South Korea operates under a civil law system, where laws are codified in statutes. The legal framework is based on the following separation of powers:

• the legislative branch, the National Assembly, which enacts statutes;
• the executive branch, led by the President and government agencies, which enforces laws; and
• the judicial branch, which includes the Supreme Court as the highest appellate body and various lower courts. Additionally, the Constitutional Court independently conducts constitutional reviews and oversees impeachment cases.

This structure ensures a well-defined regulatory environment for businesses operating within South Korea.

Foreign direct investment (FDI) in South Korea is subject to regulatory oversight primarily through reporting obligations under the Foreign Investment Promotion Act (FIPA), overseen by the Ministry of Trade, Industry, and Energy (MOTIE), and the Foreign Exchange Transaction Act (FETA), administered by the Ministry of Economy and Finance.

Under the FIPA, foreign investment in Korean companies is generally permitted, except where it may impact national security, public health, public order, environmental protection or contravene Korean laws. The Industrial Technology Protection Act (ITPA) further restricts foreign acquisitions involving certain technologies designated as national core technologies. Specifically, if a foreign investor seeks to acquire 50% or more of the shares or effective control of a Korean company or its business holding a national core technology, prior approval or reporting to the MOTIE is required.

Specific industries, including defence and finance, are subject to additional scrutiny and sector-specific regulations.

Overview and FDI Outlook

South Korea’s M&A market experienced a slowdown in the first half of 2025 against the backdrop of global uncertainties, including the Trump administration’s unpredictable tariff policies and ongoing geopolitical tensions. However, as tariff negotiations show signs of resolution and demand for business reorganisation grows, market sentiment is gradually becoming more favourable toward M&A activity. The majority of large-scale transactions continue to stem from conglomerates selling off non-core affiliates as part of restructuring efforts, along with private equity firms seeking exit opportunities.

On the regulatory front, 2025 marked a period of significant change following a shift in government and sweeping amendments to the Korean Commercial Code (KCC). The reforms, which had been under discussion since 2024, introduced a series of minority shareholder-friendly measures, including codifying directors’ duty of loyalty to shareholders, implementing electronic general shareholders’ meetings, and expanding the separate election of audit committee members. Notably, expanding the duty of loyalty to all shareholders beyond the company itself represents a paradigm shift in Korean corporate governance. While this move is widely welcomed as a step toward enhancing shareholder protection and capital market transparency, it has also raised concerns among corporations about increased legal risks and potential constraints on managerial decision-making. In addition, the government is actively pursuing further reforms, including the mandatory cancellation of treasury shares, mandatory tender offer requirements, and restrictions on dual listings. This growing regulatory complexity and associated legal uncertainty may temporarily dampen deal-making sentiment in the Korean M&A market.

A particularly high-profile controversy in 2025 involved MBK Partners, Asia’s largest PE firm, which acquired the major retail chain Homeplus through a leveraged buyout. The company’s abrupt filing for rehabilitation proceedings sparked public criticism that PE funds prioritise investment recovery over sustainable business management. This has led to legislative proposals aimed at tightening PE regulations, which have in turn raised concerns among limited partners, signalling that Korea’s regulatory and market environment for private equity investment may become more stringent in the coming years.

Common Transaction Structures in South Korea

In South Korea, common M&A structures include:

• share transfers;
• business transfers;
• mergers or consolidations;
• asset transfers;
• joint ventures (JVs);
• share subscriptions; and
• other forms like share swaps and corporate splits.

According to the Korea Fair Trade Commission’s (KFTC) 2024 data, among the transactions for which merger filing combination reports have been made to the KFTC, share transfers, including purchases and subscriptions, accounted for 39.5% of filings, JV formations for 19.4%, mergers for 16.4%, and business transfers for 11.7%. Share transfers are the most widely used structure for acquisitions, with mergers more common among affiliated companies.

In transactions involving the acquisition of control over listed and non-listed companies, there is no significant structural difference. However, for listed companies, a mandatory tender offer system has been under discussion since 2022, which would require the buyer to make an offer to purchase shares from all other shareholders if acquiring more than 25% of the company’s shares. While the government has recently revived efforts to push this forward, the legal amendments and implementation are yet to occur.

Public v Private Company Acquisitions

There are no major structural differences between acquiring control of public and private companies. However, a proposed mandatory tender offer rule, still under discussion, could require acquirers of 25% or more of a listed company’s shares to make a mandatory tender offer to obtain certain minimum shareholdings of a listed company in addition to acquiring sale shares through a private sale. This rule has not yet been codified but could affect future transaction structures.

Key Considerations for Foreign Investors

Foreign investors should consider the following factors when selecting a transaction structure.

• Tax structuring: careful planning can optimise tax efficiency for the investor’s specific circumstances.
• FIPA eligibility: confirming eligibility under the FIPA can unlock potential tax incentives and regulatory benefits.
• Foreign exchange compliance: where the FIPA is not applicable, compliance with the FETA, which mandates reporting based on a transaction’s nature and structure, is crucial. Failure to report could restrict outbound currency remittance.
• Sector-specific restrictions: certain industries limit foreign ownership or impose additional regulations, directly impacting transaction structure choices.
• Regulatory approvals: specific sectors, particularly finance, require regulatory approval for foreign acquisitions, with standards differing from those for domestic investors, especially when significant stakes are involved.

