A practical guide for foreign businesses starting operations in South Korea

Starting a business in Korea as a foreign entity is an exciting opportunity — but with opportunity comes responsibility. From tax filings to payroll compliance, your first year is crucial for setting the right financial foundation.
This checklist will walk you through the key accounting and tax obligations foreign-invested companies should be aware of in their first year of operations in Korea.

1. Registering Your Business Properly

Before anything else, you’ll need to:

• Incorporate your company (주식회사 or 유한회사)
• Register your business with the Korean Tax Office (National Tax Service)
• Obtain a business registration number (사업자등록번호)
• Register under the Foreign Investment Promotion Act (FIPA) if applicable

2. Understand Your Tax Filing Obligations

Corporate Income Tax (CIT)

• Filed annually, within 3 months after fiscal year-end
• Interim tax payment required in the eighth month of the fiscal year
• Applicable even if the company records a loss

Value-Added Tax (VAT)

• Filed biannually (if small) or quarterly
• Filing & payment deadlines: January 25 / April 25 / July 25 / October 25

Local Tax

• Includes acquisition tax, registration tax, property tax, and local income tax
• Usually paid in relation to real estate or corporate activities

3. Set Up a Proper Accounting System

In Korea, you must:

• Use Korean Generally Accepted Accounting Principles (K-GAAP) or K-IFRS depending on size/type
• Maintain double-entry bookkeeping
• Issue tax invoices (세금계산서) for B2B transactions
• Keep all receipts and proof of transactions for five years

To ensure smooth information sharing with HQ and to stay compliant with local regulations in Korea, we use a web-based ERP program. The platform supports multiple languages, including Korean, English, Chinese, and Japanese.

4. Payroll & Social Insurance Compliance

Hiring employees in Korea? Then you must:

• Withhold income tax and residence tax from salaries
• Register employees for the 4 major insurances :

                  - National Pension/ National Health Insurance/ Employment Insurance/ Industrial Accident Compensation Insurance

Monthly withholding and insurance reports are mandatory. Missing deadlines can result in penalties.

5. Meet Transfer Pricing Requirements (If Applicable)

If your Korean entity transacts with overseas affiliates:

• You must comply with transfer pricing rules
• Required documentation includes:

                 - Declaration of the Transfer Pricing Methodology

                 - Report of International Transactions with Foreign Affiliates

                 - Country-by-Country Report (CbCR) (for larger entities)

6. Don’t Miss the Year-End Closing

Your first year-end closing will require:

• Finalizing books
• Preparing financial statements (Korean format)
• Filing corporate income tax return
• Possible external audit if thresholds are met (based on capital, assets, or revenue)

We prepare internal financial statements based on your HQ’s standards and match them to the Korean format for tax filing, providing a summary to ensure local compliance.

7. Final Tips for a Smooth First Year:

• Stay consistent with monthly/quarterly reports
• Digitize your records for easier audits
• Build a relationship with an ABK team!!

Need Help Navigating Korean Accounting & Tax Rules?

ABK team specializes in helping foreign-invested companies establish and grow in Korea —, assisting you with everything from bookkeeping to financial reporting, year-end tax settlements and filing.

Contract:

Ahreum-Kim – a.kim@abk-korea.com

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