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South Korea, formally the Republic of Korea (ROK), is an East Asian nation that occupies the southern half of the Korean Peninsula and has a land border with North Korea. The Yellow Sea forms its western boundary, while the Sea of Japan forms its eastern border. South Korea claims to be the only legal government of the peninsula and its surrounding islands. It has a population of 51.75 million people, almost half of whom reside in the Seoul Capital Area, the world's sixth-biggest city. Incheon, Busan, and Daegu are other important cities.
The Korean Peninsula has been populated since the Lower Paleolithic epoch. Its first kingdom was mentioned in Chinese chronicles as early as the 7th century BCE. Korea was controlled by the Goryeo dynasty (918–1392) and the Joseon dynasty (1392–1897) after the unification of the Three Kingdoms of Korea into Silla and Balhae in the late 7th century. In 1910, the following Korean Empire was captured by the Empire of Japan. Following Japan's surrender in World War II, Korea was split into two zones: a northern zone held by the Soviet Union and a southern zone occupied by the United States. Following the failure of reunification talks in August 1948, the latter became the Republic of Korea, while the former established the socialist Democratic People's Republic of Korea the following month.
The Korean War started in 1950, with a North Korean invasion, and saw major American-led United Nations involvement in favor of the South, while China engaged in support of the North, with Soviet help. Following the conclusion of the war in 1953, the nation formed a military alliance with the United States, and its ravaged economy started to recover, posting the world's fastest gain in average GDP per capita between 1980 and 1990. Despite a lack of natural resources, the country quickly developed into one of the Four Asian Tigers through international trade and economic globalization, integrating itself into the global economy through export-oriented industrialization, and is now one of the world's largest exporting nations, with one of the world's largest foreign-exchange reserves. The June Democratic Struggle brought autocratic rule to an end in 1987, and the nation is today regarded as one of Asia's most advanced democracies, with the greatest degree of press freedom on the continent.
South Korea is a developed nation that ranks eighth in the Asia and Oceania area on the Human Development Index (HDI). South Korea has the world's third-highest life expectancy. In recent years, the nation has faced an aging population and the world's lowest fertility rate. Its economy is the world's twelfth-largest in terms of nominal GDP. Its people have access to one of the world's fastest Internet connections and the world's densest high-speed train network. The nation is the ninth-largest exporter and ninth-largest importer in the world. It has one of the world's strongest armies and the world's second-largest standing army in terms of military and paramilitary troops. South Korea has been known for its worldwide significant pop culture, notably in music (K-pop), TV dramas, and movies, since the twenty-first century, a phenomenon known as the Korean Wave. It is a member of the Development Assistance Committee of the OECD, as well as the G20 and the Paris Club.
In the first year, employees are entitled to 11 days per year. In the second and third years, employees are entitled to 15 days per year. In the third year and onward, one day’s paid leave is added for every two years of employment, up to a total of 25 days.
South Korea recognizes twelve public holidays.
There is no paid time off for illness or injury that is not connected to employment. If the illness or injury is work-related, however, the employer is required to give paid leave until the employee recovers.
Maternity benefits are available to all female workers and include 90 days of paid leave, which may be extended to 120 days for multiple/complicated deliveries. Maternity leave is typically taken 45 days before and 45 days after the due date.
The maternity payment is made up of a mix of government and social security benefits, as well as employer contributions. For bigger organizations in South Korea, maternity pay should be paid at 100.00 percent of the usual wage rate for the first 60 days. Following that, the social security/government will pay support allowance for the remaining 30 days (limited at 2 million KRW every 30 days), with the employer having the option to contribute the amount of money for any discrepancy between the employee's normal wage rate and the support allowance. In the case of small businesses, the social security/government system assists the employer for the whole 90-day period.
A male employee can take up to ten days of paid paternity leave (5 days by the employer and 5 days by the government) and seek paternity leave for up to 90 days from the day the kid is born.
Parents with children under the age of eight may seek up to one year of full-time or part-time childcare leave. A request for leave shall be submitted to the employer at least 30 days before the commencement of the leave term, with a stipend provided by social security/government.
