Korea, Republic of

A corporation having its head office or principal office in Korea is a resident corporation. A corporation with a place of effective management in Korea is also treated as a resident corporation.

Permanent establishment (PE)

The term 'permanent establishment' is defined as any fixed place of business in Korea where the business of a foreign entity is wholly or partly carried on.

The following places will trigger a PE of a foreign entity, among others:

• The place where the employee(s) of the foreign entity provides services in Korea for more than six months within 12 consecutive months.
• The place where the employee(s) of the foreign entity continuously or repeatedly renders similar services in Korea for two or more years, even if each service is provided for less than six months within 12 consecutive months.

Also, in the absence of a fixed place of business in Korea, if a foreign entity has a dependent agent in Korea (i) who has the authority to conclude contracts on its behalf and who has repeatedly exercised that authority or (ii) who, even if having no such authority, repeatedly plays a principal role leading to concluding contracts for a foreign entity (limited to the cases where the contracts are routinely concluded without material modification by the foreign entity), it will be deemed to have a PE in Korea.

Exceptions to a PE in Korea for a non-resident corporation are limited to specific places of business used only for preparatory or auxiliary nature, and such fixed places include purchasing or storage of goods not for sale, advertising, publicity, collecting or furnishing of information, etc. Even though the specific place where activities of preparatory or auxiliary nature are performed, it could be regarded as a PE in one of the following cases:

• A foreign entity or its foreign related party has a Korean PE at the same place as  the specific place used for preparatory or auxiliary activities or at a different place in Korea, and the activities performed through the PE and the specific place are complementary to each other.
• Even if the foreign entity or its foreign related entity has no PE in Korea, it performs complementary activities at the same place as the specific place or at a different place in Korea, and the overall activities, where combined, exceed activities of a preparatory or auxiliary nature in light of the business activities of the foreign entity or its foreign related party.

Liaison offices of foreign corporations that undertake non-sales functions (e.g. market survey, collection of market information) in Korea are subject to new reporting requirements. With effect from 1 January 2022, these liaison offices must prepare the required information, such as its status, head office, as of 31 December of each year and submit it to the Korean tax authorities by 10 February of the following year. With effect from 1 January 2023, they are required to submit the information on input value-added tax (VAT) invoices received from supplier.