Bookkeeping and payroll for foreign companies
The accounts of a foreign company in Korea have to satisfy two masters: Korean filing deadlines and documentation rules, and the reporting format and close that head office requires. Where the two do not line up, time leaks away at the same point every month. We run bookkeeping, filings, payroll and the social insurances as a single flow.
Who this is for
- Foreign-owned companies with a Korean entity or branch but no room for in-house accounting staff
- Finance staff worn down by reconciling head-office reporting formats with Korean filings twice a month
- Companies that have just hired foreign employees and now face payroll and social insurance processing
- Companies that have missed a VAT preliminary or final return, or a corporate tax deadline
- Companies with no system for collecting vouchers, and therefore exposed to disallowance on audit
- Companies changing bookkeeping providers and worried about losing records in the handover
Monthly bookkeeping — the rules for collecting vouchers decide the tax
Bookkeeping is not transcribing numbers; it is recording transactions in a form you can later explain. Expenses are disallowed on audit not usually because the transaction did not happen but because there is nothing to explain it with. Foreign companies in particular carry many transactions that do not fit the standard Korean voucher pattern — head-office invoices, overseas card payments, foreign-currency remittances — so the rules have to be set in advance. We give you an account-by-account list of which voucher to obtain and when, and each month-end we tell you what is missing against that list. The Commissioner periodically analyses compliance using assessment data, tax information and accounting-integrity material such as external audit opinions, and indications of non-compliance can lead to selection for a regular audit. The quality of this month’s bookkeeping is what lowers audit risk several years out.
VAT — the 25th, four times a year
VAT splits into preliminary and final returns. The preliminary periods run 1 January to 31 March and 1 July to 30 September, each filed and paid within 25 days after the period ends. The final return is due within 25 days after each taxable period ends, and by the 25th of the month following closure where the business closes. Two points most often go wrong at foreign companies: zero-rating and input tax credits. Applying zero-rating to exports or services supplied abroad requires evidence that the conditions are met, and how much input tax on costs recharged to the parent is creditable depends on the character of the transaction. We classify revenue first into zero-rated, taxable and exempt, then rule on creditability purchase by purchase and carry that into the books.
Corporate tax close — work back from three months after year-end
Corporate tax is due within three months from the last day of the month in which the fiscal year ends, at 10% up to a base of KRW 200m, 20% over 200m to 20bn, 22% over 20bn to 300bn and 25% above 300bn. Companies on a parent’s non-December year-end frequently misread that starting point. A close begun just before the deadline is always short of time. We pull a list of open items two months before year-end, clear inventory, receivables, accruals and intercompany balances first, and flag the likely tax adjustment issues so head-office reporting and the Korean return carry the same numbers.
Payroll and social insurance — foreign staff add one more rule
Payroll is less about calculation than about managing entitlements. Every hire and leaver brings an acquisition or loss filing across the four insurances, and an omission comes back later as retroactive contributions. Foreign employees add a further rule. The National Pension Act makes a foreign national employed at a covered workplace or residing in Korea a compulsory subscriber as a matter of course, but applies a reciprocity proviso: it does not apply where the foreign national’s home country does not extend its corresponding pension scheme to Korean nationals. Coverage can therefore turn on nationality. For health insurance, an overseas Korean or foreign national staying in Korea becomes an employee subscriber where they are an employee of a covered workplace and are registered as a resident, have reported a domestic place of residence, or have completed alien registration under the Immigration Act; statutory exclusions, such as an opt-out for equivalent foreign medical coverage, are checked separately. We check nationality, visa status and registration at the point of hiring to determine coverage, and handle payroll calculation, withholding and year-end settlement together.
Documents to prepare
- Corporate registry extract, business registration certificate, corporate seal certificate
- Prior-year financial statements and corporate tax return, and recent VAT returns
- General ledger and trial balance from the existing accounting system, for handover
- Bank statements, corporate card records and evidence of foreign-currency remittances
- Employee register — nationality, visa status, start date — employment contracts and payroll records
- History of acquisition and loss filings across the four insurances, and the workplace management number
How we work
Handover and diagnosis
We take over the existing books and returns and identify open items and gaps in documentation first.
Set the rules
We fix the voucher list by account and the monthly close calendar, aligned to head-office reporting.
Monthly and quarterly run
We run bookkeeping, payroll and social insurance, and the VAT preliminary and final returns, on schedule.
Annual close
Two months before year-end we clear open items, then align the corporate tax return with head-office reporting.
Frequently asked questions
How many VAT returns are there in a year?
Preliminary and final. The preliminary return is filed and paid within 25 days after the preliminary period ends — 1 January to 31 March, and 1 July to 30 September (VAT Act, Article 48(1)) — and the final return within 25 days after each taxable period ends (Article 49(1)). On closure, the final return is due by the 25th of the month following the date of closure.
Our parent’s year-end is 30 June — when is corporate tax due?
Within three months from the last day of the month in which the fiscal year ends (Corporate Tax Act, Article 60(1)). For a 30 June year-end the clock runs from the end of June. It is four months where a compliance confirmation report is filed.
Do foreign employees have to join the national pension?
As a rule, yes. But Article 126(1) of the National Pension Act contains a reciprocity proviso: it does not apply where the employee’s home country does not extend its corresponding pension scheme to Korean nationals, so the outcome can depend on nationality. We check nationality and visa status at the point of hiring.
What about health insurance for foreign employees?
An overseas Korean or foreign national staying in Korea becomes an employee subscriber where they are an employee of a covered workplace and are registered as a resident, have reported a domestic place of residence under the Act on the Immigration and Legal Status of Overseas Koreans, or have completed alien registration under the Immigration Act (National Health Insurance Act, Article 109(2)). Statutory exclusions, including an opt-out for equivalent foreign medical coverage, are checked separately (Article 109(5)).
We worry about losing records if we change bookkeepers.
At handover we take the general ledger, trial balance and recent returns together, reconcile the balances and produce a list of open items. We confirm that the figures connect across the handover against that list before starting regular bookkeeping.
One office for your cross-border tax questions
Foreign-corporation tax, cross-border inheritance and gifts, Korea–U.S. income tax — we explain exactly how your own case is treated. Please get in touch.