Control Acquisitions v Minority Investments

Share transfers are preferred for control buyouts, while JVs and share subscriptions are common for minority investments. These structures suit foreign investors seeking strategic partnerships or limited ownership for market entry. Asset and business transfers are also commonly used for broader corporate restructuring or reorganisation.

Additional Regulatory Approvals

Foreign investors considering M&A transactions in South Korea should be aware of regulatory review and reporting requirements beyond FDI regulations, including antitrust and securities filings. This includes the following.

• Antitrust and competition review: acquiring the shares or business of a South Korean company may require a merger filing with the Korea Fair Trade Commission (KFTC) under the Monopoly Regulation and Fair Trade Act  (MRFTA) (see 6. Antitrust/Competition). Merger filings are mandatory if the transaction meets specific asset or revenue thresholds, aiming to prevent anti-competitive market concentration.
• Securities reporting for public companies: for public company investments, securities regulations mandate disclosure filings based on shareholding thresholds. Investors must file a substantial shareholding report at the 5% threshold and an additional report at 10% ownership. These requirements promote transparency in shareholder activity for publicly listed companies.

Overview

The two primary legal structures for corporate entities are a joint stock company (jusik hoesa) and a limited company (yuhan hoesa). Each has its own distinct governance requirements as follows.

• Joint stock company (jusik hoesa): this structure is most common for larger businesses and is required for all public companies. It mandates a board of directors, an internal auditor or audit committee and shareholder meetings. The board oversees major decisions, while a representative director manages daily operations. Shareholders enjoy limited liability, and the company has flexibility in issuing stock options, convertible shares and bonds, which are key advantages for raising capital.
• Limited company (yuhan hoesa): typically used by smaller or closely held companies, this structure offers operational flexibility without requiring a board or internal auditor. However, it cannot issue stock options, convertible shares or bonds, which limits financing options. Like a jusik hoesa, shareholders’ liability is limited, but governance requirements are less complex, making it suitable for smaller entities.

Key Considerations for Foreign Investors

Foreign investors should consider the following when selecting a corporate structure.

• Governance and control: a jusik hoesa provides a more formal governance framework, suitable for investors needing clear oversight mechanisms and roles.
• Operational flexibility: a yuhan hoesa provides flexibility for smaller or family-owned investments but is less ideal for larger-scale operations requiring sophisticated capital options.
• Capital structure: a jusik hoesa’s ability to issue various securities with conversion/redemption rights allows greater flexibility for financing, while a yuhan hoesa’s restrictions could affect capital-raising strategies.

Selecting between a jusik hoesa and a yuhan hoesa depends on an investor’s priorities for governance, operational complexity and capital flexibility, enabling foreign investors to align the entity structure with investment goals.

Under the KCC, except where non-equitable treatment is permitted, all shareholders must be treated equitably in proportion to their shareholding, based on the principle of shareholder equality. Any agreement granting preferential rights or benefits to specific shareholders, without justification, is generally deemed invalid. Major corporate actions such as mergers or amendments to the articles of incorporation require enhanced voting thresholds, ensuring minority input on significant decisions. Dissenting shareholders are also granted appraisal rights in cases involving mergers, spin-offs, comprehensive share swaps or transfers of substantial business assets, allowing them to seek fair value for their shares.

In addition, the 2025 amendments to the KCC significantly strengthened minority shareholder rights. Most notably, the directors’ duty of loyalty was expanded to cover all shareholders, marking a fundamental shift in corporate governance for Korean companies. Further, listed companies with total assets of KRW2 trillion or more will be required to:

• adopt a mandatory cumulative voting system; and
• increase the number of audit committee members elected separately from other directors from one to two.

These changes are expected to improve minority shareholder representation on boards and further stimulate the activities of minority investors and activist funds in the Korean market.

South Korea imposes no additional FDI-specific disclosure requirements on foreign investors. However, shareholders of public companies are subject to ownership-based disclosure obligations, with thresholds triggering reporting requirements (eg, 5% and 10%). For private companies, disclosures are governed by the Act on External Audit of Stock Companies, which mandates financial statement and audit report disclosures for companies meeting specific thresholds. Disclosure is required if a company is either:

• a stock or limited liability company with total assets or sales of at least KRW50 billion in the previous business year; or
• a company that meets at least two of the following criteria for stock companies, or three for limited liability companies:
1. total assets of KRW12 billion or more at the end of the previous year;
2. total liabilities of KRW7 billion or more at the end of the previous year;
3. sales of KRW10 billion or more in the previous year;
4. 100 or more employees at the end of the previous year; or
5. 50 or more members at the end of the previous year for limited liability companies.

South Korea’s capital markets have matured significantly, offering diversified funding sources that support the country’s economic development. The Korea Exchange (KRX) remains the primary platform for securities trading, with its KOSPI market serving larger companies and its KOSDAQ market catering to smaller, high-growth firms.

South Korean businesses have traditionally relied heavily on bank financing. However, since the 1997 Asian financial crisis, corporate bonds and equity offerings have gained popularity, allowing companies to reduce dependence on bank loans. The equity market strengthened substantially in 2025, and as of October 2025, the KRX reported a market capitalisation of approximately KRW3,088 trillion, reflecting the continued depth and maturity of the Korean equity market. Meanwhile, the corporate bond market has also expanded significantly, with companies increasingly turning to bond issuance as a preferred funding strategy. In the first half of 2025, corporate bond issuance by Korean firms exceeded KRW75 trillion, representing a 15% increase from the same period in the previous year.