Employees on work-related injury leave earn 70% of their salary for up to three months.
The employer, the employee, or both parties may cancel an employment contract at the end of a fixed-term contract. Employers may fire employees only for a legitimate reason traceable to the employee or for a pressing managerial need, which may involve layoffs.
Employers must provide employees 30 days' notice or compensation in lieu of notice before dismissing them. The termination must be in writing and specify the cause for the termination as well as the date. The written dismissal can be given at the same time as the notice, but not later than the dismissal date.
According to the legal information website about the Korean Labour Law, the Korean Labor Standards Act does not contain an explicit provision regarding probationary periods.
The severance payment must be tantamount to a month's salary for each year of service.
The standard workweek is 40 hours and the day is eight hours. Employees may work up to an additional 12 hours per week if both parties agree. Certain industries may be permitted to work more than 12 hours of overtime with the Minister of Employment and Labor's approval.
Employees who work on holidays, overtime, or at night are entitled to a wage increase above the standard rate. Work hours at night are between 10 p.m. and 6 a.m.
Employees are entitled to a 30-minute unpaid break after every four hours worked and one hour of unpaid leave after every eight-hour shift.
Overtime is defined as work exceeding 40 hours per week, 8 hours per day, and is compensated at 150 percent of a regular salary. After 10 p.m., work is paid at a rate of 200 percent. Daily overtime is unlimited for employees, but weekly overtime cannot exceed 12 hours.
The minimum wage in North Korea is set to increase to 9,160 won (US$8) per hour in the next year.
South Korea provides free healthcare to all citizens. The National Health Insurance Program is part of South Korea's universal healthcare system. The program is supported by mandatory employer and employee contributions, government subsidies, and tobacco surcharges. The contribution rate is a percentage of an employee's salary that is shared equally by the employer and the employee. Employers withhold contributions and remit them monthly, by the 10th of the following month.
Employers frequently provide additional health and life insurance benefits.
Domestic companies must pay corporation tax on all revenue produced both domestically and in other countries, while foreign businesses must only pay corporate tax on income generated domestically.
Each business year, a ‘Corporate tax on income from the business year' is imposed on its income. When property, buildings, houses, or bordering land in specified regions are transferred, or land for non-commercial purposes is transferred, a ‘corporate tax for land and other transfer revenue' is imposed in addition. When a domestic company closes, a 'corporate tax on liquidated income' is levied.
The tax rate for a business generating KRW 200 million or less is 10%.
The tax rate for a business generating more than KRW 200 million but less than KRW 20 billion is the value of KRW 20 million + the amount in excess of KRW 200 million multiplied by 20%.
The tax rate for a business generating more than KRW 20 billion is the value of KRW 3,980 million plus the amount in excess of KRW 20 billion multiplied by 22 percent.
The Income Tax Act divides taxable income into three categories: worldwide income, retirement income, and transfer income.
The total of interest income, dividend income, company income (including real estate rental revenue), wage and salary income, pension income, and other income is referred to as global income. The tax base for global income is determined by subtracting required expenditures, income deductions, and so on from global income, and a tax rate ranging from 6 to 40% is applied. For interest income, dividend income, other income separately taxed at the source, and wage and salary income free from income tax burden owing to year-end tax settlement, submitting a global income tax return is exempt.
The term "retirement income" refers to the revenue mentioned below that was earned during the fiscal year in question.
Transfer income is revenue earned by people as a result of the transfer of certain assets throughout the fiscal year. According to Korean tax law, ‘transfer' refers to the practical transfer of assets for money as a result of a sale, exchange, or in-kind investment in companies, etc., independent of the registration status of such assets. Transfer income tax applies to land and buildings, real estate rights, other assets, and stocks (excluding listed equities transferred on exchange by minority owners). However, transfer income tax is not imposed on income derived from the transfer of one home for one family (excluding high-priced housing), revenue derived from the sale of assets owing to bankruptcy, or income derived from the exchange, split, or annexation of farmland.
