Moving money in and out of Korea: FX rules for foreign-owned companies

Foreign investors ask two questions about Korean money: can I get it out, and what do I have to do first? The answer to the first is yes — Korea guarantees the repatriation of profits and capital from registered foreign investment. The answer to the second fills two statutes, the Foreign Exchange Transactions Act and the Foreign Investment Promotion Act, with the Foreign Exchange Transaction Regulations doing most of the detailed work. Korea has been liberalising for two decades — the limit for remittances without documents was doubled to USD 100,000 in 2023, and a wholesale rewrite of the Act has been discussed for years — but the principle remains: report first, then move the money.

This guide covers a Korean company with foreign shareholders: capital in, loans, payments to the group, dividends and exits. Dividend tax is in our guide to dividend withholding; the foreign investment notification itself is in the KRW 100 million rule.

Capital in: the foreign investment notification

A foreign investor buying shares in a Korean company — at incorporation or in a capital increase — files a foreign investment notification (외국인투자신고, oegugin tuja singo) with a Korean foreign exchange bank or KOTRA under Article 5 of the Foreign Investment Promotion Act before the money is sent. The capital is remitted from abroad to the company’s account at that bank; the bank certifies receipt; and after incorporation or the capital increase is registered, the company registers as a foreign-invested company (외국인투자기업, oegugin tuja gieop). Investments of KRW 100 million or more with at least 10% of the voting shares qualify; smaller amounts are handled as ordinary capital transactions under the FX Act.

The paper trail matters later. Registered foreign investment is what the Act protects and what the bank will ask to see when dividends or exit proceeds go out. Capital that arrived through a personal account, in cash, or before the notification is the classic cause of a blocked remittance years later. Changes — share transfers, new investors, capital reductions — are notified as changes to the foreign investment.

Loans from and to the group

A loan between a Korean company and a foreign group company is a capital transaction (자본거래, jabon georae). When the Korean company borrows foreign currency from abroad, it reports the borrowing to its designated foreign exchange bank before drawing the funds, as long as cumulative borrowing in the year stays at or below USD 50 million; above that, the report goes through the bank to the Ministry of Economy and Finance. Foreign-invested manufacturers and certain high-technology companies have a special regime for short-term borrowing within limits tied to their foreign investment. A loan from the foreign parent with a term of five years or more can instead be treated as foreign investment under the Foreign Investment Promotion Act, which brings the protections of registered investment but excludes cash-grant eligibility.

Lending the other way — the Korean company lending to its parent or a sister company — is also a capital transaction reported to the bank, and the tax office will look at the interest rate. Guarantees given by the Korean company for group borrowing abroad are reportable too. Interest paid on inbound loans bears Korean withholding tax, reduced by treaty, and thin-capitalisation and interest-limitation rules cap deductible interest on related-party debt.

Paying the group for goods, services and licences

Payments for goods, services, royalties and cost recharges are current transactions (경상거래, gyeongsang georae): they need no prior report, but the bank needs evidence that the payment is what it says. For a management-services fee that means the intercompany agreement and the invoice; for a royalty, the licence agreement and the withholding-tax payment; for goods, the import documents. The designated-bank rules allow modest remittances without documents — up to USD 100,000 a year — but a company should never rely on that for group payments.

The FX rules do not set prices; tax law does. Under the Adjustment of International Taxes Act intercompany fees must be at arm’s length, supported by a benefit test for services and a benchmark for royalties, and royalties and some service fees bear Korean withholding tax. Unsupported management fees are disallowed as deductions and can be recharacterised as dividends. See corporate tax for the deduction side.

Dividends and other remittances home

Under Article 3 of the Foreign Investment Promotion Act, a foreign investor may remit abroad the dividends from its registered investment, the proceeds of selling its shares, and the proceeds of a capital reduction or liquidation, as well as principal and interest on loans that qualify as foreign investment. The remittance goes through the foreign exchange bank with the shareholders’ or board resolution, the audited or approved financial statements, and proof that Korean withholding tax was paid. Interim and quarterly dividends follow the same route if the articles allow them.

Dividends can be paid only from distributable profits under the Commercial Act, after the statutory reserve. The usual timetable is the annual shareholders’ meeting within three months of the year-end, payment within a month, and withholding tax paid by the tenth of the following month. Treaty rates require the recipient’s residence certificate and the limited-tax-rate application before payment.

Exits: capital reduction, sale and liquidation

A foreign investor leaves a Korean company in one of three ways. A sale of shares to another investor is notified as a change of foreign investment, and the seller remits the proceeds; Korean capital gains tax may apply under the treaty and is withheld by the buyer where the buyer is Korean. A capital reduction (감자, gamja) returns capital to shareholders after a creditor-protection procedure under the Commercial Act and is notified to the bank before remittance. A liquidation (청산, cheongsan) ends the company and returns what is left after creditors and taxes; the foreign investment registration is cancelled at the end. Our guide to closing a Korean company covers the corporate steps.

In every case the bank wants the original foreign investment documents, the corporate resolutions, the tax clearance or withholding receipts and the creditor-protection evidence. Companies that kept their FX file clean find exits routine; those that did not discover their gaps at the worst moment.

The traps: netting, third-party payments and odd routes

• Netting (상계) — setting off what the Korean company owes the parent against what the parent owes it, rather than paying both ways — is a special settlement method that generally requires a prior report to the bank, even when the underlying transactions are ordinary trade.
• Third-party payments (제3자 지급) — the parent paying a Korean supplier on the subsidiary’s behalf, or the subsidiary paying a foreign party that is not its counterparty — generally need a prior report.
• Payments outside the bank — cash, personal accounts, crypto, payment apps — for company transactions are irregular settlement and need reports, if they are allowed at all.
• Expense advances to the parent and loans dressed as prepayments are capital transactions in disguise.
• Founder’s personal funds used to cover company costs, later “repaid” abroad, create an unreported loan.