Despite this shift, bank financing remains crucial, particularly for small and medium-sized enterprises (SMEs). Overall, South Korea’s capital markets provide a well-balanced mix of funding options, underscoring the country’s dynamic and mature financial landscape.

South Korea’s capital markets are governed by the Financial Investment Services and Capital Markets Act (FSCMA), which regulates financial investment business licensing, securities issuance, public company regulation, prevention of unfair trading, fund management and the governance of market institutions, such as the Korea Financial Investment Association and Korea Securities Depository. The KRX sets listing and disclosure requirements for its three main markets as follows.

• KOSPI: companies must meet both quantitative criteria (eg, operating history, capital size, financial performance) and qualitative criteria (eg, management transparency, investor protection).
• KOSDAQ: listing requirements are less stringent, focusing on share distribution, financial performance and investor protection.
• KONEX: targeted at SMEs and venture companies, KONEX offers smaller-scale compliance and includes special exemptions for technology-rated or crowd-funded companies.

Requirements for Foreign Investors

Foreign investors are subject to specific requirements under the FSCMA. These requirements are as follows.

• Private off-market transactions – permitted for:
1. the acquisition of 10% or more in voting rights or if they confer board representation; or
2. the sale of shares totalling more than 10% or more in voting rights or conferring board representation.
• Public-purpose corporations – foreign ownership is limited as stipulated in the articles of incorporation, but in any event, to 40% of the total number of equity securities.
• Trading listed securities or derivatives – foreign investors must open a trading account and comply with transaction reporting requirements.

Foreign investors structured as investment funds are not subject to additional regulations beyond those applicable to other types of foreign investors.

South Korea operates a merger control regime and is considered one of the most rigorous jurisdictions in Asia for enforcing merger control regulations.

Reportable Transactions

The MRFTA, South Korea’s statutory source of antitrust/competition law enforced by the KFTC, mandates merger filing for the following types of transactions, provided they meet the applicable filing thresholds.

• Share acquisition: the acquisition of 20% or more of a target company’s voting shares (15% if the target is a listed company) triggers a filing requirement. A filing is also required if an entity already holding 20% (15% if the target is a listed company) acquires additional shares and becomes the largest shareholder.
• Business or asset transfer: acquiring or leasing all or a “significant portion” of another company’s business or operational fixed assets or taking over another company’s management. “Significant portion” refers to when:
1. a transferred or leased business segment either constitutes an independent operational unit or the business/asset transfer results in a substantial reduction in the transferor’s revenue; and
2. the transfer exceeds 10% of the transferor’s total assets as recorded on its balance sheet at the end of the previous fiscal year or KRW10 billion.
• Statutory merger: transactions where the absorbed entity ceases to exist after being integrated into the surviving company.
• Joint establishment of a new company: following the formation of a new JV, the largest shareholder is required to submit the merger filing.
• Interlocking directorate in large-scale companies: when the employee or officer of a large-scale company under the MRFTA holds a directorship in another company.

Filing Thresholds

Filing obligations under the MRFTA are triggered when either of the following thresholds are met.

• Size-of-party threshold: filing is required if:
1. one party to the transaction has sales or total assets of at least KRW300 billion and the other party has sales or total assets of at least KRW30 billion; and
2. both the acquirer and target are foreign companies, or the target is a foreign company, each of the foreign parties must have sales in Korea of at least KRW30 billion. It is worth noting that sales, total assets, and domestic revenue are calculated by aggregating the figures of the party to the transaction and its affiliates, both pre- and post-transaction.
• Size-of-transaction threshold: even if the above size-of-party thresholds are not met, filing is required if:
1. the transaction value exceeds KRW600 billion; and
2. the target is engaged in substantial business activities within the Korean market (commonly referred to as “small-scale business combinations”).

Timing of the Filing

Merger filings are generally required within 30 days after closing (post-closing filing). However, pre-closing filing is mandatory in the following situations.

• Where one party to the transaction qualifies as a large-scale company, with total assets or sales, including those of its affiliates, exceeding the KRW2 trillion threshold.
• Where the transactions at issue are deemed as small-scale business combinations.

In case of pre-closing filing, filings must be submitted prior to closing, and clearance must be obtained before the transaction is finalised.

In practice, foreign investment transactions often involve acquirers that qualify as large-scale companies and are therefore subject to mandatory pre-closing filing requirements. However, post-closing filing may be allowed in cases where share acquisitions occur through unforeseeable mechanisms, such as public tender offers, competitive trading in the securities market, enforcement of collateral rights and the like.

Exemptions From Merger Filing Obligations

The MRFTA provides explicit exemptions from merger filing requirements in the following cases.

• Statutory mergers or business transfers between a parent company and a subsidiary where the parent holds at least 50% of the subsidiary’s shares.
• Share acquisitions or the establishment of JVs involving venture capital firms, investment companies or start-ups established under relevant Korean laws.
• The joint establishment of a private equity fund (PEF) under the Capital Markets and Financial Investment Business Act.
• Interlocking directorships involving less than one-third of the total board members.
• Inter-affiliate mergers involving a target (on a standalone basis) with total assets or worldwide revenue of less than KRW30 billion.

