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.

A foreign entity is generally deemed to have a tax presence (i.e. PE) in Korea in the following cases, among others:

• It is represented by a dependent agent in Korea, (i) who has the authority to conclude contracts on its behalf and who has repeatedly exercised that authority; (ii) who, even if having no such authority, repeatedly performs a principal role in the course of concluding contracts.
• Its employee(s) provides services in Korea for more than six months within 12 consecutive months.
• Its employee(s) continuously or repeatedly renders similar services in Korea for two or more years, even if each service visit is for less than six months within 12 consecutive months.

Exceptions to a PE in Korea for a non-resident corporation are limited to specific fixed places of business used only for preparatory or auxiliary nature, and such fixed places include purchasing or storage of goods, advertising, publicity, collecting or furnishing of information, etc. Even though the specific place is 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 Korea PE at the same place where the specific place exists or at a different place in Korea and the activities performed via 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, the activities of the specific places exceed preparatory or auxiliary nature as a whole.

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 July 2022, they are required to submit the information on input value-added tax (VAT) invoices received from supplier.