Foreign companies in Korea
How do you convert a Korean branch into a Korean subsidiary?
In short Set up a Korean company and transfer the whole branch business to it as a going concern. A transfer of an entire business is not a supply of goods for VAT, so the assets can move without VAT if the conditions are met. The branch's goodwill is valued, assets and liabilities are cut off at one date, and the branch files its final corporate tax return including any gain on the transfer.
Key points
| Usual route | New Korean company + transfer of the whole branch business |
|---|---|
| VAT | A transfer of the entire business is not a supply of goods (VAT Act Art. 10(9)2), so no VAT on the transfer when the conditions are met |
| Goodwill | Customer base and trading history valued and documented |
| Cut-off | Receivables, payables, inventory and staff listed as of one date in the transfer agreement |
| Branch | Files its final corporate tax return, including any gain on the transfer |
Why companies convert
A branch is legally part of the head office. Head offices often move to a Korean subsidiary when they need local contracts in the company's own name, want to hire more staff, or want to keep liabilities inside a Korean entity.
The transfer itself
The usual route is to set up the Korean company first and then transfer the whole branch business to it. If the entire business moves, the transfer is not treated as a supply of goods for VAT (VAT Act Article 10(9)2), so no VAT is charged on it. If only some assets move, VAT can apply to them, so the scope of the transfer matters.
The branch's goodwill, meaning its customer base and trading history, has a value under Korean tax rules. We prepare the valuation report the tax office expects and attach the asset and liability list as of the cut-off date to the transfer agreement.
After the transfer
The branch files its final corporate tax return, including any gain from the transfer, and the new company starts its own books from the cut-off date. We handled this for a foreign company's Korean office in 2025, preparing the goodwill valuation report and the business transfer agreement.
FAQ
How long does it take?
It depends on the size of the branch and on company registration. The tax work (valuation, agreement, final return) can usually be prepared in parallel with registration.
Do employees have to sign new contracts?
How employment moves in a business transfer is a labour law question, so please check it with a labour attorney. We coordinate the payroll and withholding side.
Can the branch stay open for a while?
Yes. Some companies run both for a short period. The cut-off date in the agreement decides which entity books each transaction.
Sources
- VAT Act Art. 10(9)2 (transfer of a business is not a supply)
- Corporate Tax Act Art. 97 (foreign corporations: filing)
Checked 2026-11-04. Treaty rates and individual facts change the answer, so please confirm your case with us.
More questions in English
Seojin Tax Corporation, Yeouido, Seoul. Registered tax accountant No. 9105103. Previously in the international tax team at Hana Tax Corporation (2022 to 2024). Statutory references were checked against the official Korean law database on 2026-11-04.
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