In addition, while not explicitly stipulated, the following scenarios are interpreted under the MRFTA as not triggering a filing obligation.

• In share acquisitions, the shareholding percentage is calculated at the corporate group level. Therefore, when a target’s shares are transferred between affiliates, it is not considered a new acquisition, and no filing is required.
• When all parties participating in the establishment of a new company are affiliates, the transaction is not deemed a business combination, and no filing obligation arises.

In the case of the formation of a JV, factors such as whether the JV is full function, has autonomy, or operates within Korea do not impact the filing obligation. Even if the JV is established abroad and operates exclusively outside Korea, a filing obligation arises if the parent companies meet the filing thresholds under Korean law.

Timeframe

In Korea, merger filings can only be submitted after the transaction documents have been executed. However, parties may apply for a provisional merger review from the KFTC before execution of transaction documents. In addition, parties may also ask for pre-filing consultation to initiate formal discussion with the KFTC ahead of submitting a formal merger notification or an application of provisional merger review.

The review period officially begins once the filing is submitted. While the standard review period is 30 calendar days, the KFTC may extend it by up to 90 additional calendar days, for a total of 120 days. If the KFTC issues a request for information (RFI) during the review, the clock stops until the requested information is fully provided, often resulting in a longer overall review timeframe in practice.

The MRFTA prohibits mergers and acquisitions that substantially restrict competition in the relevant market. The criteria for conducting a competitive assessment are outlined in detail under the KFTC’s Merger Review Guidelines, which broadly classify mergers into three types: horizontal mergers; vertical mergers; and conglomerate mergers, with specific criteria provided for assessing the anti-competitive effects of each type.

Horizontal Mergers

In the case of horizontal mergers, the KFTC comprehensively evaluates factors such as market concentration before and after the merger, the potential for unilateral and co-ordinated effects, the extent of foreign competition and international competitive conditions, the likelihood of new market entry, and the presence of substitute or adjacent markets.

Vertical Mergers

For vertical mergers, the KFTC primarily evaluates the likelihood of foreclosure of supply or distribution channels for competitors of the merging parties, as well as the potential to block market entry by other businesses.

Conglomerate Mergers

For conglomerate mergers, the KFTC focuses on whether the merger reduces potential competition or results in the exclusion of rival businesses.

The Merger Review Guidelines also include special provisions for mergers in the digital sector.

• For mergers involving online platforms, network effects are considered as a factor in assessing anti-competitive concerns.
• For mergers involving data assets, the potential formation, strengthening, or maintenance of market dominance through the acquisition of data assets is taken into account.

Additionally, mitigating factors that may alleviate anti-competitive concerns include the presence of foreign competition, international market dynamics, the likelihood of new market entry, competitive pressure from neighbouring markets and buyers’ countervailing buying power.

Under the MRFTA, the KFTC has broad discretion to impose “necessary measures to remedy the violation” for mergers that restrict competition. This allows the KFTC to implement a wide range of remedies to address anti-competitive concerns. Types of remedies are broadly classified as structural remedies such as divestitures, and behavioural remedies such as limitations of price increases, supply obligations and/or non-discriminatory access to certain intellectual property.

The KFTC has the authority to block or prohibit mergers that are deemed to have anti-competitive effects. A company subject to prohibition orders may file an objection with the KFTC or appeal the decision in court.

Failing to file the required notification and closing the transaction without approval for a transaction requiring pre-merger notification or failing to file within 30 days after the closing date for a transaction requiring post-merger notification may result in a fine of up to KRW100 million.

However, if an unnotified transaction or premature closing is ultimately found to have no anti-competitive effects, the KFTC will limit its actions to imposing the fine and will not pursue additional corrective measures or financial sanctions.

Foreign Investment and National Security Review in South Korea

The FIPA regulates FDI exceeding KRW100 million or 10% ownership in a Korean company, or less than 10% ownership if it includes the right to appoint a director. These investments require notification to an authorised foreign exchange bank or KOTRA and registration of the Korean entity as a foreign-invested company, granting access to potential tax and other benefits.

The FIPA restricts FDI that could affect national security or public order. Under the 2022 Security Review Procedures, investments flagged for national security are reviewed by the MOTIE, with oversight from a specialised committee and the Foreign Investment Committee. Decisions on these investments follow a multi-tiered review process.

Furthermore, the Act on the Prevention of Divulgence and Protection of Industrial Technology mandates prior approval for M&A activities resulting in foreign acquisitions involving 50% or more of a company holding national core technology developed with government R&D support. Foreign acquisitions of other companies holding any national core technology must be reported in advance to the Minister of Trade, Industry and Energy.

Under the FIPA, foreign investment qualifies as FDI in South Korea in the following cases, regardless of its form (ie, partnerships, JVs, government-affiliated acquisitions, or non-controlling minority investments).

• Acquisition of 10% or more of voting shares in a Korean company.
• A long-term loan with a maturity of five years or more provided by an overseas parent company.
• Contribution exceeding 10% or KRW50 million to a non-profit organisation or corporation.
• Investment of retained earnings in the establishment or expansion of facilities.

However, under the Foreign Investment Security Review guidelines, the following cases require a security review assessing potential threats posed by foreign investors or governments, vulnerabilities of the target company, and the impact on national security.

