SOUTH KOREA LAW AND PRACTICE Contributed by: Tehyok Daniel Yi, Gun Kim, Kyu Hyun Kim, Sun Hee Kim, Yong Whan Choi, Yong Min Lee, Jung Woo Lee and Hyeon Jeong, Yulchon LLC
holds the authority to suspend, prohibit or require reversal of overseas M&A if national security is at risk. This decision is made following consultation with rele - vant central administrative agencies and a committee review. Unauthorised investments involving national core technologies can lead to criminal penalties. 8. Other Review/Approvals 8.1 Other Regimes Regulatory Framework for Foreign Investment in South Korea While South Korea encourages foreign investment across many sectors, key regulatory frameworks apply. Investments that do not fall under the scope of the FIPA are governed by the FETA. Under the FETA, foreign exchange transactions must be reported to the appropriate authority, such as the Ministry of Strategy and Finance, the Bank of Korea, or an authorised for - eign exchange bank, depending on transaction struc - ture and investment size. Compliance with these reporting requirements is criti - cal, as non-compliance may restrict remittance of for - eign currency. In severe cases, significant unreported transactions may lead to criminal penalties, even for seemingly technical violations. Sectoral Restrictions on Foreign Investment South Korea’s foreign investment framework allows foreign participation in most sectors. However, certain industries impose limitations to protect national inter - ests. Specific sectors are subject to varying degrees of regulatory oversight, depending on the industry’s sensitivity and strategic importance. For example, under the regulations established pursu - ant to the FIPA, foreign investment is prohibited in the following sectors. • Postal services, central banking, personal mutual aid services, pension services and financial market management services. • Legislative, judicial, and administrative agencies and diplomatic missions in South Korea. • Educational institutions (including preschools, primary and secondary schools, colleges, universi -
ties, postgraduate schools, and any other forms of schools). • Artists, religious organisations, industrial or profes - sional associations, environmental groups, political organisations, and labour unions. • Nuclear power generation, radio broadcasting, and terrestrial broadcasting. Under the regulations established pursuant to the FIPA, foreign investment is restricted in the following sectors. • Livestock farming (beef cattle), meat wholesale, power transmission and distribution, electricity sales, domestic passenger and freight transport, air transportation, newspaper publication, and maga - zine or periodical publication (restricted to under 50%). • Programme supply, cable broadcasting, satel - lite broadcasting, and other telecommunications (except value-added telecommunications, which have no foreign ownership restrictions) (restricted to under 49%). • Hydroelectric, thermal, solar, wind, and other power generation (restricted to up to 30%). • News services (restricted to less than 25%). • Grain and other crop cultivation, basic inorganic chemical manufacturing, non-ferrous metal smelt - ing and refining, radioactive waste collection, transport, and disposal, and domestic banking (excluding agricultural and fisheries co-operatives) (generally allowed but restricted with respect to limited scope of business). These restrictions reflect South Korea’s commitment to balancing its open investment climate with safe - guarding national interests and strategic industries.
9. Tax 9.1 Taxation of Business Activities
Korean companies are subject to tax on their world - wide income, while foreign companies are only sub - ject to tax in Korea on income sourced within Korea. A company is considered a Korean resident company if it has its head office, principal office or a place of effective management in Korea.
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