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How to Change the Investor of Foreign Direct Investment
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2021-07-12
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How to Change the Investor of Foreign Direct Investment

 

Ⅰ. Introduction

Let’s look in to the change procedure and list of documents to prepare, where a domestic investor is changed from domestic corp. A to a domestic corp. B for reasons such as transferring shares of a overseas subsidiary held by foreign direct investment.

 

Ⅱ. Required Documents for Bank Reporting

1. Bank reporting in the invested country; outside of Korea

The overseas subsidiary notifies Investor Change Reporting to bank where the corporation reported the initial investment.

 

2. Bank reporting in the investing country; in Korea

(1) Seller (Initial investor A)

- Foreign direct investment acquisition report between residents

- Old Foreign Direct Investment report

- Acquisition agreement or separation plan / financial statement before separation

(2) Buyer (New investor B)

- A copy of thecorporate register

- Business license

- National andlocal tax payment certificate

- Credit reports (available at bank)

- Business plan

- Foreign direct investment report

- Acquisition agreement or separation plan / financial statement before separation

- Certificate of acquisition agreement (issued at the bank upon completing the above transfer)

- Foreign direct investment follow-up confirmation

- Application for designation of foreign exchange transaction bank

- If transaction bank differs from the seller, all the above papers from (1) are required. (Upon completion of the report of the seller, bank returns them.)

 

* Both reportings (1) and (2) should be completed in one day. However, if transaction bank of the seller and buyer differs, upon completion of the reporting of A, B may proceed their reporting and B should submit entire bank reporting documents of the seller (A) upon receipt.

 

3. Follow-up Control

- Remittance / Investment Report: Submit immediately upon remittance / investment. This is only to when the payment is transferred overseas through the initial directinvestment and when selling or buying it’s replaced with a receipt of Korean won transfer.

- Acquisition Report of Foreign Securities: Submit within six months period. When buying or selling,submit in revised shareholder list of overseas corp. (In case of registeredstocks, submit the revised stocks) (E.g. Chinese verification report)

- Report of Foreign Direct Investment Change of Contents: Submit within three months upon therevision.

- Annual Business Performance Report: Submit within five months after the accounting period.

 

* Foreign Direct Investment is subject to follow-up by bank upon liquidation and Annual Business Report is due every year before liquidation.

 

Ⅲ. Reporting to National Tax Office

1. The Selling Corporation

(1) Transfer Tax / Security Transaction Tax

In case ofcorporations, they pay corporate tax for incurring capital gains and they arenot subject to pay additional transfer tax.

If stocks issued by the overseas subsidiary is not listed to a stock market as per Article 8-2, (4), 1 of the Financial Investment Services and Capital Markets Act, the corporation are not obligated to report and pay the security transaction tax.

 

(2) Statement and Balance sheet of Foreign Corporation in Overseas

When filing corporate tax, until the tax year in which the date of transfer is included, statement and balance sheet of overseas subsidiary are required to be filed. In this case, the date of transfer in the statement of the overseas subsidiary should be given.

 

2. The Buying Corporation

In the year of acquisition, assets are booked to account titles as investment stocks of affiliated companies and when filing corporate tax, statement and balance sheet of the overseas subsidiary are required to be included.

 








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