• Acquisition of effective managerial control.
• Actions that disrupt the production of defence materials, involve technology or goods potentially diverted for military use, risk disclosure of state secrets, pose a serious threat to international peace and security efforts, or risk the leakage of national core or advanced strategic technology.

The Act on the Prevention of Divulgence and Protection of Industrial Technology mandates additional review for foreign investments in entities possessing national core technology, which is defined as technology whose foreign disclosure could significantly impact national security and economic stability. Criteria for requiring prior approval or notification include:

• acquiring 50% or more of shares, or less than 50% but becoming the largest shareholder with control over executive appointments or management decisions;
• leasing or acquiring the whole or a significant portion of the business with operational control; or
• providing funds or contributions with control over the appointment of a majority of the executive officers.

Under the FIPA, FDI filings do not generally involve specific remedies or commitments. For investments subject to the Foreign Investment Security Review, the MOTIE may prohibit, conditionally allow, or approve the investment, with immediate notification to the investor. The Regulations on Security Review Procedures do not mandate predefined remedies or commitments for conditional or denied investments, although investors may propose these measures and the authorities may consider them at their discretion.

Similarly, under the Act on the Prevention of Divulgence and Protection of Industrial Technology, foreign investors in transactions involving national core technologies may request a preliminary review from the MOTIE. However, remedies or commitments are not stipulated for cases where approval is denied.

In South Korea, FDI must generally be reported in advance, and failure to do so results in foreign exchange banks denying remittance approval, effectively blocking the investment. If a foreign investor proceeds without filing, they may face administrative fines or criminal penalties, and the MOTIE can issue corrective orders for non-compliance.

Under the Act on the Prevention of Divulgence and Protection of Industrial Technology, the MOTIE also holds the authority to suspend, prohibit or require reversal of overseas M&A if national security is at risk. This decision is made following consultation with relevant central administrative agencies and a committee review. Unauthorised investments involving national core technologies can lead to criminal penalties.

Regulatory Framework for Foreign Investment in South Korea

While South Korea encourages foreign investment across many sectors, key regulatory frameworks apply. Investments that do not fall under the scope of the FIPA are governed by the FETA. Under the FETA, foreign exchange transactions must be reported to the appropriate authority, such as the Ministry of Strategy and Finance, the Bank of Korea, or an authorised foreign exchange bank, depending on transaction structure and investment size.

Compliance with these reporting requirements is critical, as non-compliance may restrict remittance of foreign currency. In severe cases, significant unreported transactions may lead to criminal penalties, even for seemingly technical violations.

Sectoral Restrictions on Foreign Investment

South Korea’s foreign investment framework allows foreign participation in most sectors. However, certain industries impose limitations to protect national interests. Specific sectors are subject to varying degrees of regulatory oversight, depending on the industry’s sensitivity and strategic importance.

For example, under the regulations established pursuant to the FIPA, foreign investment is prohibited in the following sectors.

• Postal services, central banking, personal mutual aid services, pension services and financial market management services.
• Legislative, judicial, and administrative agencies and diplomatic missions in South Korea.
• Educational institutions (including preschools, primary and secondary schools, colleges, universities, postgraduate schools, and any other forms of schools).
• Artists, religious organisations, industrial or professional associations, environmental groups, political organisations, and labour unions.
• Nuclear power generation, radio broadcasting, and terrestrial broadcasting.

Under the regulations established pursuant to the FIPA, foreign investment is restricted in the following sectors.

• Livestock farming (beef cattle), meat wholesale, power transmission and distribution, electricity sales, domestic passenger and freight transport, air transportation, newspaper publication, and magazine or periodical publication (restricted to under 50%).
• Programme supply, cable broadcasting, satellite broadcasting, and other telecommunications (except value-added telecommunications, which have no foreign ownership restrictions) (restricted to under 49%).
• Hydroelectric, thermal, solar, wind, and other power generation (restricted to up to 30%).
• News services (restricted to less than 25%).
• Grain and other crop cultivation, basic inorganic chemical manufacturing, non-ferrous metal smelting and refining, radioactive waste collection, transport, and disposal, and domestic banking (excluding agricultural and fisheries co-operatives) (generally allowed but restricted with respect to limited scope of business).

These restrictions reflect South Korea’s commitment to balancing its open investment climate with safeguarding national interests and strategic industries.

Korean companies are subject to tax on their worldwide income, while foreign companies are only subject to tax in Korea on income sourced within Korea. A company is considered a Korean resident company if it has its head office, principal office or a place of effective management in Korea.

The corporate income tax is imposed at progressive marginal rates. The current rates are as follows:

• 9% on taxable income up to KRW200 million;
• 19% on income between KRW200 million and KRW20 billion;
• 21% on income between KRW20 billion and KRW300 billion; and
• 24% on income exceeding KRW300 billion.

A local income surtax, equivalent to 10% of the corporate income tax liability, is also imposed.

Under a government-submitted tax amendment bill, each rate is expected to increase by one percentage point for taxable years beginning on or after 1 January 2026 – ie, 10%, 20%, 22% and 25%, respectively.

Partnerships are exempt from tax at the partnership level, but each partner is subject to tax on income allocated from the partnership.

VAT is imposed on the supply of goods and services. The applicable VAT rate is generally 10%, but zero-rated VAT is available for exported goods and services rendered outside Korea and for certain services provided to a non-resident in a foreign currency. Certain goods and services including unprocessed food, medical and health services, and financial and insurance services are VAT exempt.

