[Korean lawyer] What are the types of FDI in Korea?
Attorney Ella will introduce the different types of FDI today.
What is FDI?
Foreign Direct Investment (외국인직접투자) is an investment made by an entity (법인) or individual (개인) in one country into business interests located in another country.
Four different types of FDI
1. Acquisition of stocks or shares of a domestic company
(국내기업의 주식 또는 지분의 취득)
▶ Stocks or shares are managed by a Korean corporation or a Korean National. These could be the ones that is newly issued or the ones that already existed.
2. Long-term loan (장기차관)
▶ A loan with a maturity of not less than five years which is provided to a foreign-capital invested company by any of the following entities;
○ Overseas parent company of the foreign invested company
○ A company with a capital investment relation with the overseas parent
company or a foreign investor
○ A company that has a capital investment relationship with the foreign
★ Loan maturity must be not less than five years based on the loan maturity prescribed in the first loan contract.
3. Reinvestment of Unappropriated Earned Surplus
▶ An investment of foreign-invested company's unappropriated earned surplus for such purpose including new or additional factory.
★ From Aug. 5, 2020, the foreign-invested company shall be deemed as a foreigner and the invested amount shall be calculated by multiplying the investment ratio.
4. Contribution to a Non-Profit Organization (NPO), company, or corporations
(비영리법인에 대한 출연)
▶ A contribution to a NPO or companies is recognized as FDI where the foreign contribution amount is at least KRW 50 million and accounts for 10 percent or more of the total amount and where all of conditions prescribed by article 2 ENFORCEMENT DECREE OF THE FOREIGN INVESTMENT PROMOTION ACT are met.
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