Doing Business 2020 Korea, Rep. Economy Profile Korea, Rep. Page 1 Doing Business 2020 Korea, Rep. Economy Profile of Korea, Rep. Doing Business 2020 Indicators (in order of appearance in the document) Starting a business Procedures, time, cost and paid-in minimum capital to start a limited liability company Dealing with construction permits Procedures, time and cost to complete all formalities to build a warehouse and the quality control and safety mechanisms in the construction permitting system Getting electricity Procedures, time and cost to get connected to the electrical grid, and the reliability of the electricity supply and the transparency of tariffs Registering property Procedures, time and cost to transfer a property and the quality of the land administration system Getting credit Movable collateral laws and credit information systems Protecting minority investors Minority shareholders’ rights in related-party transactions and in corporate governance Paying taxes Payments, time, total tax and contribution rate for a firm to comply with all tax regulations as well as postfiling processes Trading across borders Time and cost to export the product of comparative advantage and import auto parts Enforcing contracts Time and cost to resolve a commercial dispute and the quality of judicial processes Resolving insolvency Time, cost, outcome and recovery rate for a commercial insolvency and the strength of the legal framework for insolvency Employing workers Flexibility in employment regulation and redundancy cost Page 2 Doing Business 2020 Korea, Rep. About Doing Business The Doing Business project provides objective measures of business regulations and their enforcement across 190 economies and selected cities at the subnational and regional level. The Doing Business project, launched in 2002, looks at domestic small and medium-size companies and measures the regulations applying to them through their life cycle. Doing Business captures several important dimensions of the regulatory environment as it applies to local firms. It provides quantitative indicators on regulation for starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency. Doing Business also measures features of employing workers. Although Doing Business does not present rankings of economies on the employing workers indicators or include the topic in the aggregate ease of doing business score or ranking on the ease of doing business, it does present the data for these indicators. By gathering and analyzing comprehensive quantitative data to compare business regulation environments across economies and over time, Doing Business encourages economies to compete towards more efficient regulation; offers measurable benchmarks for reform; and serves as a resource for academics, journalists, private sector researchers and others interested in the business climate of each economy. In addition, Doing Business offers detailed subnational studies, which exhaustively cover business regulation and reform in different cities and regions within a nation. These studies provide data on the ease of doing business, rank each location, and recommend reforms to improve performance in each of the indicator areas. Selected cities can compare their business regulations with other cities in the economy or region and with the 190 economies that Doing Business has ranked. The first Doing Business study, published in 2003, covered 5 indicator sets and 133 economies. This year’s study covers 11 indicator sets and 190 economies. Most indicator sets refer to a case scenario in the largest business city of each economy, except for 11 economies that have a population of more than 100 million as of 2013 (Bangladesh, Brazil, China, India, Indonesia, Japan, Mexico, Nigeria, Pakistan, the Russian Federation and the United States) where Doing Business also collected data for the second largest business city. The data for these 11 economies are a population-weighted average for the 2 largest business cities. The project has benefited from feedback from governments, academics, practitioners and reviewers. The initial goal remains: to provide an objective basis for understanding and improving the regulatory environment for business around the world. To learn more about Doing Business please visit doingbusiness.org Page 3 Doing Business 2020 Korea, Rep. Ease of Doing Business in DB RANK DB SCORE Region OECD high income Korea, Rep. Income Category High income 5 Population 51,635,256 84.0 City Covered Seoul Rankings on Doing Business topics - Korea, Rep. 2 2 12 11 25 21 33 36 40 67 Starting Dealing Getting Registering Getting Protecting Paying Trading Enforcing Resolving a with Electricity Property Credit Minority Taxes across Contracts Insolvency Business Construction Investors Borders Permits Topic Scores 93.4 84.4 99.9 76.3 65.0 74.0 87.4 92.5 84.1 82.9 Starting a Business (rank) 33 Getting Credit (rank) 67 Trading across Borders (rank) 36 Score of starting a business (0-100) 93.4 Score of getting credit (0-100) 65.0 Score of trading across borders (0-100) 92.5 Procedures (number) 3 Strength of legal rights index (0-12) 5 Time to export Time (days) 8 Depth of credit information index (0-8) 8 Documentary compliance (hours) 1 Cost (number) 14.6 Credit registry coverage (% of adults) 68.2 Border compliance (hours) 13 Paid-in min. capital (% of income per capita) 0.0 Credit bureau coverage (% of adults) 100.0 Cost to export Documentary compliance (USD) 11 Dealing with Construction Permits (rank) 12 Protecting Minority Investors (rank) 25 Border compliance (USD) 185 Score of dealing with construction permits (0-100) 84.4 Score of protecting minority investors (0-100) 74.0 Time to export Procedures (number) 10 Extent of disclosure index (0-10) 8.0 Documentary compliance (hours) 1 Time (days) 27.5 Extent of director liability index (0-10) 6.0 Border compliance (hours) 6 Cost (% of warehouse value) 4.4 Ease of shareholder suits index (0-10) 8.0 Cost to export Building quality control index (0-15) 12.0 Extent of shareholder rights index (0-6) 4.0 Documentary compliance (USD) 27 Extent of ownership and control index (0-7) 5.0 Border compliance (USD) 315 Getting Electricity (rank) 2 Extent of corporate transparency index (0-7) 6.0 Score of getting electricity (0-100) 99.9 Enforcing Contracts (rank) 2 Procedures (number) 3 Paying Taxes (rank) 21 Score of enforcing contracts (0-100) 84.1 Time (days) 13 Score of paying taxes (0-100) 87.4 Time (days) 290 Cost (% of income per capita) 34.3 Payments (number per year) 12 Cost (% of claim value) 12.7 Reliability of supply and transparency of tariff index (0-8) 8 Time (hours per year) 174 Quality of judicial processes index (0-18) 14.5 Total tax and contribution rate (% of profit) 33.2 Registering Property (rank) 40 Postfiling index (0-100) 93.9 Resolving Insolvency (rank) 11 Score of registering property (0-100) 76.3 Score of resolving insolvency (0-100) 82.9 Procedures (number) 7 Recovery rate (cents on the dollar) 84.3 Time (days) 5.5 Time (years) 1.5 Cost (% of property value) 5.1 Cost (% of estate) 3.5 Quality of the land administration index (0-30) 27.5 Outcome (0 as piecemeal sale and 1 as going 1 concern) Strength of insolvency framework index (0-16) 12.0 Page 4 Doing Business 2020 Korea, Rep. Starting a Business This topic measures the number of procedures, time, cost and paid-in minimum capital requirement for a small- to medium-sized limited liability company to start up and formally operate in each economy’s largest business city. To make the data comparable across 190 economies, Doing Business uses a standardized business that is 100% domestically owned, has start-up capital equivalent to 10 times the income per capita, engages in general industrial or commercial activities and employs between 10 and 50 people one month after the commencement of operations, all of whom are domestic nationals. Starting a Business considers two types of local limited liability companies that are identical in all aspects, except that one company is owned by 5 married women and the other by 5 married men. The ranking of economies on the ease of starting a business is determined by sorting their scores for starting a business. These scores are the simple average of the scores for each of the component indicators. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Procedures to legally start and formally operate a company To make the data comparable across economies, several assumptions about the business and the (number) procedures are used. It is assumed that any required information is readily available and that the entrepreneur will pay no bribes. • Preregistration (for example, name verification or reservation, notarization) The business: • Registration in the economy’s largest business city -Is a limited liability company (or its legal equivalent). If there is more than one type of limited • Postregistration (for example, social security registration, liability company in the economy, the limited liability form most common among domestic firms is company seal) chosen. Information on the most common form is obtained from incorporation lawyers or the statistical office. • Obtaining approval from spouse to start a business or to leave -Operates in the economy’s largest business city. For 11 economies the data are also collected for the home to register the company the second largest business city. • Obtaining any gender specific document for company -Performs general industrial or commercial activities such as the production or sale to the public of registration and operation or national identification card goods or services. The business does not perform foreign trade activities and does not handle products subject to a special tax regime, for example, liquor or tobacco. It is not using heavily Time required to complete each procedure (calendar days) polluting production processes. • Does not include time spent gathering information -Does not qualify for investment incentives or any special benefits. -Is 100% domestically owned. • Each procedure starts on a separate day (2 procedures cannot -Has five business owners, none of whom is a legal entity. One business owner holds 30% of the start on the same day) company shares, two owners have 20% of shares each, and two owners have 15% of shares • Procedures fully completed online are recorded as ½ day each. -Is managed by one local director. • Procedure is considered completed once final document is received -Has between 10 and 50 employees one month after the commencement of operations, all of them domestic nationals. • No prior contact with officials -Has start-up capital of 10 times income per capita. -Has an estimated turnover of at least 100 times income per capita. Cost required to complete each procedure (% of income per -Leases the commercial plant or offices and is not a proprietor of real estate. capita) -Has an annual lease for the office space equivalent to one income per capita. • Official costs only, no bribes -Is in an office space of approximately 929 square meters (10,000 square feet). -Has a company deed that is 10 pages long. • No professional fees unless services required by law or commonly used in practice The owners: Paid-in minimum capital (% of income per capita) -Have reached the legal age of majority and are capable of making decisions as an adult. If there • Funds deposited in a bank or with third party before registration is no legal age of majority, they are assumed to be 30 years old. or up to 3 months after incorporation -Are in good health and have no criminal record. -Are married, the marriage is monogamous and registered with the authorities. -Where the answer differs according to the legal system applicable to the woman or man in question (as may be the case in economies where there is legal plurality), the answer used will be the one that applies to the majority of the population. Page 5 Doing Business 2020 Korea, Rep. Starting a Business - Korea, Rep. Standardized Company Legal form Jusik Hoesa Paid-in minimum capital requirement No minimum City Covered Seoul Indicator Korea, Rep. OECD high income Best Regulatory Performance Procedure – Men (number) 3 4.9 1 (2 Economies) Time – Men (days) 8 9.2 0.5 (New Zealand) Cost – Men (% of income per capita) 14.6 3.0 0.0 (2 Economies) Procedure – Women (number) 3 4.9 1 (2 Economies) Time – Women (days) 8 9.2 0.5 (New Zealand) Cost – Women (% of income per capita) 14.6 3.0 0.0 (2 Economies) Paid-in min. capital (% of income per capita) 0.0 7.6 0.0 (120 Economies) Figure – Starting a Business in Korea, Rep. – Score 88.2 92.5 92.7 100.0 Procedures Time Cost Paid-in min. capital Figure – Starting a Business in Korea, Rep. and comparator economies – Ranking and Score DB 2020 Starting a Business Score 0 100 96.6: Australia (Rank: 7) 94.1: China (Rank: 27) 93.4: Korea, Rep. (Rank: 33) 91.3: Regional Average (OECD high income) 86.1: Japan (Rank: 106) 81.3: Brazil (Rank: 138) Note: The ranking of economies on the ease of starting a business is determined by sorting their scores for starting a business. These scores are the simple average of the scores for each of the component indicators. Page 6 Doing Business 2020 Korea, Rep. Figure – Starting a Business in Korea, Rep. – Procedure, Time and Cost Time (days) Cost (% of income per capita) 8 16 7 14 Cost (% of income per capita) 6 12 Time (days) 5 10 4 8 3 6 2 4 1 2 0 0 1 2 3 Procedures (number) * This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure. Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a different procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://doingbusiness.org/en/methodology). For details on the procedures reflected here, see the summary below. Page 7 Doing Business 2020 Korea, Rep. Details – Starting a Business in Korea, Rep. – Procedure, Time and Cost No. Procedures Time to Complete Associated Costs 1 Make company seal 1 day KRW 30,000 Agency : Seal maker Company seal must be made upon registration of establishment of new company. Business founders can make a company seal at the seal maker for approximately KRW 30,000. A company seal can either be made online or at a seal maker's shop and is in most cases ordered at a shop. 2 Register the company with Start-Biz and pay incorporation fees 3 days KRW 2,000 fee of e- Agency : Small and Medium Business Administration (SMBA) registration+ 1.2% capital Start Biz Online (www.startbiz.go.kr), has combined the Internet Register Office, the Local Tax registration tax + Payment System, the Electronic Notarization System, the National Tax Information System, the education tax (20% of the Financial Common Network, and the Social Insurance Information System which are registration tax) + KRW independently run, for the purpose of incorporation. Start Biz Online allows its users to process 20,000 (e-registration the entire incorporation process online, including checking the availability of trade name and form) obtain a certificate of name availability, opening a bank statement from a bank, filing the application package for incorporation and obtaining a corporate registration tax bill, register the company and obtaining a certificate of seal impression of corporation, registering and getting a tax identification number (TIN), submitting the rules of employment, and registering electronically for the Public Health Insurance Program, the National Pension Fund, Employment Insurance, and Industrial Accident Compensation Insurance. Name verification is typically conducted prior to applying for registration. This can be done online, with no approval or verification by authorities. After checking the company name, uploading incorporation documents as well as filling company information, applicants can process to the payments for the corporate registration tax bill as well as the registration fee. Since applicant has already filled in the company information, there is no need to fill in separate forms for the payments. They will be automatically directed to the payment pages where they can make all payments, and re-directed to the Start-biz system once the payments are completed. In most of the cases, it takes 3 days to obtain the certificate of incorporation from the Start-Biz system. During this period, the court registry office reviews the documents and information provided by the applicants, and due diligence of company address is conducted by the tax office. After registration, company needs to physically visit the authority to pick up the hard copy of the incorporation documents. 3 Register with the tax office 4 days no charge Agency : National Tax Service Following the completion of its court registration, a company is required to register with the appropriate tax office pursuant to the Corporation Tax Law (Article 111) and the Value Added Tax Law. The filing should be made no later than 20 days from the commencement of the business by the company. This can be done either by visiting the tax office or by submitting information online at www.hometax.go.kr . The following documents need to be provided: - Registration application; - Article of Incorporation; - Certificate of the commercial registry; - Lease agreement for the office; - Certificate of the corporate seal; - Corporate seal; - Permit (in the case of a business that requires any); - PoA and ID card of the representative director; - proof of funds and its origin (e.g., copy of tax return or a loan agreement). Tax office personnel may visit the company to confirm physical existence of the premises or call the office and confirm it through an employee. However, such visits are not frequent. Takes place simultaneously with previous procedure. Page 8 Doing Business 2020 Korea, Rep. Dealing with Construction Permits This topic tracks the procedures, time and cost to build a warehouse—including obtaining necessary the licenses and permits, submitting all required notifications, requesting and receiving all necessary inspections and obtaining utility connections. In addition, the Dealing with Construction Permits indicator measures the building quality control index, evaluating the quality of building regulations, the strength of quality control and safety mechanisms, liability and insurance regimes, and professional certification requirements. The most recent round of data collection was completed in May 2019. See the methodology for more information What the indicators measure Case study assumptions Procedures to legally build a warehouse (number) To make the data comparable across economies, several assumptions about the construction company, the warehouse project and the utility connections are used. • Submitting all relevant documents and obtaining all necessary clearances, licenses, permits and certificates The construction company (BuildCo): • Submitting all required notifications and receiving all necessary - Is a limited liability company (or its legal equivalent) and operates in the economy’s largest inspections business city. For 11 economies the data are also collected for the second largest business city. • Obtaining utility connections for water and sewerage - Is 100% domestically and privately owned; has five owners, none of whom is a legal entity. Has a licensed architect and a licensed engineer, both registered with the local association of architects • Registering and selling the warehouse after its completion or engineers. BuildCo is not assumed to have any other employees who are technical or licensed Time required to complete each procedure (calendar days) experts, such as geological or topographical experts. - Owns the land on which the warehouse will be built and will sell the warehouse upon its • Does not include time spent gathering information completion. • Each procedure starts on a separate day—though procedures that can be fully completed online are an exception to this rule The warehouse: • Procedure is considered completed once final document is - Will be used for general storage activities, such as storage of books or stationery. received - Will have two stories, both above ground, with a total constructed area of approximately 1,300.6 square meters (14,000 square feet). Each floor will be 3 meters (9 feet, 10 inches) high and will be • No prior contact with officials located on a land plot of approximately 929 square meters (10,000 square feet) that is 100% owned by BuildCo, and the warehouse is valued at 50 times income per capita. Cost required to complete each procedure (% of income per - Will have complete architectural and technical plans prepared by a licensed architect. If capita) preparation of the plans requires such steps as obtaining further documentation or getting prior • Official costs only, no bribes approvals from external agencies, these are counted as procedures. - Will take 30 weeks to construct (excluding all delays due to administrative and regulatory Building quality control index (0-15) requirements). • Quality of building regulations (0-2) The water and sewerage connections: • Quality control before construction (0-1) - Will be 150 meters (492 feet) from the existing water source and sewer tap. If there is no water • Quality control during construction (0-3) delivery infrastructure in the economy, a borehole will be dug. If there is no sewerage • Quality control after construction (0-3) infrastructure, a septic tank in the smallest size available will be installed or built. - Will have an average water use of 662 liters (175 gallons) a day and an average wastewater flow • Liability and insurance regimes (0-2) of 568 liters (150 gallons) a day. Will have a peak water use of 1,325 liters (350 gallons) a day and • Professional certifications (0-4) a peak wastewater flow of 1,136 liters (300 gallons) a day. - Will have a constant level of water demand and wastewater flow throughout the year; will be 1 inch in diameter for the water connection and 4 inches in diameter for the sewerage connection. Page 9 Doing Business 2020 Korea, Rep. Dealing with Construction Permits - Korea, Rep. Standardized Warehouse Estimated value of warehouse KRW 1,724,607,858.40 City Covered Seoul Indicator Korea, Rep. OECD high income Best Regulatory Performance Procedures (number) 10 12.7 None in 2018/19 Time (days) 27.5 152.3 None in 2018/19 Cost (% of warehouse value) 4.4 1.5 None in 2018/19 Building quality control index (0-15) 12.0 11.6 15.0 (6 Economies) Figure – Dealing with Construction Permits in Korea, Rep. – Score 80.0 99.6 78.2 80.0 Procedures Time Cost Building quality control index Figure – Dealing with Construction Permits in Korea, Rep. and comparator economies – Ranking and Score DB 2020 Dealing with Construction Permits Score 0 100 84.7: Australia (Rank: 11) 84.4: Korea, Rep. (Rank: 12) 83.1: Japan (Rank: 18) 77.3: China (Rank: 33) 75.6: Regional Average (OECD high income) 51.9: Brazil (Rank: 170) Note: The ranking of economies on the ease of dealing with construction permits is determined by sorting their scores for dealing with construction permits. These scores are the simple average of the scores for each of the component indicators. Page 10 Doing Business 2020 Korea, Rep. Figure – Dealing with Construction Permits in Korea, Rep. – Procedure, Time and Cost Time (days) Cost (% of warehouse value) 3 25 2.5 Cost (% of warehouse value) 20 2 Time (days) 15 1.5 10 1 5 0.5 0 0 1 2 3 4 *5 *6 7 *8 9 * 10 Procedures (number) * This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure. Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a different procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://doingbusiness.org/en/methodology). For details on the procedures reflected here, see the summary below. Page 11 Doing Business 2020 Korea, Rep. Figure – Dealing with Construction Permits in Korea, Rep. and comparator economies – Measure of Quality 16 15.0 14.0 14 13.0 12.0 11.6 12 Index score 10 8.4 8 6 4 2 0 Korea, Australia Brazil China Japan OECD Rep. high income Details – Dealing with Construction Permits in Korea, Rep. – Procedure, Time and Cost No. Procedures Time to Complete Associated Costs 1 Request and obtain proof of ownership of land 1 day KRW 1,000 Agency : Property Register BuildCo must obtain proof of ownership from the Property Register to show that BuildCo has the right to construct a warehouse on the land. The issuance date stated in the Land Registry should be within 3 months prior to the date of submitting the application for a building permit. Once the application for a building permit and the relevant documents are filed with the licensing authority, the authority will forward the design drawing to the relevant regulatory agencies, the fire department and the sewage department. It is possible to obtain proof of ownership (from the Court Registry) immediately after applying over the Internet at www.iros.gov.kr. The fee for issuing certificate of registered items is KRW 1,000 for issuance via internet. 