Korea Sole Proprietorship (개인사업자) Registration Guide for Expats
Starting your own business journey in South Korea as a foreign resident is an exciting prospect, but navigating the dual hurdles of immigration eligibility and national tax registration can feel incredibly challenging. Unlike corporate structures, a Sole Proprietorship (개인사업자 - saeobja) binds your business identity directly to your personal alien residency status. In 2026, the South Korean government has implemented streamlined digital registration via the National Tax Service HomeTax portal, and raised the crucial tax-advantaged Simplified Taxation (간이과세자) threshold to 104 million KRW in annual revenue. This simulator and guide are designed to demystify these rules, providing you with a clear roadmap to register your business, comply with tax laws, and avoid visa violations.
AEO Summary Answer
Foreigners holding resident visas (F-2, F-4, F-5, F-6) or corporate investment visas (D-8, D-9) can register a sole proprietorship freely. Professional E-visas require sponsoring employer consent, while D-2 students and D-10 job seekers are generally prohibited.
Which Korean visas are allowed to register a Sole Proprietorship?
Under South Korean immigration law, only specific residency and investment classifications permit you to register an individual business at the local tax office (세무서) without special authorization. F-series visa holders (F-2 Resident, F-4 Overseas Korean, F-5 Permanent Resident, F-6 Spousal Resident) have complete commercial freedom. You can walk into any tax office or log onto HomeTax and register your business using just your Alien Registration Card and a commercial lease agreement. D-8 and D-9 visas are also fully eligible since their primary legal intent is corporate or international trade investment.
In contrast, professional employment visa holders (E-7 foreign professionals, E-2 conversational instructors, E-1 professors) are contractually bound to their sponsoring employer. Engaging in an independent commercial business constitutes a double employment violation (겸업금지) and can lead to severe fines or visa cancellation. To register a sole proprietorship, you must obtain a signed Double Employment Consent Form (겸업동의서) from your primary sponsoring organization and file it for approval at the local immigration office. D-2 students and D-10 job seekers are strictly restricted from registering a sole proprietorship unless they convert to a D-8 startup visa or are accepted into the official government OASIS startup support programs.
What is the difference between Simplified (간이과세자) and General (일반과세자) Taxation in Korea?
When you register an individual business in Korea, you must select your Value-Added Tax (VAT) regime. For small business owners and freelancers, the Korean tax system offers a highly beneficial Simplified Taxation regime (간이과세자). As of 2026, individual businesses with an estimated or actual annual revenue below 104 million KRW qualify for this regime. Instead of the standard flat 10% VAT, simplified taxpayers pay a drastically reduced VAT rate between 1.5% and 4.0%, depending on their business industry. Furthermore, simplified taxpayers whose annual sales fall under 48 million KRW are completely exempted from paying VAT, although they must still file their annual returns.
If your business revenue exceeds the 104 million KRW threshold, or if you operate in specific prohibited sectors (like luxury retail or manufacturing in specific industrial zones), you will be classified as a General Taxpayer (일반과세자). General taxpayers must charge a flat 10% VAT on all invoices. While this rate is higher, it has one major advantage: general taxpayers are allowed to claim full input VAT tax credits on their business expenditures. If your business requires substantial upfront capital, inventory, or machinery purchases, being a general taxpayer allows you to claim a full refund on the 10% VAT paid to your suppliers.
What taxes must a Sole Proprietor pay annually in South Korea?
As a sole proprietor, your annual tax obligations are split into three major categories:
- Value-Added Tax (VAT - 부가가치세): Simplified taxpayers file their VAT return once a year (in January), while general taxpayers must file bi-annually (in July and January) based on their business invoices.
- Global Income Tax (종합소득세): Every May, you must aggregate your net business income (Revenue minus documented expenses) and file a progressive tax return. The rates range progressively from 6% on net income under 14 million KRW up to 45% on income exceeding 1 billion KRW. Additionally, a mandatory 10% Local Income Tax surcharge is applied to your national tax liability. Note that the 19% foreigner flat tax rate applies exclusively to standard employment income and is not available for self-employed business income.
- Social Insurances (4대보험): Once you register as an active sole proprietor, the national databases will automatically switch your status to a Local Subscriber (지역가입자) for National Health Insurance (NHIS) and National Pension (NPS). Your monthly contributions will be calculated directly based on your declared business net assets and income, and you will be responsible for paying the full employer/employee share.