Breaches are handled in proportion. Small reporting failures usually lead to a warning or an administrative fine imposed through the bank and the authorities; large or repeated unreported capital transactions can be criminal. More practically, the bank will not process a remittance whose origin it cannot reconcile, and a company in that position has to file late reports, accept the fine, and only then move the money. Filing first costs nothing. Where a past gap is found — typically during due diligence before a sale, or when the first large dividend is prepared — the usual course is to reconstruct the transactions with the bank, file the late reports with an explanation, pay any fine and then proceed; voluntary correction before the authorities find the breach is treated more leniently than discovery.

Korea will let the money out. It just wants to have seen it come in.

Voixa Korea

Trade payments: exporters and importers

A Korean trading company pays foreign suppliers and receives money from foreign customers every day, and almost all of it is current-account business: the bank sees the invoice, the import or export declaration, and the payment. Two patterns move trade into reportable territory. Unusual timing — large prepayments long before shipment, or receivables left unpaid for very long periods — can turn a trade credit into a financing arrangement. And unusual routes — collecting export proceeds into a group company abroad, or paying a supplier through an agent that is not the seller — are the special settlement methods described above. A trading business that keeps payments matched to invoices, through its own Korean accounts, rarely needs a report at all. See import-export companies.

Founders, directors and personal money

Foreign founders mix company and personal money more than they should. A founder who pays the company’s first rent from a personal foreign card has lent money to the company; a founder who later takes it back as a transfer abroad has made an unreported capital transaction unless it was documented as a loan or as a capital contribution. Keep the founder’s money out of the company until it arrives properly as share capital or a reported loan, and reimburse expenses only against receipts as ordinary current payments.

Salaries and dividends paid to foreign individuals are straightforward: salaries after Korean payroll withholding can be sent abroad by the employee through his own bank with evidence of income; dividends to a foreign individual shareholder follow the remittance route above. Individuals who live in Korea — including D-8 visa holders — can hold foreign-currency accounts and remit abroad within the designated-bank limits, with documents for larger amounts. Overseas accounts above KRW 500 million at a month-end must be reported annually by Korean tax residents; see our guide to creators’ tax for the rule.

When the Korean company invests abroad

A foreign-owned Korean company that sets up its own subsidiary or branch abroad — a Korean distributor opening a Vietnamese office, for example — makes an overseas direct investment (해외직접투자, haeoe jikjeop tuja), reported to its designated bank before the money goes, with annual reports afterwards on the foreign entity’s results. Lending to, guaranteeing or acquiring foreign companies are capital transactions with their own reports. Groups that use the Korean company as a regional hub should plan these flows with the FX reports in mind, as well as Korea’s controlled-foreign-company and transfer-pricing rules.

Banks and the designated-bank system

Most capital transactions and several current ones must go through a designated foreign exchange bank (지정거래외국환은행, jijeong georae oegukhwan eunhaeng) chosen for each type of transaction. Choosing one bank for all of them, at the start, keeps the file in one place; switching banks means moving the history. Korean banks are careful with foreign-owned companies: the corporate account opening and the FX file are linked, and a relationship manager who knows the company’s foreign investment registration saves weeks later. See opening a corporate bank account.

Currency, hedging and timing

The Korean won is not freely traded offshore in the way the euro or the dollar is: offshore markets trade it mainly as non-deliverable forwards, and actual won settlement happens onshore through Korean banks, whose trading hours were extended into the European and early American day in 2024. A foreign-owned company can hold foreign-currency accounts in Korea, convert when it chooses, and hedge with its Korean bank under ordinary derivatives contracts; derivatives with foreign counterparties are capital transactions with their own reports. For a subsidiary that earns won and pays the parent in euros or dollars, the practical decision is when to convert. Matching the timing of intercompany invoices to expected cash, rather than converting at the year-end in one block, smooths results and keeps transfer-pricing documentation consistent.

Cash pooling across borders, popular in European groups, is harder in Korea: a Korean company sweeping cash to a foreign pool header is lending to it, which is a reportable capital transaction and a transfer-pricing question. Some groups run notional pools with Korean banks or keep the Korean subsidiary outside the pool and settle intercompany balances monthly instead.

A worked example

A Swedish software group owns a Seoul subsidiary capitalised with KRW 300 million under a foreign investment notification. In year two the subsidiary needs working capital; the parent lends USD 500,000 for three years, which the subsidiary reports to its designated bank before drawing. The subsidiary pays the parent a monthly fee for shared services and a royalty for the software, under intercompany agreements with a transfer-pricing benchmark, withholding tax on the royalty at the Sweden–Korea treaty rate.

In year four the subsidiary pays its first dividend: the shareholders approve it in March, the subsidiary withholds tax at the treaty rate on the strength of the parent’s residence certificate, and the bank remits the net amount against the resolution, financial statements and withholding receipt. When the group later sets off a year of royalties against a marketing reimbursement owed by the parent, its accountant files the netting report with the bank first — the one step the group had not known it needed.

Mistakes we see

1. Capital sent before the foreign investment notification, or from a personal account.
2. Group loans drawn before the bank report.
3. Netting intercompany balances without a prior report.
4. The parent paying Korean costs directly, creating unreported third-party payments.
5. Management fees without contracts or benefit evidence.
6. Share transfers not notified as foreign investment changes.
7. Dividends declared beyond distributable profits.

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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