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 (PE)' is defined as any fixed place of business in Korea through which the business of a foreign corporation is wholly or partly carried on.  A fixed place of business PE includes the following places in Korea, among others:

• The place where the employee(s) of the foreign corporation provides services in Korea for more than six months within 12 consecutive months.
• The place where the employee(s) of the foreign corporation 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.

In addition, even in the absence of a fixed place of business PE in Korea, a foreign corporation will be deemed to have a PE in Korea if it has an agent in Korea: (i) who has, and habitually exercises, authority to conclude contracts on its behalf, or (ii) who, even if having no such authority, habitually plays the principal role leading to the conclusion of contracts for a foreign corporation (limited to cases where the contracts are routinely concluded without material modification by the foreign corporation). This deemed PE rule also applies to independent agents that conduct significant parts of the business, such as contract execution, while acting exclusively or almost exclusively for a related party foreign corporation, replacing the prior reference to an independent agent acting mainly for a specific foreign corporation under the amended Presidential Decree of the CITL, effective 27 February 2026.

As an exception, a foreign corporation is not regarded as having a PE in Korea if any of the following specific places are used solely for activities of a preparatory or auxiliary character: a place used only for purchasing or for the storage of goods not for sale; a place for advertising, collecting or furnishing of information, etc.; or a place where the corporation’s goods are processed by another person. However, such a place may nevertheless be treated as a PE in either of the following cases:

• A foreign corporation or its foreign related party has a Korean PE at the same specific place used for preparatory or auxiliary activities, or at another place in Korea, and the activities performed at the specific place and those through the PE are complementary; or
• A foreign corporation or its foreign related party perform complementary activities at the same specific place or at another place in Korea, and the overall activities, where combined, are not of a preparatory or auxiliary character in light of the business activities of the foreign corporation or its foreign related party.

With effect from 1 January 2022, a foreign corporation maintains a liaison office that undertakes non-sales functions (e.g. market survey, collection of market information) in Korea is subject to new reporting requirements. The foreign corporation 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. Effective 1 January 2026, if a foreign corporation fails to submit that required information or submits false information, the competent authority may issue an order to the foreign corporation to take corrective action within a prescribed period of 30 days.  Failure to submit the statement, submission of a false information, or non-compliance with an order to take corrective action is subject to a fine of up to five million Korean Won.  In addition, with effect from 1 January 2023, they are required to submit the information on input value-added tax (VAT) invoices received from suppliers.