Acquisition tax is imposed in connection with the acquisition of certain properties, such as real estate, motor vehicles, construction equipment and golf memberships. The acquisition tax rate varies depending on the type of assets and ranges from 0.96% to 4.6% of the acquisition cost. However, the rate can be significantly higher for corporations acquiring residential properties or other real properties located in metropolitan areas.

Securities transaction tax is imposed on the transfer of shares. The securities transaction tax rate for publicly traded shares is currently 0.15% and the tax rate for unlisted shares is 0.35%. Under a government-submitted tax amendment bill, the tax rate for publicly traded shares is expected to increase to 0.2%.

In general, interest and dividends paid to a non-resident company or individual are subject to a 22% withholding tax (including local income tax). The rate may be reduced under applicable tax treaties. Many tax treaties provide a lower withholding tax rate for dividends received by shareholders whose shareholding exceeds the ownership percentage specified in the treaty.

The Korean tax authority takes a conservative position in relation to the application of reduced treaty rates, which can differ depending on the beneficial owner of the Korean source income. A beneficial owner is a person who bears legal or economic risk related to Korean source income and who, in substance, holds ownership rights over this income, including disposal rights.

In particular, the Korean tax authority tends to challenge the use of treaty countries by non-treaty country residents by aggressively applying the substance-over-form principle to argue that entities established in favourable treaty countries are not the beneficial owners of the relevant Korean source income.

“Step Up” of Depreciable Asset Basis

Depreciation and amortisation expenses are calculated based on the original acquisition cost, making any “step up” strategy impracticable.

“Earnings Stripping” With Intercompany Debt

Under Korea’s thin capitalisation rules, where amounts borrowed by a Korean company from a foreign controlling shareholder exceed a multiple of its equity (six times equity for financial institutions and two times equity for non-financial institutions), interest attributable to the excess borrowing is treated as a non-deductible deemed dividend paid by the Korean company to its foreign controlling shareholder. In addition, interest deduction is disallowed for net interest (interest paid less interest received) paid by a Korean company to a foreign-related party in excess of 30% of its adjusted net income (earnings before interest, taxes, depreciation, and amortisation) (30% deduction limitation rule).

Cross-Licensing or Similar Arrangements

Korean tax law does not have specific regulations regarding cross-licensing. However, if taxpayers use cross-licensing or similar arrangements to avoid taxation in Korea, the Korean tax authority can impose tax by applying the substance-over-form principle. For example, if a Korean company holding a patent enters into a cross-licence agreement with a foreign-related party that does not hold a patent, the Korean tax authority may impose tax on the Korean company on the basis that the Korean company’s royalty income was intentionally reduced.

Use of Net Operating Losses

Tax losses can be carried forward for 15 years, although annual utilisation is capped at 80% of annual taxable income (with an exception granted for SMEs and distressed companies).

Consolidation Tax System

Consolidation is available for a Korean parent company and its directly or indirectly owned Korean subsidiaries, provided that the parent company owns 90% or more of the subsidiaries. A taxpayer may elect the consolidated tax filing regime upon approval from the tax authority, but such election cannot be revoked for five years.

Capital gains derived by non-residents from the sale of shares in Korean companies or Korean real estate (including the sale of shares in real estate rich companies) are either exempt from Korean tax under an applicable tax treaty or subject to withholding tax at 11% of the sale proceeds or 22% of the capital gains, whichever is lower. The purchaser is obliged to collect and pay the tax.

Under many tax treaties, capital gains from the sale of Korean company shares are not taxed in Korea. However, controlling shareholders (with ownership percentage conditions varying by tax treaty) are often taxed in Korea when they sell Korean shares. Unlike capital gains from the sale of shares, capital gains from the sale of Korean real estate (and shares of real estate rich companies) are generally subject to tax in Korea under most tax treaties.

Foreign investors can invest in a Korean partnership through a “blocker” corporation to avoid being directly taxed on partnership income (ie, the foreign investors become shareholders of the “blocker” corporation and the “blocker” corporation becomes a partner of the partnership). In this case, it is the “blocker” corporation and not the foreign investors that is taxed in Korea on the income derived by the partnership. When the Korean “blocker” corporation repatriates accumulated profits to its shareholders (ie, the foreign investors), dividend withholding tax is imposed (the tax rate may be reduced by applicable tax treaties).

The Korean tax authority closely monitors companies whose profitability suddenly drops or whose profits fluctuate over a number of years. The Korean tax authority is likely to scrutinise companies that have had significant business restructuring, as well as those paying substantial royalties or management service fees to foreign companies and companies with financial transactions with foreign-related parties.

Korea is a member of the OECD and generally follows the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations (the “OECD Guidelines”). However, the OECD Guidelines do not have the force of law, while the Law for the Co-ordination of International Tax Affairs (which governs transfer pricing in Korea) does. Accordingly, the Korean tax authority might not accept a taxpayer’s arguments if they are based solely on the OECD Guidelines.

Deduction is limited for interest paid on hybrid instruments that are treated as debt in Korea but treated as equity in a foreign country.

