India Market Entry for Korean Companies

Korean manufacturers, especially in automotive, electronics and appliances, are major investors in India, and they bring supplier ecosystems with them. A Korean parent usually wants speed, a factory-ready location, and a structure that works for both the group and its Korean suppliers following it to India. The India-Korea Comprehensive Economic Partnership Agreement, in force since 2010, covers trade and investment between the two countries.

Treaty and withholding

India and Korea signed a new double taxation treaty that took effect in 2016. It reduces withholding tax on dividends, interest, royalties and technical fees paid to a Korean resident, but the rates depend on the holding and the payment, so confirm them in the treaty text before relying on any figure.

India and Korea signed a new double taxation treaty that took effect in 2016. It reduces India's withholding tax on dividends, interest, royalties and fees for technical services paid to a Korean resident, and it changed how capital gains on shares are taxed. The rates depend on the size of the shareholding and the type of payment, and the sources we checked did not agree on every rate. Confirm the current rates in the treaty text and in Indian notifications before applying one. Treaty rates are available only with a Korean Tax Residency Certificate, Form 10F, beneficial ownership and clearance of India's anti-avoidance tests. India's default rate for dividends, royalties and technical fees to non-residents is 20 per cent before surcharge and cess.

Setting up fast, including in an SEZ

Korean manufacturers often locate in a special economic zone or industrial park in a state with strong auto or electronics clusters. We incorporated a Korean manufacturer's SEZ unit in 40 days using a power of attorney, and SEZ units have their own approval, customs and reporting rules.

Korean manufacturers often locate in a special economic zone or an industrial park in a state with strong auto or electronics clusters. We incorporated a Korean manufacturer's SEZ unit in India in 40 days using a power of attorney. Read the case study: Korean company SEZ unit in India, set up in 40 days. SEZ units have their own approval, customs and reporting rules, which our customs and trade compliance team handles together with incorporation.

Structuring and reporting

Most Korean groups use a wholly owned or majority-owned private limited company, with the equity inflow reported to the Reserve Bank of India within 30 days of allotment. Licence and management fee payments to the Korean parent need transfer pricing documentation, and supplier entities should be planned at the same time.

Most Korean groups use a wholly-owned or majority-owned Private Limited company. Equity inflows are reported on Form FC-GPR within 30 days of allotment, and the entity needs two directors, one resident in India. Technology and brand licence payments to the Korean parent, and charges for management services, need transfer pricing documentation. If your Korean suppliers will follow you, plan their entities and intercompany pricing at the same time, not one by one.

Frequently asked questions

Can a Korean company set up an Indian subsidiary without travelling? Often, yes. Incorporation can be handled through a power of attorney, as in the case study above, though some documents still need the foreign directors' signatures or legalisation.

Do manufacturing units in an SEZ pay Indian customs duty? SEZ units get duty exemptions on goods imported for authorised operations, subject to conditions and to duty when goods enter the domestic market. Terms depend on the unit's approval.

What changed in the 2016 Korea treaty? Besides the rates, it changed the tax treatment of capital gains on shares, so exit planning for Korean investors should check the current treaty text.

How do we hire before the factory is ready? An Employer of Record can employ your first managers and engineers while the entity is built.