VAT is a tax imposed on the added value (profit) obtained through the transaction of items (goods) or the supply of services. Korea levies VAT on the value created at each stage of a transaction, with a rate of 10%. Businesses' VAT is determined by deducting the input tax from the output tax.
Every six months, value added tax should be reported and paid, and the taxable period of six months is split into three months for a preliminary report.
Foreigners arriving in South Korea to work must register with the local immigration authorities during the first three months of their stay. The kind of work permit and employment visa required depends on the function that the person will be doing. To enable an employee to remain in South Korea for more than 90 days, the following visas must be obtained:
The E-1 Professor Visa is intended for foreigners who want to give lectures or do research in their area; it is valid for one year and may be extended on an annual basis.
The E-2 Foreign Language Instructor position is intended for foreigners who want to teach a foreign language in a company/school/education infrastructure. It has a two-year validity period and may be renewed every two years.
E-3 Research is intended for foreigners invited by a public or private institution to do natural science or advanced technology research; it is valid for one year and may be renewed yearly.
E-4 Technological Guidance is intended for foreigners who are invited to give expertise in natural science or high technology by a governmental or private organization; it is valid for one year and may be renewed yearly.
E-5 Special Profession is intended for foreigners who are architects, attorneys, surgeons, accountants, and other globally licensed professionals who have authorization from the Korean government to practice their area of competence. It is good for one year and may be renewed yearly.
E-6 Culture and Art visas are intended for foreigners who engage in musical, artistic, and literary activities; they are valid for one year and may be renewed yearly.
E-7 Specially Designed Events are intended for foreigners who have been asked to engage in activities organized by the Korean Ministry of Justice via a public or private organization. It is valid for a year and may be renewed on a yearly basis.
D-5 Long-Term New Coverage is intended for international media correspondents (broadcast, newspapers, magazines, etc.). The single-entry visa is valid for three months and may be renewed once per year for a total of three years.
Formalized Alien Registration Card (ARC) Most individuals who remain in South Korea for more than six months must also get an Alien Registration Card (ARC).
Employment contracts in Korea must be in writing and must include the terms of employment, such as the number of work hours, holidays, paid annual leave, working conditions, remuneration, and payment arrangements. Although the agreement does not have to be written in Korean, it is strongly advised. Employers must furnish the employee with the employment contract and may face fines if they do not.
Employment contracts may be for an indeterminate or definite period of time. Fixed-term employment contracts are limited to two years.
South Korean Won (KRW)
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Before deciding where to put their headquarters in South Korea, companies growing there should examine a number of issues. Begin by considering critical business aspects such as your industry type and any current trade ties. South Korea also has legislative requirements for customs and imports. Check ahead of time to ensure that the things you import and sell are legal to import. You'll need to get the necessary licenses and permissions, as well as export and import paperwork.
South Korea is one of the most homogeneous nations in the world, which may make doing business there difficult for foreign nationals. "Face" is important in South Korean business culture, and you should be aware of this when forming your subsidiary.
Although all official paperwork in South Korea will be in Korean, international commerce is often conducted in English. Local language proficiency is required in South Korea, thus if you do not speak Korean, it is better to hire a translator or an employee who does.
Finally, while determining where to locate your headquarters, take into account South Korea's free economic zones. If you establish a South Korean subsidiary here, you may be eligible for additional incentives or tax breaks.
The following actions are required to establish a South Korean subsidiary:
1. Creating a business seal
2. Choosing a financial institution for your capital deposit
3. Registering your business
4. Having to pay registration costs for social security
5. Opening a business bank account
6. Creating a business office
7. Filling out employment rules
When establishing a South Korean subsidiary, you have three alternatives for business structure: a corporation, a foreign branch, or a liaison office. One of the most typical methods is to incorporate as a private limited liability company, which comes with its own South Korean subsidiary rules. Foreign investment is acknowledged for this form of foreign-owned firm. At least 100 million won must be invested by the enterprise. A D-9 trade visa is required for private enterprises that spend 300 million won or more.