A Korean entity that is classified as a tax transparent entity in Korea but is considered a corporation in the counterpart country is not subject to a separate anti-hybrid rule in Korea. In other words, there is no anti-hybrid rule in Korea. However, if a Korean corporation invests in a foreign entity that is tax transparent in its country of residence but is opaque under Korean tax law (a reverse hybrid entity), the Korean entity can elect to treat that foreign entity as tax transparent for Korean tax purposes. This special rule is considered a countermeasure to the anti-hybrid rules in other countries.

Employment relationships in Korea are broadly governed by the Labour Standards Act (LSA), which prescribes various minimum terms and conditions of work, including allowances and benefits, which supersede any provisions of employment contracts, rules of employment (employee handbook) or collective bargaining agreements (CBAs) that may be less favourable to employees. There are other labour-related laws that govern the terms and conditions of work, such as the Retirement Benefits Act, the Minimum Wage Act and the Gender Equality Employment Act.

In principle, most of the provisions of the LSA and other labour-related laws (including the requirement to have “just cause” for termination, work hours, wages, overtime/nighttime/holiday work allowances and public holidays) are applicable to any employer, including foreign companies, that continuously employ five or more employees in any workplace located in Korea. However, breaks, weekly holidays, maternity/paternity/parental leave, severance pay and social insurance also apply to employers employing fewer than five employees.

Depending on the types/periods employees are employed under, other statutes may be relevant, such as the Act on the Protection of Temporary and Part-time Workers and the Protection of Dispatched Workers and Foreign Workers Act.

Labour unions, collective bargaining, CBAs and other aspects of collective labour-management relations are subject to the Labour Union and Labour Relations Adjustment Act, which regulates labour union activities and dispute resolution, and the Act on the Promotion of Employee Participation and Co-Operation which regulates labour-management councils and grievance procedures.

According to the Minimum Wage Act, employers are required to pay employees at least the minimum wage determined each year by the Minimum Wage Council. The minimum wage in 2025 is KRW10,030 per hour and will increase to KRW10,320 per hour in 2026. As long as the wage of an employee is above the minimum wage, the amount of the wage will typically be determined by contract.

Employers are required to pay employees severance pay upon retirement if the employee has been continuously employed for one year or longer. Employees who are eligible for severance pay are entitled to receive 30 days’ average wages for each year of continuous employment, upon separation from the employer (regardless of whether the separation is voluntary or involuntary). Severance pay must generally be paid within 14 days after the date of separation. As an alternative to the severance pay system, an employer may establish a retirement pension system. Fixed payment type (ie, defined-benefit pension plan) and fixed contribution type (ie, defined-contribution pension plan) are available.

For work performed beyond the regular work hours, the employer must pay an additional 50% of ordinary wages as an overtime allowance on top of ordinary wages. A 50% uplift of ordinary wages also applies to any work done between 10pm and 6am, which is classified as night work under the LSA. For work during a holiday, the employer must pay an additional 50% of ordinary wages for up to eight hours of work per day and 100% of ordinary wages for work exceeding eight hours per day. Night work, overtime work and holiday work allowances are cumulative, not mutually exclusive, and the employer must pay each additional allowance to its employees as applicable.

Equity-linked compensation such as stock options and phantom stock may be granted by certain employers in the market.

Under Korean law, the consent of individual employees is required in principle when an employer intends to have them transferred to a separate legal entity, and it would not be possible to pursue a transfer of employment relationship against the employee’s will, provided that:

• in a change of control transaction of an employer unless the CBA provides otherwise, the employee’s consent is not required; and
• in the transfer of a business, the employees of the business are automatically transferred unless individual employees decide to opt out.

When the employees are transferred to another legal entity, the terms and conditions of employment should remain the same, and, therefore, consent of an individual employee is required if the terms and conditions set out in the individual employment agreement need to be changed unfavourably (from the employee’s perspective) and the consent of a majority of the transferred employees is required if the terms and conditions set out in the rules of employment need to be changed unfavourably (from the employees’ perspective).

In addition, if there is a CBA that states pre-consultation or consent of the labour union in regard to acquisition, change of control or other similar transaction is required, the employer’s obligations under the CBA must be observed.

The ITPA restricts foreign acquisitions involving certain technologies designated as national core technologies. Specifically, if a foreign investor seeks to acquire 50% or more of shares or effective control of a Korean company or its business holding a national core technology, prior approval or reporting to the MOTIE is required. See 7. Foreign Investment/National Security.

South Korea is generally considered to provide strong intellectual property protections by offering various venues for IP enforcement and adequate remedies/sanctions.

For venues, IP owners can file a lawsuit before judicial courts and also seek to initiate a KFTC investigation for cases involving IP infringement allegations. Additionally, IP infringement can be subject to criminal liability.

In terms of remedies and sanctions, civil remedies, administrative sanctions and criminal sanctions are available. Civil remedies include equitable reliefs (eg, injunctions, destruction of infringing products and/or facilities used for the manufacture thereof) and monetary damages, which can be enhanced in the case of wilful infringement (up to five times for patents, trade marks and trade secrets). Administrative sanctions can include export bans and administrative penalties. Criminal sanctions include imprisonment and criminal fines.

However, certain limitations and exceptions may apply in the protection of IP as follows.

• AI-generated inventions are not patentable and AI-generated works of authorship without human input are not copyrightable.
• Methods of treatment, diagnosis and prophylaxis of humans are ineligible for patent protection.
• The Korean government has the compulsory licensing power in certain circumstances (eg, state of emergency) although this power has not been exercised to date.

