Foreign companies in Korea
Does a liaison office of a foreign company in Korea pay corporate tax?
In short Generally no. A place used only for preparatory or auxiliary work, such as purchasing, storage, advertising, information gathering or market research, is not a permanent establishment, so it has no corporate tax on business income. It still withholds income tax on salaries and handles staff tax settlement, and it becomes taxable if it starts concluding contracts or doing core business.
Key points
| Corporate tax | Generally none if activities stay preparatory or auxiliary (Art. 94(4)) |
|---|---|
| Allowed activities | Purchasing, storage not for sale, advertising, information gathering, market research and similar |
| Becomes taxable when | It habitually concludes contracts for the head office, plays the principal role in concluding them, or its activities combined with related entities are no longer auxiliary (Art. 94(3), (5)) |
| Still required | Withholding tax on salaries, year-end settlement for staff, social insurance |
| Registration | A unique (non-business) number instead of a business registration number |
Why a liaison office is usually not taxed
A fixed place used only for preparatory or auxiliary activities is excluded from the permanent establishment definition: buying assets, storing assets not for sale, advertising, providing or collecting information, market research and similar work (Corporate Tax Act Article 94(4)). Without a permanent establishment, there is no corporate tax return for business income.
When it becomes a permanent establishment
The exclusion stops working if the office habitually concludes contracts in the name of the foreign company, or repeatedly plays the principal role in concluding them (Article 94(3)). It also stops if the foreign company or a related company does business elsewhere in Korea and the activities complement each other, or if the combined activities are no longer auxiliary (Article 94(5)). Sales support that turns into negotiating prices and closing deals is the most common way this happens.
What a liaison office still has to do
Even without corporate tax, the office pays salaries in Korea, so it withholds income tax every month, runs the year-end tax settlement for its staff and handles social insurance. We review its actual activities each year so it does not drift into permanent establishment status without anyone noticing.
FAQ
Does a liaison office file VAT returns?
If it makes no sales in Korea, it generally has no VAT return. Its expenses are paid by the head office and recorded as remittances.
Can a liaison office sign contracts with Korean customers?
That is exactly what can turn it into a permanent establishment. If contracts need to be signed in Korea, a branch or a Korean subsidiary is the safer structure.
We want to start selling. What should we do?
Convert the office to a branch, or set up a Korean subsidiary. See our page on converting a branch into a subsidiary.
Sources
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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