1. Definition of Foreign Direct Investment
Foreign Direct Investment (FDI) is defined as an investment with an investment threshold contributed by foreigners amounting to at least KRW 100 million and being 10% or more of the total amount.
Types of FDI include the acquisition of stocks of domestic companies, long-term loans from parent companies and investments in non-profit corporations,…
2. Forms of foreign direct investment
*Acquisition of equity shares
To steadily create an economic relationship with a Korean company, foreign investors can buy the shares of that company. When two or more persons intend to invest, each person has to invest at least KRW 100 million and hold at least 10% of voting shares which includes both new or existing shares. However, a foreigner assigns or appoints an executive to the domestic Korean company even when investing more KRW 100 million but acquiring less than 10% of equity shares of the domestic company, which is treated as FDI.
*Long-term loans
A loan of at least 5 years from a foreign-invested company’s overseas parent company or a company which has a capital investment relationship with the company to the foreign-invested company. A long-term loan must be satisfied: equity investment has been provided and the average loan period of at least 5 years.
*Contribution to a non-profit organization (NPO)
The foreigners contribute at least KRW 50 million to an NPO or a company. It also accounts for at least 10% of the total amount and meets all of the following conditions:
– The NPO or company has independent research facilities in the fields of science and technology, and meets any one of the following conditions:
+ There are at least five regular workers with a bachelor’s degree in a science/technology field and at least three years’ experience in research, or with a master’s or higher degree in a science and technology field;
+ The NPO conducts R&D activities in the fields of natural science and engineering as classification of the Korean Standard Industrial Classification.
– Other contributions to an NPO which are recognized as foreign direct investment by the Foreign Investment Committee meet one of the following conditions:
+ An NPO is established for the purpose of promotion,… of science, art, medical services, education and continues to conduct its business with so as to develop professionals in the relevant fields and to expand international exchanges;
+ An NPO which is a regional office of an international organization joining international cooperation business between civilians or governments.
*Reinvestment of Unappropriated Earned Surplus
The foreign investor can reinvest in a foreign-invested company’s unappropriated earned surplus for some certain purposes such as construction or expansion of a factory,… In this case, the foreign-invested company shall be considered as a foreigner and the foreign investment amount will be calculated by multiplying the amount spent and the foreign investment ratio.