In South Korea, data protection is primarily regulated by the Personal Information Protection Act (PIPA). The Credit Information Use and Protection Act (the “Credit Information Act”) can take precedence over the PIPA with respect to financial companies’ processing of credit information. Credit information is defined under the law as “the information necessary to assess the creditworthiness of a counterparty in financial or commercial transactions”, that is combined with information that can identify a specific credit information subject. The Act on Promotion of Information and Communications Network Utilisation and Information Protection (the “Network Act”) also oversees IT service network security, covering nearly all online services and measures for spam prevention.

Role and Authority of the Data Protection Agencies

The Personal Information Protection Commission (PIPC) oversees and enforces the PIPA. The Financial Supervisory Service (FSS) oversees and enforces the Credit Information Act, and the KCC and the Ministry of Science and ICT (MSIT) oversee matters under the Network Act. The PIPC covers general data protection issues under the PIPA. The PIPC has enforcement authority, including issuing corrective orders and/or imposing administrative fines in the event of violations. The Korea Internet & Security Agency (KISA) also conducts on-site inspections and preliminary investigations of data protection compliance and security incidents based on the authority delegated by the PIPC, KCC and/or MSIT.

Key Characteristics of the PIPA

Under the PIPA, a data controller must be equipped with legal grounds to process the data subject’s personal information, with “consent” being the most fundamental legal basis. A data controller must obtain explicit and specific consent from each data subject before processing their personal information, following an explanation of essential details such as the purpose of processing, specific items processed and retention period.

When transferring personal information to third parties, it is important to distinguish between:

• provision of personal data to third parties; and
• entrustment of the processing of personal data to third parties.

A provision occurs when the personal data is transferred from a data controller (transferor) to a third-party recipient (transferee) for the benefit and business purpose of the third-party recipient, beyond the original purposes of collecting and using personal data. In contrast, the entrustment of processing is when personal data is transferred from a data controller (entrustor) to a third-party processor (entrustee) for the benefit and business purpose of the data controller. While the provision of personal data to a third party requires the data subject’s consent, as a general rule, entrustment does not require separate consent, as long as the necessary information is disclosed in the privacy policy of the data controller.

Key Developments Under the Amended PIPA

The PIPA was significantly amended in March 2023, and those amendments came into effect in September 2023. Thereafter, the PIPC issued an Enforcement Decree, detailing specific aspects of the revisions as well as providing various guidelines to clarify the obligations and interpretation of the updated PIPA. Some of the key developments are as follows.

Voluntary consent

Under the amended PIPA, personal data necessary for executing a contract can be collected and used without prior consent from the data subject (previously, an exception based on contractual necessity was very limited). At the same time, the principle of voluntary consent has been reinforced, which requires data controllers to clearly differentiate between mandatory and optional consent items. Data controllers must ensure that optional consent items are not included in the mandatory consent section, as doing so could constitute a breach of the voluntary consent principle.

Mobile visual data processing devices

Article 25-2 of the amended PIPA establishes a legal basis for recording videos of identifiable individuals (personal visual data) in public spaces for business purposes using mobile visual data processing devices, such as autonomous vehicles, robots, drones and body cameras (collectively, mobile visual devices). The PIPC also announced the release of the Guideline on the Protection and Use of Personal Visual Data for Mobile Visual Data Processing Devices. The guideline was issued to address regulatory uncertainties related to the above provisions, promote the safe use of mobile visual devices and support the development of related industries and technologies.

Strengthened qualifications for chief privacy officers (CPOs)

Under the amended PIPA, CPOs of data controllers exceeding specified thresholds must possess a minimum of four years of professional experience in data privacy and security.

Cross-border transfer mechanisms

Article 28-8 of the amended PIPA introduced PIPC’s adequacy decision as a legal basis for the overseas data transfer from Korea. On 16 September 2025, the EU became the first jurisdiction to receive the PIPC’s adequacy decision.

PIPC guideline on the use of publicly available data to develop AI

In July 2024, the PIPC announced the release of a Guideline on Handling Publicly Available Personal Information for AI Development and Services. This guideline explains the legal basis (in particular, legitimate interest) for collecting and utilising publicly available personal information for the development of AI technologies and services and provides businesses with guidance on implementing appropriate safeguards throughout the stages of AI development and service deployment.

PIPC guideline on the processing of personal information for generative AI

In August 2025, the PIPC announced the release of a Guideline on the Processing of Personal Information for the Development and Utilisation of Generative AI. The guideline classifies the stages of developing and utilising generative AI into four phases – (i) goal setting, (ii) strategy formulation, (iii) AI training and development, and (iv) system implementation and management – and presents considerations that businesses developing or utilising generative AI should take into account at each stage to ensure the protection of personal information.

Extraterritorial Scope of the PIPA

In April 2024, the PIPC issued the Guideline on Foreign Companies’ Compliance, clarifying that service providers actively and significantly targeting Korean users demonstrated by factors such as a Korean-language website or a sizeable Korean user base (establishing a nexus to the Korean market) are subject to the PIPA and must comply with its consent and other regulatory requirements.

Under the PIPA, offshore data controllers lacking a business presence in Korea must also appoint a local representative for data compliance and regulatory oversight purposes if they meet any of several thresholds of scale in revenue or local users, such as by reaching KRW1 trillion in total revenue or one million Korean data subjects.