2 Purchase National Housing Bonds (NHB) 0.5 days KRW 169,078 Agency : Commercial bank To qualify for a building permit, BuildCo must purchase National Housing Bonds (NHBs). The bonds can be purchased online through commercial bank websites. The NHB is calculated at a rate ranging from KRW 600.00 to KRW 1,300.00 per sq. m., depending upon the structure of the warehouse. If the warehouse is constructed in steel frame, the rate of KRW 1,300.00 per sq. m. is applied. BuildCo can either receive the money paid for the NHBs upon maturity or sell them at a discount (the discount rate is variable but has been around 10%). Upon purchase, the bank issues a receipt, which must then be presented to the Building Authorities. The cost is calculated as follows: KRW 1,300.00 x 1300.6 sq. m. = KRW 1,690,780.00. However, many sell the NHBs immediately, which, assuming a discount of 10%, brings the actual cost incurred by the company to KRW 169,078.00. Page 12 Doing Business 2020 Korea, Rep. 3 Request and obtain building permit 9 days KRW 121,500 Agency : County (Ku) Office of Construction BuildCo must submit an application for a building permit to the County (Ku) Office of Construction. The application must include: • The size of construction lot; • Documentation showing BuildCo's ownership or the right to use the construction lot; and • Basic design drawings, which must specify the approximate location of the water pipes, sewage, septic tank, electrical facilities, and telephone lines. Once the application for the building permit with the relevant documents is filed with the licensing authority, this authority forwards the design drawings to the relevant regulatory agencies (such as the sewerage department and the fire department). Thus, it is not necessary for the company to obtain separate project clearances from these departments. Under the Article 10 of the new Building Code, anyone who intends to construct a building may opt for a fast-track procedure and apply for an "advance decision regarding building permit" before applying for a building permit. If an advance decision is obtained for the construction, the builder must separately apply for and obtain a building permit for the construction. However, when the advance decision is obtained, the relevant approval for the development or re-characterization of land (such approval is needed in certain zoning areas under several relevant laws) is deemed to be obtained. This effect of the advance decision is valid for 2 years from the date of issuance, before the builder applies for the building permit itself. In addition, it is possible to submit simultaneous applications for an advance decision and for the traffic and environment impact assessment procedures, and the like, if those procedures are necessary. Accordingly, if the builder obtains an advance decision before applying for the building permit, the time before the construction may be reduced more or less. However, this has not worked well in practice and many companies follow the traditional way. According to the Standard for Civil Petitions Treatment published by the Korean Government on December 30, 2005, the duration for obtaining a building permit for a two-story, 1,300-square- meter building is estimated to be 3 -- 14 days, subject to certain circumstances, including whether the work is performed by an agent (a certified architect). The duration can take a few days longer, as the case may be. Before construction work begins, the company informs the authority thereof. BuildCo must present a notification application, including: • A copy of all relevant contract(s) between the relevant parties (owner, construction company, architect, building inspector, etc.) • The design drawings, which must specify the location of the water pipes, sewage, septic tank, electrical facilities, and telephone lines. 4 Hire a certified inspector 1 day KRW 22,247,441 Agency : Private Company A certified inspector conducts inspections throughout the period of construction. If the company does not hire a certified inspector during construction, there is a penalty of up to 2 years’ imprisonment or a fine of up to KRW 10 million. The inspector is independent of the company. The frequency of inspections varies depending on the size and cost of construction. Generally, an inspection takes place if the inspector and the company deem it necessary. However, in some instances, the contract between the company and the inspector contains a clause specifying the frequency of inspection. There must be at least two inspections throughout the construction, during which the construction work does not stop. The fees for hiring a certified inspector is calculated by multiplying the value of the project by the relevant rate of 1.29%, in accordance with the Regulation for Scope of Architect Services and Fee Standard. 5 Request water and sewage and occupancy permit inspections certificate 1 day no charge Agency : Public Sewer Management Agency When installing drainage facilities in a building, the type, size, and other features of the drainage facilities must be reported pursuant to the Sewage Act to the Public Sewer Management Agency. According to the Act’s enforcement provision, the time to complete the inspection should be 14 days. There is no penalty for the authorities if the time line is missed, but they generally meet the deadline. 6 Request and obtain fire inspection certificate 1 day no charge Agency : Fire Department When BuildCo applies for an occupancy permit, the fire control facility will ask the Fire Department to inspect the building. The Fire Department will issue an inspection certificate after inspection of the premises. The average waiting time is one week. 7 Obtain occupancy permit certificate 7 days no charge Agency : County (Ku) Office of Construction BuildCo must apply for an occupancy permit within 7 days of the completion of construction. The occupancy permit is issued after the fire inspection mentioned in the previous procedure. 8 Receive final inspection from local government 1 day no charge Agency : Local Government Page 13 Doing Business 2020 Korea, Rep. 9 Obtain connection to water and sewage services 7 days KRW 4,443,000 Agency : Korea Water Company In order to obtain a connection to clean water, BuildCo must apply online through the Office of Waterworks of the Seoul Metropolitan Government's website. For sewerage, if the warehouse is built near a sewerage terminal disposal plant, BuildCo can connect to the public sewer system, although it must pay a fee as a Dirty Water Originator. The cost and time required depend on the distance between the building and the water and sewerage resources and on the installation method of the building's facilities. Register the building with the Court Registry 4 days KRW 48,304,020 10 Agency : Court Registry An acquisition and the e-revenue stamp tax must be paid within 30 days of receiving the occupancy permit. The acquisition tax is 2.8% of the value of the property without surcharge (3.16% with surcharge) and the stamp tax is KRW 15,000.00 per land parcel. Once the tax is paid, BuildCo must register the warehouse within 60 days from the inspection completion date. Takes place simultaneously with previous procedure. Page 14 Doing Business 2020 Korea, Rep. Details – Dealing with Construction Permits in Korea, Rep. – Measure of Quality Answer Score Building quality control index (0-15) 12.0 Quality of building regulations index (0-2) 2.0 How accessible are building laws and regulations in your economy? (0-1) Available online; Free 1.0 of charge. Which requirements for obtaining a building permit are clearly specified in the building regulations or on any List of required 1.0 accessible website, brochure or pamphlet? (0-1) documents; Fees to be paid; Required preapprovals. Quality control before construction index (0-1) 0.0 Which third-party entities are required by law to verify that the building plans are in compliance with existing By law, there is no 0.0 building regulations? (0-1) need to verify plans compliance; Civil servant reviews plans. Quality control during construction index (0-3) 2.0 What types of inspections (if any) are required by law to be carried out during construction? (0-2) Inspections by in- 1.0 house engineer; Inspections by external engineer or firm; Inspections at various phases. Do legally mandated inspections occur in practice during construction? (0-1) Mandatory 1.0 inspections are always done in practice. Quality control after construction index (0-3) 3.0 Is there a final inspection required by law to verify that the building was built in accordance with the approved Yes, final inspection 2.0 plans and regulations? (0-2) is done by government agency; Yes, in-house engineer submits report for final inspection; Yes, external engineer submits report for final inspection. Do legally mandated final inspections occur in practice? (0-1) Final inspection 1.0 always occurs in practice. Liability and insurance regimes index (0-2) 1.0 Which parties (if any) are held liable by law for structural flaws or problems in the building once it is in use Architect or engineer; 1.0 (Latent Defect Liability or Decennial Liability)? (0-1) Professional in charge of the supervision; Construction company; Owner or investor. Which parties (if any) are required by law to obtain an insurance policy to cover possible structural flaws or No party is required 0.0 problems in the building once it is in use (Latent Defect Liability Insurance or Decennial Insurance)? (0-1) by law to obtain insurance . Professional certifications index (0-4) 4.0 Page 15 Doing Business 2020 Korea, Rep. What are the qualification requirements for the professional responsible for verifying that the architectural plans Minimum number of 2.0 or drawings are in compliance with existing building regulations? (0-2) years of experience; University degree in architecture or engineering; Being a registered architect or engineer; Passing a certification exam. What are the qualification requirements for the professional who supervises the construction on the ground? (0- Minimum number of 2.0 2) years of experience; University degree in engineering, construction or construction management; Being a registered architect or engineer; Passing a certification exam. Page 16 Doing Business 2020 Korea, Rep. Getting Electricity This topic measures the procedures, time and cost required for a business to obtain a permanent electricity connection for a newly constructed warehouse. Additionally, the reliability of supply and transparency of tariffs index measures reliability of supply, transparency of tariffs and the price of electricity. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Procedures to obtain an electricity connection (number) To make the data comparable across economies, several assumptions about the warehouse, the electricity connection and the monthly consumption are used. • Submitting all relevant documents and obtaining all necessary clearances and permits The warehouse: • Completing all required notifications and receiving all necessary - Is owned by a local entrepreneur and is used for storage of goods. inspections - Is located in the economy’s largest business city. For 11 economies the data are also collected for • Obtaining external installation works and possibly purchasing the second largest business city. material for these works - Is located in an area where similar warehouses are typically located and is in an area with no physical constraints. For example, the property is not near a railway. • Concluding any necessary supply contract and obtaining final - Is a new construction and is being connected to electricity for the first time. supply - Has two stories with a total surface area of approximately 1,300.6 square meters (14,000 square Time required to complete each procedure (calendar days) feet). The plot of land on which it is built is 929 square meters (10,000 square feet). • Is at least 1 calendar day The electricity connection: • Each procedure starts on a separate day - Is a permanent one with a three-phase, four-wire Y connection with a subscribed capacity of 140- • Does not include time spent gathering information kilo-volt-ampere (kVA) with a power factor of 1, when 1 kVA = 1 kilowatt (kW). - Has a length of 150 meters. The connection is to either the low- or medium-voltage distribution • Reflects the time spent in practice, with little follow-up and no network and is either overhead or underground, whichever is more common in the area where the prior contact with officials warehouse is located and requires works that involve the crossing of a 10-meter road (such as by excavation or overhead lines) but are all carried out on public land. There is no crossing of other Cost required to complete each procedure (% of income per owners’ private property because the warehouse has access to a road. capita) - Does not require work to install the internal wiring of the warehouse. This has already been • Official costs only, no bribes completed up to and including the customer’s service panel or switchboard and the meter base. • Value added tax excluded The monthly consumption: The reliability of supply and transparency of tariffs index (0-8) - It is assumed that the warehouse operates 30 