Q: My family has precision tool business in the UK and I wish to have an affiliate in Korea. What is best way to form?
Subsidiary or Branch?
ANSWER:
If you wish to set up a legal entity that is rooted (or funded) from the parent company, you have two options. Subsidiary and Branch
Differences:
A branch office is not a separate legal entity of the parent corporation. This structure generally subjects the parent corporation to taxation on its entire corporate income, and this structure does not shield the parent corporation from liability incurred at the branch level.
A subsidiary is a separate legal entity from the parent, although owned by the parent corporation. When the subsidiary’s retained earning wants to be paid back to the parent company (at the time of repatriation) divident income tax shall be paid, which is different with branch office
•Similarities: Korean tax rates are same for both entities (10% for the tax basis below 200m KRW and 20% when the tax basis is above 200m KRW. And both entity can run business (different from liason office, both can generate profit in Korea)
