; a three-year extension is available by agreement between the agencies. It is a contributions-only agreement without totalisation, and Korea does not pay lump-sum pension refunds to Japanese nationals, so a Japanese employee who joins the Korean system without a certificate pays contributions he is unlikely to recover. Korean health insurance and industrial accident insurance apply to everyone; see Korean social insurance.
Liability, in practice
The parent’s liability for a branch is not theoretical. Every Korean contract, employment claim, tax assessment and court judgment against the branch is a claim against the Japanese company, enforceable against its Korean assets and, with recognition, in Japan. The reverse also holds: the branch’s Korean assets — bank balances, receivables, intellectual property registered in Korea — are the parent’s assets, and a Korean judgment against the Japanese company on any matter can be enforced against them. Korean plaintiffs in the wartime labour cases, for example, sought seizure of Korean assets of the Japanese companies concerned. Groups that are sensitive to that exposure, or that hold significant Korean assets, usually prefer a subsidiary.
Branch or subsidiary for a Japanese company
| Branch (영업소) | Subsidiary (주식회사) | |
|---|---|---|
| Legal person | The Japanese company itself | A separate Korean company |
| Liability | Parent liable; branch assets reachable by the parent’s creditors | Limited to the subsidiary |
| Korean tax on profit | 10–25% + local tax | 10–25% + local tax |
| Money home | Profit remittance, no withholding | Dividends, 5% or 15% withholding |
| Japanese tax | About 30% on profit, credit for Korean tax | 95% exemption on dividends; withholding a cost |
| Korean losses | Reduce Japanese tax at once | Stay in Korea |
| Visas | D-7 for transferees | D-8, D-7, E-7 |
For a profitable Korean business, the subsidiary usually costs less tax; for a loss-making one, the branch.
A worked example
An Osaka maker of precision machine tools sells to Korean battery and display manufacturers through a distributor and wants its own service engineers in Korea. Its board resolves to open a Seoul branch with an operating fund of KRW 200 million and appoints its Korea sales manager, employed by the company for nine years, as representative. The certificate of all registered matters and seal certificate are apostilled directly; the minutes and power of attorney are notarised in Osaka and apostilled the same day. The fund is remitted from Osaka with the bank filing the FEFTA report.
In Korea the bank report, fund, court registration and tax registration take about three weeks; the manager moves on a D-7 visa with a Japanese certificate of coverage, and three Korean engineers are hired. Year one ends with a loss of KRW 150 million, which reduces the parent’s Japanese taxable income. By year three the branch earns KRW 400 million: Korean corporate tax is KRW 60 million plus KRW 6 million local tax, and Japan taxes the same profit at about 30% — KRW 120 million — less a KRW 66 million credit, for a total of about KRW 120 million. As a subsidiary paying out its after-tax profit, the total would have been about KRW 88 million: Korean tax, 5% withholding and Japanese tax on the 5% of the dividend that is not exempt. The company decides to incorporate a Korean subsidiary and move the business into it in year four.
Mistakes we see
- Certificates older than three months when they reach the Korean registry.
- Minutes that do not state the operating fund or the representative’s details.
- Trading through the Seoul office before registration.
- Operating money sent outside the designated bank, or through a group cash pool.
- Internal interest and head-office charges deducted without arm’s-length support or the allocation report.
- Staying a branch after the business turns profitable without running the numbers.
- Posted staff in the Korean pension without a certificate of coverage — contributions Japanese nationals cannot get back.
- Underestimating the liability link between branch assets and the parent’s creditors.
Korean and Japanese terms you will meet
Questions readers ask
Can a Japanese company open a branch in Korea?
Yes. It reports the branch to a Korean foreign exchange bank, brings in an operating fund and registers a business office at the court registry under Article 614 of the Commercial Act.
Which Japanese documents are needed?
The certificate of all registered matters, the articles, board minutes, the representative director’s seal certificate and a power of attorney, apostilled, with Korean translations.
Does Japan require approval to fund a Korean branch?
Not for most industries. Branch funding is outward direct investment under FEFTA; only five sectors need prior notification, and others file a post-payment report above JPY 30 million.
Can Korean branch losses reduce Japanese tax?
Yes. The branch’s result is part of the Japanese company’s taxable income, so losses reduce it and profits are taxed with a credit for Korean tax.
Is a branch or a subsidiary cheaper for a Japanese company?
For a profitable business, usually the subsidiary, because dividends are 95% exempt in Japan and only Korean tax and 5% withholding apply. A loss-making business may prefer a branch.
Do staff posted from Japan pay Korean pension?
Not for postings under five years with a certificate of coverage under the 2005 agreement; Korean health insurance still applies.
- PwC Worldwide Tax Summaries — Korea, branch income
- PwC Worldwide Tax Summaries — Korea, withholding taxes
- JETRO — Outward direct investment procedures under FEFTA
- Bank of Japan — FEFTA reporting
- National Pension Service — Korea–Japan Social Security Agreement
- Crowe Korea — Guide to Korean branches and subsidiaries (May 2026)
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.