days a month from 9:00 a.m. to 5:00 p.m. (8 hours • Duration and frequency of power outages (0–3) a day), with equipment utilized at 80% of capacity on average and that there are no electricity cuts • Tools to monitor power outages (0–1) (assumed for simplicity reasons) and the monthly energy consumption is 26,880 kilowatt-hours (kWh); hourly consumption is 112 kWh. • Tools to restore power supply (0–1) - If multiple electricity suppliers exist, the warehouse is served by the cheapest supplier. • Regulatory monitoring of utilities’ performance (0–1) - Tariffs effective in January of the current year are used for calculation of the price of electricity for the warehouse. Although January has 31 days, for calculation purposes only 30 days are used. • Financial deterrents limiting outages (0–1) • Transparency and accessibility of tariffs (0–1) Price of electricity (cents per kilowatt-hour)* • Price based on monthly bill for commercial warehouse in case study *Note: Doing Business measures the price of electricity, but it is not included in the ease of doing business score nor in the ranking on the ease of getting electricity. Page 17 Doing Business 2020 Korea, Rep. Getting Electricity - Korea, Rep. Standardized Connection Name of utility Korea Electric Power Corp (KEPCO) Price of electricity (US cents per kWh) 11.4 City Covered Seoul Indicator Korea, Rep. OECD high income Best Regulatory Performance Procedures (number) 3 4.4 3 (28 Economies) Time (days) 13 74.8 18 (3 Economies) Cost (% of income per capita) 34.3 61.0 0.0 (3 Economies) Reliability of supply and transparency of tariff index (0-8) 8 7.4 8 (26 Economies) Figure – Getting Electricity in Korea, Rep. – Score 100.0 100.0 99.6 100.0 Reliability of supply and transparency of Procedures Time Cost tariff index Figure – Getting Electricity in Korea, Rep. and comparator economies – Ranking and Score DB 2020 Getting Electricity Score 0 100 99.9: Korea, Rep. (Rank: 2) 95.4: China (Rank: 12) 93.2: Japan (Rank: 14) 85.9: Regional Average (OECD high income) 82.3: Australia (Rank: 62) 72.8: Brazil (Rank: 98) Note: The ranking of economies on the ease of getting electricity is determined by sorting their scores for getting electricity. These scores are the simple average of the scores for all the component indicators except the price of electricity. Figure – Getting Electricity in Korea, Rep. – Procedure, Time and Cost Time (days) Cost (% of income per capita) 40 12 35 Cost (% of income per capita) 10 30 Time (days) 8 25 20 6 15 4 10 2 5 0 0 1 2 *3 Procedures (number) * This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure. Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a different procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://doingbusiness.org/en/methodology). For details on the procedures Page 18 Doing Business 2020 Korea, Rep. reflected here, see the summary below. Figure – Getting Electricity in Korea, Rep. and comparator economies – Measure of Quality 9 8 8 8 7.4 7 7 7 6 Index score 6 5 4 3 2 1 0 Korea, Australia Brazil China Japan OECD Rep. high income Page 19 Doing Business 2020 Korea, Rep. Details – Getting Electricity in Korea, Rep. – Procedure, Time and Cost No. Procedures Time to Complete Associated Costs 1 Submit application to KEPCO and sign contract 1 calendar day KRW 11,684,877.39 Agency : Korea Electric Power Corporation (KEPCO) As soon as KEPCO receives the electricity application, it charges the customer for a standard connection fee, and the customer signs a contract with KEPCO. 2 Receive external works, meter installation and electricity flow 12 calendar days KRW 0 Agency : Korea Electric Power Corporation (KEPCO) On signing the contract with the customer, KEPCO begins designing the external wiring works, securing materials, and making a contract with the electricity contractors. Generally, warehouses are connected with overhead distribution lines in Seoul (90% of network is overhead). 3 Request and receive internal wiring inspection 5 calendar days KRW 148,740 Agency : Korea Electrical Safety Corporation (KESCO) The customer has to hire a licensed electrician or an electrical contractor to design and install the internal facilities. The customer should submit the application with the license number and the certification stamp of the hired electrician attached for the internal inspection to KESCO (Korea Electrical Safety Corporation). According to The Electricity Enterprises Act #62, #63 and The Enforcement Regulations of Electricity Enterprises Act #31, facilities over 75kVA shall be inspected by KESCO. Takes place simultaneously with previous procedure. Page 20 Doing Business 2020 Korea, Rep. Details – Getting Electricity in Korea, Rep. – Measure of Quality Answer Reliability of supply and transparency of tariff index (0-8) 8 Total duration and frequency of outages per customer a year (0-3) 3 System average interruption duration index (SAIDI) 0.0 System average interruption frequency index (SAIFI) 0.1 What is the minimum outage time (in minutes) that the utility considers for the calculation of SAIDI/SAIFI 5.0 Mechanisms for monitoring outages (0-1) 1 Does the distribution utility use automated tools to monitor outages? Yes Mechanisms for restoring service (0-1) 1 Does the distribution utility use automated tools to restore service? Yes Regulatory monitoring (0-1) 1 Does a regulator—that is, an entity separate from the utility—monitor the utility’s performance on reliability of supply? Yes Financial deterrents aimed at limiting outages (0-1) 1 Does the utility either pay compensation to customers or face fines by the regulator (or both) if outages exceed a certain cap? Yes Communication of tariffs and tariff changes (0-1) 1 Are effective tariffs available online? Yes Link to the website, if available online http://home.kepco.co.kr/k epco/EN/F/htmlView/ENF BHP003.do? menuCd=EN060203 Are customers notified of a change in tariff ahead of the billing cycle? Yes Note: If the duration and frequency of outages is 100 or less, the economy is eligible to score on the Reliability of supply and transparency of tariff index. If the duration and frequency of outages is not available, or is over 100, the economy is not eligible to score on the index. If the minimum outage time considered for SAIDI/SAIFI is over 5 minutes, the economy is not eligible to score on the index. Page 21 Doing Business 2020 Korea, Rep. Registering Property This topic examines the steps, time and cost involved in registering property, assuming a standardized case of an entrepreneur who wants to purchase land and a building that is already registered and free of title dispute. In addition, the topic also measures the quality of the land administration system in each economy. The quality of land administration index has five dimensions: reliability of infrastructure, transparency of information, geographic coverage, land dispute resolution, and equal access to property rights. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Procedures to legally transfer title on immovable property To make the data comparable across economies, several assumptions about the parties to the (number) transaction, the property and the procedures are used. • Preregistration procedures (for example, checking for liens, The parties (buyer and seller): notarizing sales agreement, paying property transfer taxes) - Are limited liability companies (or the legal equivalent). • Registration procedures in the economy's largest business city. - Are located in the periurban (that is, on the outskirts of the city but still within its official limits) • Postregistration procedures (for example, filling title with area of the economy’s largest business city. For 11 economies the data are also collected for the municipality) second largest business city. - Are 100% domestically and privately owned. Time required to complete each procedure (calendar days) - Perform general commercial activities. • Does not include time spent gathering information The property (fully owned by the seller): • Each procedure starts on a separate day - though procedures - Has a value of 50 times income per capita, which equals the sale price. that can be fully completed online are an exception to this rule - Is fully owned by the seller. • Procedure is considered completed once final document is - Has no mortgages attached and has been under the same ownership for the past 10 years. received - Is registered in the land registry or cadastre, or both, and is free of title disputes. • No prior contact with officials - Is located in a periurban commercial zone (that is, on the outskirts of the city but still within its official limits), and no rezoning is required. Cost required to complete each procedure (% of property - Consists of land and a building. The land area is 557.4 square meters (6,000 square feet). A two- value) story warehouse of 929 square meters (10,000 square feet) is located on the land. The warehouse is 10 years old, is in good condition, has no heating system and complies with all safety standards, • Official costs only (such as administrative fees, duties and building codes and legal requirements. The property, consisting of land and building, will be taxes). transferred in its entirety. • Value Added Tax, Capital Gains Tax and illicit payments are - Will not be subject to renovations or additional construction following the purchase. excluded - Has no trees, natural water sources, natural reserves or historical monuments of any kind. - Will not be used for special purposes, and no special permits, such as for residential use, Quality of land administration index (0-30) industrial plants, waste storage or certain types of agricultural activities, are required. • Reliability of infrastructure index (0-8) - Has no occupants, and no other party holds a legal interest in it. • Transparency of information index (0–6) • Geographic coverage index (0–8) • Land dispute resolution index (0–8) • Equal access to property rights index (-2–0) Page 22 Doing Business 2020 Korea, Rep. Registering Property - Korea, Rep. Indicator Korea, Rep. OECD high income Best Regulatory Performance Procedures (number) 7 4.7 1 (5 Economies) Time (days) 5.5 23.6 1 (2 Economies) Cost (% of property value) 5.1 4.2 0.0 (Saudi Arabia) Quality of the land administration index (0-30) 27.5 23.2 None in 2018/19 Figure – Registering Property in Korea, Rep. – Score 50.0 97.8 65.9 91.7 Procedures Time Cost Quality of the land administration index Figure – Registering Property in Korea, Rep. and comparator economies – Ranking and Score DB 2020 Registering Property Score 0 100 81.0: China (Rank: 28) 77.0: Regional Average (OECD high income) 76.3: Korea, Rep. (Rank: 40) 75.7: Australia (Rank: 42) 75.6: Japan (Rank: 43) 54.1: Brazil (Rank: 133) Note: The ranking of economies on the ease of registering property is determined by sorting their scores for registering property. These scores are the simple average of the scores for each of the component indicators. Page 23 Doing Business 2020 Korea, Rep. Figure – Registering Property in Korea, Rep. – Procedure, Time and Cost Time (days) Cost (% of property value) 5 5 Cost (% of property value) 4 4 Time (days) 3 3 2 2 1 1 0 0 1 2 3 4 5 6 7 Procedures (number) * This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure. Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a different procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://doingbusiness.org/en/methodology). For details on the procedures reflected here, see the summary below. Page 24 Doing Business 2020 Korea, Rep. Figure – Registering Property in Korea, Rep. and comparator economies – Measure of Quality 30 27.5 25.5 25 24.0 23.2 Index score 19.5 20 16.3 15 10 5 0 Korea, Australia Brazil China Japan OECD Rep. high income Details – Registering Property in Korea, Rep. – Procedure, Time and Cost No. Procedures Time to Complete Associated Costs 1 Obtain certified copies of the corporate registration and the registered corporate seal, and Less than one day, KRW 4,000; (KRW 1,000 the registry extract of the concerned land and building from the District Court Registration online for corporate registry Office extracts of the Party Agency : District Court Registration Office (online) I. Obtain commercial registry extracts and registry extracts of the concerned land and building + KRW 1,000 for registered corporate seal The parties, as legal entities, must prepare corporate registry extracts, corporate seal card and of the Party (unattended registry extracts of the concerned land and building. machine) There are three methods to obtain the purchasing corporation's registration certificates on the land and the building to collect the real estate information: + KRW 1,000 for registry extract of the concerned (i) by visiting the District Court Registration Office in person and obtaining such documents from a land registration officer (cost: KRW 1,200 each). The District Registration Officer issues copies of the + KRW 1,000 for registry corporate registration, real property registration, etc.; extract of the concerned (ii) by using an unattended machine (cost: KRW 1,000 each); and building) (iii) by obtaining online via website(www.iros.go.kr) (cost: KRW 1,000 each) II. Obtain the certificate of the registered corporate seal card (i) visiting the District Court Registration Office in person and getting the document from an officer (cost: KRW 1,200); and (ii) using an unattended machine (cost: KRW 1,000 each) All registry extracts and the certificate should be issued within three months before the registration of the titles will happen. 2 Obtain copies of the Land Cadastre Certificate and the Building Management Certificate Less than one day, One copy of the Land Agency : The jurisdictional district office (e.g. City Hall, Gu-Office, Gun-Office) online Cadastre Certificate & the Governmental offices of various levels issue those copies (e.g. the City Hall, Gu-Office similar to Building Management "borough office" or Gun-Office similar to "district office") and there are three ways to obtain each Certificate could be copy of certificates above: requested online and has not cost. It is also possible (i) visiting the City Hall, Gu-Office or Gun-Office and getting through an officer (cost: KRW 500 to obtain the Land each); (ii) using an unattended machine placed in a governmental district (cost: KRW 300 each); and Cadastre & the Building (iii) obtaining via the website (https://www.gov.kr) of the Korean government (free of charge). Management at the Jurisdictional District Office (Land and Building ledger: http://https://www.gov.kr or http://www.minwon.go.kr) (cost: KRW 1000 and KRW 1500). The Integrated Certificate can be issued online at https://seereal.lh.or.kr (cost: certificate of all items KRW 1000, certificates of partial items KRW 800) or in person at the Jurisdictional District From January 18, 2014, Office (cost: KRW 1500). the Integrated Certificate of Real Estate that includes both certificates for the Land Cadastre and the Building Management is also available. The Integrated Certificate can be issued online at https://seereal.lh.or.kr (cost: Certificate of all items KRW 1000, Certificates of partial items KRW 800) or in person at the Jurisdictional District Office (cost: KRW 1500). Page 25 Doing Business 2020 Korea, Rep. 3 Prepare the sale agreement and affix the stamp duty 1 day KRW 8,973,039.29; Agency : District government office, Korea Financial Telecommunications and Clearings Institute, ("National Revenue Stamp post offices and commercial banks (for stamp duty) + Real Preparing sale agreement: Although it is not mandatory to use a real estate agent, most people estate agent fee (the use agents or occasionally lawyers. Both parties that commissioned the brokerage pays a parties and the agent commission fee to the real estate agent. The brokerage client and the real estate agent decided usually agree for same or the amount by agreement. The lawyers charge the commission fee hourly. less than 0.9% of the sale Affixing Stamp duty: The purchasing corporation should purchase National Revenue Stamp. Due price) to the amendment of the Stamp Tax Act enforced as of January 1, 2015, only the electronic form of NRS is permissible. Parties can purchase the electronic form of NRS via the website (www.e- * Note: Stamp duty (in this revenuestamp.or.kr) or from banks and post offices, paying the same amount of price as case, KRW 350,000) aforementioned. Property value (KRW million) NRS (KRW) Over 10, less than or equal to 30 20,000 Over 30, less than or equal to 50 40,000 Over 50, less than or equal to 100 70,000 Over 100, less than or equal to 1,000 150,000 Over 1,000 350,000) 4 Report the real transaction price Less than one day, no charge Agency : District government office online There is a system of reporting 'real transaction price' in Korea. The parties that agree to the sale of the real property should report real transaction price to the Tax Department of jurisdictional district office (usually to Gu-Office, in case of there's no Gu: to City Hall, etc.) within 60 days after signing the sale agreement. This procedure is required to prevent tax evasion. Both seller and buyer or real estate agents are on duty of reporting the sale price, which can be performed via the website (http://rtms.molit.go.kr/) of the Ministry of Land, Infrastructure, and Transport. After reporting the price of the sale, the Office of the Tax Department issues "the real transaction price report. "The real transaction report" includes: (i) the identification of both parties; (ii) signing date, intermediate payment date, and remainder payment date; (iii) the location, parcel number and land category of an agreed real estate; (iv) the type of real estate and the area of an agreed real estate; and (v) the real price of a transaction. With this report, the District Tax Office will calculate the payment of taxes as below ('real transaction price' of the report can also be the 'purchase price'). 5 Buyer pays taxes online Less than one day, KRW 79,331,961.49; ((1) Agency : Tax department of jurisdictional district office online Acquisition Tax: 4% of the The buyer pays all required taxes (specified below) online at etax.seoul.co.kr. purchase price (2) Education Tax: 0.4% of The tax amount due for the property with a value of about KRW 1.68 billion located in Seoul is as the purchase price follow: (3) Agricultural and Fisheries Tax: 0.2% of the (1) Acquisition Tax: 4% of the purchase price (2) Education Tax: 0.4% of the purchase price purchase price) (3) Agricultural and Fisheries Tax: 0.2% of the purchase price Page 26 Doing Business 2020 Korea, Rep. 6 The buyer buys Housing Bonds Less than one day, (1) If the location of the Agency : Commercial banks online warehouse is in Seoul, The buyer should buy 'national housing bonds ("Bonds") at commercial banks in Korea, write the Inchon, Daejeon, number of the Bonds at the application form for the registration, and submit it to the District Courts Gwangju, Busan, Ulsan or Registration Office at the moment of applying for the registration of the title. Five commercial Daegu: 5% of the standard banks handle national housing bonds, which are: Shinhan Bank, Woori Bank, Kookmin Bank, market price of the land + Industrial Bank of Korea, and Nonghyup. 2% of the standard market Value of Bonds that need to be purchased by the buyer, in case of real property located in Seoul, price of the building. based on the "standard market price." (2) In case the location of - Land: the warehouse is other 2.5% (from KRW 5M ~ less than KRW 50M) than the above seven 4% (from KRW 50M ~ less than KRW 100M) cities mentioned: 4.5% of 5% (from KRW 100M) the standard market price - Real property other than land and house: of the land + 1.8% of the 1% (from KRW 10M ~ less than KRW 130M) standard market price of 1.6% (from KRW 130M ~ less than KRW 250M) the building. 2% (from KRW 250M) Both are not included in The Bonds have a maturity of 5 years. After that, the redemption is with interests. The buyer, the calculation of total however, can sell the Bonds shortly after purchasing them at the update discounting rate published in the websites of commercial banks. cost. In practice, however, buyer buys the Bonds at the bank and resells the Bonds immediately at a loss of above discount rate. The bank will issue the receipt with the Bonds number to the buyer after receiving the discount fees. The buyer needs the receipt with the Bonds number for applying for the registration of the titles. (Cost of Procedure 6 is not included in the calculation of total cost). 7 Buyer applies for the registration of the titles 2 days KRW 15,000; (Cost per Agency : District Court Registration Office real property (land + Parties file the application form for registration of the title at the District Court Registration Office building) for court registry within the jurisdiction. The District Court Registration Office is in charge of registering the title stamp: In person: KW under the name of the new owner. Fee for the application is KRW 15,000 per each lot in case of 15,000, Electronic submitting the application form (written by hands) with other necessary documents to the standard form application: registration officer. In case of applying using the 'e-form' (online and printed) with other documents KW 13,000, Electronic required to the registration officer, the fee is KRW 13,000. If the parties apply online application: KW 10,000) (www.iros.go.kr), the fee is KRW 10,000, but the authentication certificate for internet banking is necessary for using the online application. Documents to be submitted for the registration of the title transfer include: (i) In general, certificate copies of the corporate registration and the authentication certificate of a seal of a vendor corporation’s representative are required; (ii) copies of the Land Cadastre Certificate & the Building Management Certificate; (iii) a certificate of reporting real transaction price; (iv) original copy of the executed sale agreement on which NRS should be affixed; (v) property tax clearance; (vi) the receipt of purchase of Housing Bonds; (vii) a registration certificate which is in possession of the seller; (viii) a Power of Attorney Takes place simultaneously with previous procedure. Page 27 Doing Business 2020 Korea, Rep. Details – Registering Property in Korea, Rep. – Measure of Quality Answer Score Quality of the land administration index (0-30) 27.5 Reliability of infrastructure index (0-8) 8.0 Type of land registration system in the economy: Title Registration System What is the institution in charge of immovable property registration? District Court Registration Office In what format are past and newly issued land records kept at the immovable property registry of the largest Computer/Fully digital 2.0 business city of the economy —in a paper format or in a computerized format (scanned or fully digital)? Is there a comprehensive and functional electronic database for checking for encumbrances (liens, mortgages, Yes 1.0 restrictions and the like)? Institution in charge of the plans showing legal boundaries in the largest business city: Gu-Offices in Seoul In what format are past and newly issued cadastral plans kept at the mapping agency of the largest business Computer/Fully digital 2.0 city of the economy—in a paper format or in a computerized format (scanned or fully digital)? Is there an electronic database for recording boundaries, checking plans and providing cadastral information Yes 1.0 (geographic information system)? Is the information recorded by the immovable property registration agency and the cadastral or mapping agency Different databases 1.0 kept in a single database, in different but linked databases or in separate databases? but linked Do the immovable property registration agency and cadastral or mapping agency use the same identification Yes 1.0 number for properties? Transparency of information index (0–6) 4.5 Who is able to obtain information on land ownership at the agency in charge of immovable property registration Anyone who pays the 1.0 in the largest business city? official fee Is the list of documents that are required to complete any type of property transaction made publicly available– Yes, online 0.5 and if so, how? Link for online access: www.iros.go.kr Is the applicable fee schedule for any type of property transaction at the agency in charge of immovable property Yes, online 0.5 registration in the largest business city made publicly available–and if so, how? Link for online access: www.iros.go.kr www.minwon.go.kr http://www.gov.kr Does the agency in charge of immovable property registration agency formally commit to deliver a legally Yes, online 0.5 binding document that proves property ownership within a specific timeframe –and if so, how does it communicate the service standard? Link for online access: http://www.iros.go.kr/ pos1/html/eng/PEngS erviceH.html Is there a specific and independent mechanism for filing complaints about a problem that occurred at the agency No 0.0 in charge of immovable property registration? Contact information: Are there publicly available official statistics tracking the number of transactions at the immovable property Yes 0.5 registration agency? Number of property transfers in the largest business city in 2018: 531,284 transaction of real estate in Seoul in 2018. (house: 171,050; lands: 360,234) Who is able to consult maps of land plots in the largest business city? Freely accessible by 0.5 anyone Is the applicable fee schedule for accessing maps of land plots made publicly available—and if so, how? Yes, online 0.5 Page 28 Doing Business 2020 Korea, Rep. Link for online access: www.minwon.go.kr Does the cadastral/mapping agency formally specifies the timeframe to deliver an updated cadastral plan—and Yes, online 0.5 if so, how does it communicate the service standard? Link for online access: Building Ledger: http://www.minwon.go .kr/main? a=AA020InfoCappVie wApp&HighCtgCD=A 02002003&CappBizC D=15000000098 Land Cadastre: http://www.minwon.go .kr/main? a=AA020InfoCappVie wApp&HighCtgCD=A 02009006&CappBizC D=13100000026 Is there a specific and independent mechanism for filing complaints about a problem that occurred at the No 0.0 cadastral or mapping agency? Contact information: Geographic coverage index (0–8) 8.0 Are all privately held land plots in the largest business city formally registered at the immovable property Yes 2.0 registry? Are all privately held land plots in the economy formally registered at the immovable property registry? Yes 2.0 Are all privately held land plots in the largest business city mapped? Yes 2.0 Are all privately held land plots in the economy mapped? Yes 2.0 Land dispute resolution index (0–8) 7.0 Does the law require that all property sale transactions be registered at the immovable property registry to make Yes 1.5 them opposable to third parties? Legal basis: One may not oppose against the third person without making registration. If there is no other regulations prescribing the priority of rights registered on the same property, the priority comes on the first-come-first-serve basis. ○ Principle As prescribed in the Article 186 of the Civil Act, any change on acquisition and loss of a real right caused by a legal act on a particular property only came into effect when registered. ○Exception As prescribed in the Article 187 of the Civil Act, acquisition of a property grounded on inheritance, public expropriation, judgement, auction and any other provision of other Acts does not require registration. However, unless it is registered, it cannot be disposed. Is the system of immovable property registration subject to a state or private guarantee? No 0.0 Page 29 Doing Business 2020 Korea, Rep. Type of guarantee: Legal basis: There is no stipulated regulations regarding a guarantee. However, under applicable case law, the registered owner is presumed to be the owner. Is there a is a specific, out-of-court compensation mechanism to cover for losses incurred by parties who Yes 0.5 engaged in good faith in a property transaction based on erroneous information certified by the immovable property registry? Legal basis: Korean Civil Code, Article 750 and State Compensation Act. Also, the State Tort Liability Act provides that if a registration officer violates the Real Property Registration Act, either intentionally or due to his/her gross negligence, thereby causing damages to a third party, then such registration officer will be liable for the compensation of such damages. Does the legal system require a control of legality of the documents necessary for a property transaction (e.g., Yes 0.5 checking the compliance of contracts with requirements of the law)? If yes, who is responsible for checking the legality of the documents? Registrar; Notary; Lawyer; Does the legal system require verification of the identity of the parties to a property transaction? Yes 0.5 If yes, who is responsible for verifying the identity of the parties? Registrar; Notary; Lawyer; Is there a national database to verify the accuracy of government issued identity documents? Yes 1.0 What is the Court of first instance in charge of a case involving a standard land dispute between two local Depending on the businesses over tenure rights for a property worth 50 times gross national income (GNI) per capita and located exact location of the in the largest business city? land within Seoul, the court of first instance in charge may be: - Seoul Central District Court (Civil Collegiate Section), - Seoul Eastern District Court (Civil Collegiate Section), - Seoul Western District Court (Civil Collegiate Section), - Seoul Southern District Court (Civil Collegiate Section), - Seoul Northern District Court (Civil Collegiate Section). How long does it take on average to obtain a decision from the first-instance court for such a case (without Less than a year 3.0 appeal)? Are there publicly available statistics on the number of land disputes at the economy level in the first instance No 0.0 court? Number of land disputes in the economy in 2018: Equal access to property rights index (-2–0) 0.0 Do unmarried men and unmarried women have equal ownership rights to property? Yes Page 30 Doing Business 2020 Korea, Rep. Do married men and married women have equal ownership rights to property? Yes 0.0 Page 31 Doing Business 2020 Korea, Rep. Getting Credit This topic explores two sets of issues—the strength of credit reporting systems and the effectiveness of collateral and bankruptcy laws in facilitating lending. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Strength of legal rights index (0–12) Doing Business assesses the sharing of credit information and the legal rights of borrowers and lenders with respect to secured transactions through 2 sets of indicators. The depth of credit • Rights of borrowers and lenders through collateral laws (0-10) information index measures rules and practices affecting the coverage, scope and accessibility of • Protection of secured creditors’ rights through bankruptcy laws credit information available through a credit registry or a credit bureau. The strength of legal rights (0-2) index measures the degree to which collateral and bankruptcy laws protect the rights of borrowers and lenders and thus facilitate lending. For each economy it is first determined whether a unitary Depth of credit information index (0–8) secured transactions system exists. Then two case scenarios, case A and case B, are used to • Scope and accessibility of credit information distributed by determine how a nonpossessory security interest is created, publicized and enforced according to credit bureaus and credit registries (0-8) the law. Special emphasis is given to how the collateral registry operates (if registration of security interests is possible). The case scenarios involve a secured borrower, company ABC, and a Credit bureau coverage (% of adults) secured lender, BizBank. • Number of individuals and firms listed in largest credit bureau In some economies the legal framework for secured transactions will allow only case A or case B as a percentage of adult population (not both) to apply. Both cases examine the same set of legal provisions relating to the use of movable collateral. Credit registry coverage (% of adults) • Number of individuals and firms listed in credit registry as a Several assumptions about the secured borrower (ABC) and lender (BizBank) are used: percentage of adult population - ABC is a domestic limited liability company (or its legal equivalent). - ABC has up to 50 employees. - ABC has its headquarters and only base of operations in the economy’s largest business city. For 11 economies the data are also collected for the second largest business city. - Both ABC and BizBank are 100% domestically owned. The case scenarios also involve assumptions. In case A, as collateral for the loan, ABC grants BizBank a nonpossessory security interest in one category of movable assets, for example, its machinery or its inventory. ABC wants to keep both possession and ownership of the collateral. In economies where the law does not allow nonpossessory security interests in movable property, ABC and BizBank use a fiduciary transfer-of-title arrangement (or a similar substitute for nonpossessory security interests). In case B, ABC grants BizBank a business charge, enterprise charge, floating charge or any charge that gives BizBank a security interest over ABC’s combined movable assets (or as much of ABC’s movable assets as possible). ABC keeps ownership and possession of the assets. Page 32 Doing Business 2020 Korea, Rep. Getting Credit - Korea, Rep. Indicator Korea, Rep. OECD high income Best Regulatory Performance Strength of legal rights index (0-12) 5 6.1 12 (5 Economies) Depth of credit information index (0-8) 8 6.8 8 (53 Economies) Credit registry coverage (% of adults) 68.2 24.4 100.0 (2 Economies) Credit bureau coverage (% of adults) 100.0 66.7 100.0 (14 Economies) Figure – Getting Credit in Korea, Rep. – Score 65.0 Score - Getting Credit Figure – Getting Credit in Korea, Rep. and comparator economies – Ranking and Score DB 2020 Getting Credit Score 0 100 95.0: Australia (Rank: 4) 65.0: Korea, Rep. (Rank: 67) 64.3: Regional Average (OECD high income) 60.0: China (Rank: 80) 55.0: Japan (Rank: 94) 50.0: Brazil (Rank: 104) Note: The ranking of economies on the ease of getting credit is determined by sorting their scores for getting credit. These scores are the sum of the scores for the strength of legal rights index and the depth of credit information index. Page 33 Doing Business 2020 Korea, Rep. Figure – Legal Rights in Korea, Rep. and comparator economies 12 11 10 Index Score 8 6.1 6 5 5 4 4 2 2 0 Korea, Australia Brazil China Japan OECD Rep. high income Page 34 Doing Business 2020 Korea, Rep. Details – Legal Rights in Korea, Rep. Strength of legal rights index (0-12) 5 Does an integrated or unified legal framework for secured transactions that extends to the creation, publicity and enforcement of functional equivalents No to security interests in movable assets exist in the economy? Does the law allow businesses to grant a non possessory security right in a single category of movable assets, without requiring a specific description No of collateral? Does the law allow businesses to grant a non possessory security right in substantially all of its assets, without requiring a specific description of No collateral? May a security right extend to future or after-acquired assets, and does it extend automatically to the products, proceeds and replacements of the Yes original assets? Is a general description of debts and obligations permitted in collateral agreements; can all types of debts and obligations be secured between parties; Yes and can the collateral agreement include a maximum amount for which the assets are encumbered? Is a collateral registry in operation for both incorporated and non-incorporated entities, that is unified geographically and by asset type, with an Yes electronic database indexed by debtor's name? Does a notice-based collateral registry exist in which all functional equivalents can be registered? No Does a modern collateral registry exist in which registrations, amendments, cancellations and searches can be performed online by any interested third Yes party? Are secured creditors paid first (i.e. before tax claims and employee claims) when a debtor defaults outside an insolvency procedure? No Are secured creditors paid first (i.e. before tax claims and employee claims) when a business is liquidated? No Are secured creditors subject to an automatic stay on enforcement when a debtor enters a court-supervised reorganization procedure? Does the law No protect secured creditors’ rights by providing clear grounds for relief from the stay and sets a time limit for it? Does the law allow parties to agree on out of court enforcement at the time a security interest is created? Does the law allow the secured creditor to sell Yes the collateral through public auction or private tender, as well as, for the secured creditor to keep the asset in satisfaction of the debt? Figure – Credit Information in Korea, Rep. and comparator economies 9 8 8 8 8 8 6.8 7 6 Index Score 6 5 4 3 2 1 0 Korea, Australia Brazil China Japan OECD Rep. high income Page 35 Doing Business 2020 Korea, Rep. Details – Credit Information in Korea, Rep. Depth of credit information index (0-8) Credit bureau Credit registry Score Are data on both firms and individuals distributed? Yes Yes 1 Are both positive and negative credit data distributed? Yes No 1 Are data from retailers or utility companies - in addition to data from banks and Yes No 1 financial institutions - distributed? Are at least 2 years of historical data distributed? (Credit bureaus and registries Yes No 1 that distribute more than 10 years of negative data or erase data on defaults as soon as they are repaid obtain a score of 0 for this component.) Are data on loan amounts below 1% of income per capita distributed? Yes Yes 1 By law, do borrowers have the right to access their data in the credit bureau or Yes Yes 1 credit registry? Can banks and financial institutions access borrowers’ credit information online Yes Yes 1 (for example, through an online platform, a system-to-system connection or both)? Are bureau or registry credit scores offered as a value-added service to help Yes No 1 banks and financial institutions assess the creditworthiness of borrowers? Total Score ("yes" to either public bureau or private registry) 8 Note: An economy receives a score of 1 if there is a "yes" to either bureau or registry. If the credit bureau or registry is not operational or covers less than 5% of the adult population, the total score on the depth of credit information index is 0. Coverage Credit bureau Credit registry Number of individuals 48,155,173 19,330,000 Number of firms 2,942,727 6,107,972 Total 51,097,900 25,437,972 Percentage of adult population 100.0 68.2 Page 36 Doing Business 2020 Korea, Rep. Protecting Minority Investors This topic measures the strength of minority shareholder protections against misuse of corporate assets by directors for their personal gain as well as shareholder rights, governance safeguards and corporate transparency requirements that reduce the risk of abuse. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions • Extent of disclosure index (0–10): Disclosure, review, and To make the data comparable across economies, a case study uses several assumptions about approval requirements for related-party transactions the business and the transaction. • Extent of director liability index (0–10): Ability of minority shareholders to sue and hold interested directors liable for The business (Buyer): prejudicial related-party transactions; Available legal - Is a publicly traded corporation listed on the economy’s most important stock exchange. remedies (damages, disgorgement of profits, disqualification - Has a board of directors and a chief executive officer (CEO) who may legally act on behalf of from managerial position(s) for one year or more, rescission of Buyer where permitted, even if this is not specifically required by law. the transaction) - Has a supervisory board in economies with a two-tier board system on which Mr. James • Ease of shareholder suits index (0–10): Access to internal appointed 60% of the shareholder-elected members. corporate documents; Evidence obtainable during trial and - Has not adopted bylaws or articles of association that go beyond the minimum requirements. allocation of legal expenses Does not follow codes, principles, recommendations or guidelines that are not mandatory. - Is a manufacturing company with its own distribution network. • Extent of conflict of interest regulation index (0-30): Sum of the extent of disclosure, extent of director liability and ease of The transaction involves the following details: shareholder suits indices - Mr. James owns 60% of Buyer, sits on Buyer’s board of directors and elected two directors to • Extent of shareholder rights index (0-6): Shareholders’ rights Buyer’s five-member board. and role in major corporate decisions - Mr. James also owns 90% of Seller, a company that operates a chain of retail hardware stores. Seller recently closed a large number of its stores. • Extent of ownership and control index (0-7): Governance - Mr. James proposes that Buyer purchase Seller’s unused fleet of trucks to expand Buyer’s safeguards protecting shareholders from undue board control distribution of its food products, a proposal to which Buyer agrees. The price is equal to 10% of and entrenchment Buyer’s assets and is higher than the market value. • Extent of corporate transparency index (0-7): Corporate - The proposed transaction is part of the company’s principal activity and is not outside the transparency on ownership stakes, compensation, audits and authority of the company. financial prospects - Buyer enters into the transaction. All required approvals are obtained, and all required disclosures • Extent of shareholder governance index (0–20): Sum of the made—that is, the transaction was not entered into fraudulently. extent of shareholders rights, extent of ownership and control - The transaction causes damages to Buyer. Shareholders sue Mr. James and the executives and and extent of corporate transparency indices directors that approved the transaction. • Strength of minority investor protection index (0–50): Sum of the extent of conflict of interest regulation and extent of shareholder governance indices Page 37 Doing Business 2020 Korea, Rep. Protecting Minority Investors - Korea, Rep. Stock exchange information Stock exchange Korea Exchange Stock exchange URL http://www.krx.co.kr Listed firms with equity securities 1782 City Covered Seoul Indicator Korea, Rep. OECD high income Best Regulatory Performance Extent of disclosure index (0-10) 8.0 6.5 10 (13 Economies) Extent of director liability index (0-10) 6.0 5.3 10 (3 Economies) Ease of shareholder suits index (0-10) 8.0 7.3 10 (Djibouti) Extent of shareholder rights index (0-6) 4.0 4.7 6 (19 Economies) Extent of ownership and control index (0-7) 5.0 4.5 7 (9 Economies) Extent of corporate transparency index (0-7) 6.0 5.7 7 (13 Economies) Figure – Protecting Minority in Korea, Rep. – Score 74.0 Score - Protecting Minority Investors Figure – Protecting Minority Investors in Korea, Rep. and comparator economies – Ranking and Score DB 2020 Protecting Minority Investors Score 0 100 74.0: Korea, Rep. (Rank: 25) 72.0: China (Rank: 28) 68.2: Regional Average (OECD high income) 64.0: Australia (Rank: 57) 64.0: Japan (Rank: 57) 62.0: Brazil (Rank: 61) Note: The ranking of economies on the strength of minority investor protections is determined by sorting their scores for protecting minority investors. These scores are the simple average of the scores for the extent of conflict of interest regulation index and the extent of shareholder governance index. Page 38 Doing Business 2020 Korea, Rep. Figure – Protecting Minority Investors in Korea, Rep. and comparator economies – Measure of Quality the Republic of Korea 6 6 8 5 4 8 Australia 7 2 8 3 4 8 Brazil 6 8 5 4 4 4 China 6 4 10 6 5 5 Japan 5 6 7 2 4 8 OECD high income 5.6 5.6 6.6 4.3 4.5 7.4 0 5 10 15 20 25 30 35 40 Sub-Indicator Score Extent of corporate transparency index (0-7) Extent of director liability index (0-10) Extent of disclosure index (0-10) Extent of ownership and control index (0-7) Extent of shareholder rights index (0-6) Ease of shareholder suits index (0-10) Page 39 Doing Business 2020 Korea, Rep. Details – Protecting Minority Investors in Korea, Rep. – Measure of Quality Answer Score Extent of conflict of interest regulation index (0-30) Extent of disclosure index (0-10) 8.0 Whose decision is sufficient to approve the Buyer-Seller transaction? (0-3) Board of directors 2.0 excluding interested members Must an external body review the terms of the transaction before it takes place? (0-1) Yes 1.0 Must Mr. James disclose his conflict of interest to the board of directors? (0-2) Existence of a conflict 1.0 without any specifics Must Buyer disclose the transaction in periodic filings (e.g. annual reports)? (0-2) Disclosure on the 2.0 transaction and on the conflict of interest Must Buyer immediately disclose the transaction to the public? (0-2) Disclosure on the 2.0 transaction and on the conflict of interest Extent of director liability index (0-10) 6.0 Can shareholders representing 10% of Buyer's share capital sue for the damage the transaction caused to Yes 1.0 Buyer? (0-1) Can shareholders hold Mr. James liable for the damage the transaction caused to Buyer? (0-2) Liable if unfair or 2.0 prejudicial Can shareholders hold the other directors liable for the damage the transaction caused to Buyer? (0-2) Liable if unfair or 2.0 prejudicial Must Mr. James pay damages for the harm caused to Buyer upon a successful claim by shareholders? (0-1) Yes 1.0 Must Mr. James repay profits made from the transaction upon a successful claim by shareholders? (0-1) No 0.0 Is Mr. James disqualified upon a successful claim by shareholders? (0-1) No 0.0 Can a court void the transaction upon a successful claim by shareholders? (0-2) Only in case of fraud 0.0 or bad faith Ease of shareholder suits index (0-10) 8.0 Before suing, can shareholders representing 10% of Buyer's share capital inspect the transaction documents? Yes 1.0 (0-1) Can the plaintiff obtain any documents from the defendant and witnesses at trial? (0-3) Any relevant 3.0 document Can the plaintiff request categories of documents from the defendant without identifying specific ones? (0-1) Yes 1.0 Can the plaintiff directly question the defendant and witnesses at trial? (0-2) Preapproved 1.0 questions only Is the level of proof required for civil suits lower than that of criminal cases? (0-1) Yes 1.0 Can shareholder plaintiffs recover their legal expenses from the company? (0-2) Yes if successful 1.0 Extent of shareholder governance index (0-20) Extent of shareholder rights index (0-6) 4.0 Does the sale of 51% of Buyer's assets require shareholder approval? Yes 1.0 Can shareholders representing 10% of Buyer's share capital call for a meeting of shareholders? Yes 1.0 Must Buyer obtain its shareholders’ approval every time it issues new shares? No 0.0 Do shareholders automatically receive preemption rights every time Buyer issues new shares? Yes 1.0 Do shareholders elect and dismiss the external auditor? No 0.0 Are changes to the rights of a class of shares only possible if the holders of the affected shares approve? Yes 1.0 Page 40 Doing Business 2020 Korea, Rep. Extent of ownership and control index (0-7) 5.0 Is it forbidden to appoint the same individual as CEO and chairperson of the board of directors? No 0.0 Must the board of directors include independent and nonexecutive board members? Yes 1.0 Can shareholders remove members of the board of directors without cause before the end of their term? Yes 1.0 Must the board of directors include a separate audit committee exclusively comprising board members? No 0.0 Must a potential acquirer make a tender offer to all shareholders upon acquiring 50% of Buyer? Yes 1.0 Must Buyer pay declared dividends within a maximum period set by law? Yes 1.0 Is a subsidiary prohibited from acquiring shares issued by its parent company? Yes 1.0 Extent of corporate transparency index (0-7) 6.0 Must Buyer disclose direct and indirect beneficial ownership stakes representing 5%? Yes 1.0 Must Buyer disclose information about board members’ primary employment and directorships in other Yes 1.0 companies? Must Buyer disclose the compensation of individual managers? Yes 1.0 Must a detailed notice of general meeting be sent 21 days before the meeting? No 0.0 Can shareholders representing 5% of Buyer’s share capital put items on the general meeting agenda? Yes 1.0 Must Buyer's annual financial statements be audited by an external auditor? Yes 1.0 Must Buyer disclose its audit reports to the public? Yes 1.0 Page 41 Doing Business 2020 Korea, Rep. Paying Taxes This topic records the taxes and mandatory contributions that a medium-size company must pay or withhold in a given year, as well as the administrative burden of paying taxes and contributions and complying with postfiling procedures (VAT refund and tax audit). The most recent round of data collection for the project was completed in May 2019 covering for the Paying Taxes indicator calendar year 2018 (January 1, 2018 – December 31, 2018). See the methodology for more information. What the indicators measure Case study assumptions Tax payments for a manufacturing company in 2018 (number Using a case scenario, Doing Business records taxes and mandatory contributions a medium size per year adjusted for electronic and joint filing and payment) company must pay in a year, and measures the administrative burden of paying taxes, contributions and dealing with postfiling processes. Information is also compiled on frequency of • Total number of taxes and contributions paid or withheld, filing and payments, time taken to comply with tax laws, time taken to comply with the including consumption taxes (value added tax, sales tax or requirements of postfiling processes and time waiting. goods and service tax) • Method and frequency of filing and payment To make data comparable across economies, several assumptions are used: - TaxpayerCo is a medium-size business that started operations on January 1, 2017. It produces Time required to comply with 3 major taxes (hours per year) ceramic flowerpots and sells them at retail. All taxes and contributions recorded are paid in the • Collecting information, computing tax payable second year of operation (calendar year 2018). Taxes and mandatory contributions are measured at all levels of government. • Preparing separate tax accounting books, if required • Completing tax return, filing with agencies The VAT refund process: - In June 2018, TaxpayerCo. makes a large capital purchase: the value of the machine is 65 times • Arranging payment or withholding income per capita of the economy. Sales are equally spread per month (1,050 times income per capita divided by 12) and cost of goods sold are equally expensed per month (875 times income Total tax and contribution rate (% of commercial profits) per capita divided by 12). The machinery seller is registered for VAT and excess input VAT incurred • Profit or corporate income tax in June will be fully recovered after four consecutive months if the VAT rate is the same for inputs, sales and the machine and the tax reporting period is every month. Input VAT will exceed Output • Social contributions, labor taxes paid by employer VAT in June 2018. • Property and property transfer taxes The corporate income tax audit process: • Dividend, capital gains, financial transactions taxes - An error in calculation of income tax liability (for example, use of incorrect tax depreciation rates, • Waste collection, vehicle, road and other taxes or incorrectly treating an expense as tax deductible) leads to an incorrect income tax return and a corporate income tax underpayment. TaxpayerCo. discovered the error and voluntarily notified the Postfiling Index tax authority. The value of the underpaid income tax liability is 5% of the corporate income tax • Time to comply with VAT refund (hours) liability due. TaxpayerCo. submits corrected information after the deadline for submitting the annual tax return, but within the tax assessment period. • Time to obtain VAT refund (weeks) • Time to comply with a corporate income tax correction (hours) • Time to complete a corporate income tax correction (weeks) Page 42 Doing Business 2020 Korea, Rep. Paying Taxes - Korea, Rep. Indicator Korea, Rep. OECD high income Best Regulatory Performance Payments (number per year) 12 10.3 3 (2 Economies) Time (hours per year) 174 158.8 49 (3 Economies) Total tax and contribution rate (% of profit) 33.2 39.9 26.1 (33 Economies) Postfiling index (0-100) 93.9 86.7 None in 2018/19 Figure – Paying Taxes in Korea, Rep. – Score 85.0 80.7 90.1 93.9 Payments Time Total tax and contribution rate Postfiling index Figure – Paying Taxes in Korea, Rep. and comparator economies – Ranking and Score DB 2020 Paying Taxes Score 0 100 87.4: Korea, Rep. (Rank: 21) 85.7: Australia (Rank: 28) 84.3: Regional Average (OECD high income) 81.6: Japan (Rank: 51) 70.1: China (Rank: 105) 34.4: Brazil (Rank: 184) Note: The ranking of economies on the ease of paying taxes is determined by sorting their scores for paying taxes. These scores are the simple average of the scores for each of the component indicators, with a threshold and a nonlinear transformation applied to one of the component indicators, the total tax and contribution rate. The threshold is defined as the total tax and contribution rate at the 15th percentile of the overall distribution for all years included in the analysis up to and including Doing Business 2015, which is 26.1%. All economies with a total tax and contribution rate below this threshold receive the same score as the economy at the threshold. Page 43 Doing Business 2020 Korea, Rep. Figure – Paying Taxes in Korea, Rep. and comparator economies – Measure of Quality 120 100 93.9 95.3 95.2 86.7 Index score 80 60 50.0 40 20 7.8 0 Korea, Australia Brazil China Japan OECD Rep. high income Page 44 Doing Business 2020 Korea, Rep. Details – Paying Taxes in Korea, Rep. Tax or Payments Notes on Time (hours) Statutory tax Tax base Total tax and Notes on TTCR mandatory (number) Payments rate contribution contribution rate (% of profit) Corporate 1.0 online 75.0 10% (up to KRW taxable profit 16.52 income tax 200 million), 20% (KRW 200 million to 20 billion) and 22%(over KRW 20 billion) Employer paid 1.0 online 80.0 4.5% gross salaries 5.02 National pension Employer paid 0.0 online and jointly 3.12% gross salaries 3.52 National health insurance Employer paid 0.0 online and jointly 2.9% gross salaries 3.27 Accident compensation insurance Corporate Local 1.0 online 1% (up to KRW taxable profit 1.65 Income Tax 200 million), 2% (KRW 200 million to 20 billion) and 2.2%(over KRW 20 billion) Employer paid 0.0 online and jointly 0.9% gross salaries 1.02 Unemployment insurance Acquisition tax 1.0 2% base rate price of 0.96 for building acquisition local income tax 1.0 online 0.5% gross salaries 0.56 in proporation to employee salaries Property tax 1.0 0.3% (building), statutory 0.32 0.24%4.8% standard price (land), 0.14% (city planning) Employer paid 0.0 online and jointly 7.38% contribution to 0.26 Long Term Care national health Insurance care insurance Community 1.0 0.04%0.12% statutory 0.06 facility tax standard price of building Per capita 1.0 KRW 62,500 per per entity 0.02 resident tax entity + KRW 250 per ㎡ of business place Stamp duty 1.0 various rates contract value 0.00 small amount Fuel tax 1.0 various rates included in the 0.00 price of fuel Automobile tax 1.0 36,000 per truck per vehicle 0.00 Employee paid 0.0 online and jointly 0.65% gross salaries 0.00 withheld Employment Insurance Page 45 Doing Business 2020 Korea, Rep. Employee paid 0.0 online and jointly various rates gross salaries 0.00 withheld Individual income tax settlement Employee paid 0.0 online and jointly 3.00% gross salaries 0.00 withheld National Health Insurance Employee paid 0.0 online and jointly 4.5% gross salaries 0.00 withheld National Pension Value added tax 1.0 online 19.0 10% net sales 0.00 not included (VAT) Totals 12 174 33.2 Page 46 Doing Business 2020 Korea, Rep. Details – Paying Taxes in Korea, Rep. – Tax by Type Taxes by type Answer Profit tax (% of profit) 18.2 Labor tax and contributions (% of profit) 13.7 Other taxes (% of profit) 1.4 Page 47 Doing Business 2020 Korea, Rep. Details – Paying Taxes in Korea, Rep. – Measure of Quality Answer Score Postfiling index (0-100) 93.9 VAT refunds Does VAT exist? Yes Does a VAT refund process exist per the case study? Yes Restrictions on VAT refund process none Percentage of cases exposed to a VAT audit (%) 0% - 24% Is there a mandatory carry forward period? No Time to comply with VAT refund (hours) 0.0 100 Time to obtain VAT refund (weeks) 9.0 89.5 Corporate income tax audits Does corporate income tax exist? Yes Percentage of cases exposed to a corporate income tax audit (%) 0% - 24% Time to comply with a corporate income tax correction (hours) 9.0 86.2 Time to complete a corporate income tax correction (weeks) No tax audit per case 100 study scenario Notes: Names of taxes have been standardized. For instance income tax, profit tax, tax on company's income are all named corporate income tax in this table. The hours for VAT include all the VAT and sales taxes applicable. The hours for Social Security include all the hours for labor taxes and mandatory contributions in general. The postfiling index is the average of the scores on time to comply with VAT refund, time to obtain a VAT refund, time to comply with a corporate income tax correction and time to complete a corporate income tax correction. N/A = Not applicable. Page 48 Doing Business 2020 Korea, Rep. Trading across Borders Doing Business records the time and cost associated with the logistical process of exporting and importing goods. Doing Business measures the time and cost (excluding tariffs) associated with three sets of procedures—documentary compliance, border compliance and domestic transport—within the overall process of exporting or importing a shipment of goods. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Documentary compliance To make the data comparable across economies, a few assumptions are made about the traded goods and the transactions: • Obtaining, preparing and submitting documents during transport, clearance, inspections and port or border handling in Time: Time is measured in hours, and 1 day is 24 hours (for example, 22 days are recorded as origin economy 22×24=528 hours). If customs clearance takes 7.5 hours, the data are recorded as is. Alternatively, • Obtaining, preparing and submitting documents required by suppose documents are submitted to a customs agency at 8:00a.m., are processed overnight and destination economy and any transit economies can be picked up at 8:00a.m. the next day. The time for customs clearance would be recorded as 24 hours because the actual procedure took 24 hours. • Covers all documents required by law and in practice, including electronic submissions of information Cost: Insurance cost and informal payments for which no receipt is issued are excluded from the Border compliance costs recorded. Costs are reported in U.S. dollars. Contributors are asked to convert local currency into U.S. dollars based on the exchange rate prevailing on the day they answer the questionnaire. • Customs clearance and inspections Contributors are private sector experts in international trade logistics and are informed about • Inspections by other agencies (if applied to more than 20% of exchange rates. shipments) Assumptions of the case study: • Handling and inspections that take place at the economy’s port - For all 190 economies covered by Doing Business, it is assumed a shipment is in a warehouse in or border the largest business city of the exporting economy and travels to a warehouse in the largest business city of the importing economy. Domestic transport - It is assumed each economy imports 15 metric tons of containerized auto parts (HS 8708) from • Loading or unloading of the shipment at the warehouse or its natural import partner—the economy from which it imports the largest value (price times port/border quantity) of auto parts. It is assumed each economy exports the product of its comparative advantage (defined by the largest export value) to its natural export partner—the economy that is • Transport between warehouse and port/border the largest purchaser of this product. Shipment value is assumed to be $50,000. • Traffic delays and road police checks while shipment is en - The mode of transport is the one most widely used for the chosen export or import product and route the trading partner, as is the seaport or land border crossing. - All electronic information submissions requested by any government agency in connection with the shipment are considered to be documents obtained, prepared and submitted during the export or import process. - A port or border is a place (seaport or land border crossing) where merchandise can enter or leave an economy. - Relevant government agencies include customs, port authorities, road police, border guards, standardization agencies, ministries or departments of agriculture or industry, national security agencies and any other government authorities. Page 49 Doing Business 2020 Korea, Rep. Trading across Borders - Korea, Rep. Indicator Korea, Rep. OECD high income Best Regulatory Performance Time to export: Border compliance (hours) 13 12.7 1 (19 Economies) Cost to export: Border compliance (USD) 185 136.8 0 (19 Economies) Time to export: Documentary compliance (hours) 1 2.3 1 (26 Economies) Cost to export: Documentary compliance (USD) 11 33.4 0 (20 Economies) Time to import: Border compliance (hours) 6 8.5 1 (25 Economies) Cost to import: Border compliance (USD) 315 98.1 0 (28 Economies) Time to import: Documentary compliance (hours) 1 3.4 1 (30 Economies) Cost to import: Documentary compliance (USD) 27 23.5 0 (30 Economies) Figure – Trading across Borders in Korea, Rep. – Score 92.2 82.6 100.0 97.2 98.2 73.8 100.0 96.2 Time Cost Time Cost Time Cost Time Cost to to to to to to to to export: export: export: export: import: import: import: import: Border Border Documentary Documentary Border Border Documentary Documentary compliance compliance compliance compliance compliance compliance compliance compliance Figure – Trading across Borders in Korea, Rep. and comparator economies – Ranking and Score DB 2020 Trading Across Borders Score 0 100 94.3: Regional Average (OECD high income) 92.5: Korea, Rep. (Rank: 36) 86.5: China (Rank: 56) 85.9: Japan (Rank: 57) 70.3: Australia (Rank: 106) 69.9: Brazil (Rank: 108) Note: The ranking of economies on the ease of trading across borders is determined by sorting their scores for trading across borders. These scores are the simple average of the scores for the time and cost for documentary compliance and border compliance to export and import. Page 50 Doing Business 2020 Korea, Rep. Figure – Trading across Borders in Korea, Rep. – Time and Cost Time (hours) Cost (USD) 14 13 315 350 12 300 Time (hours) 10 250 Cost (USD) 8 185 200 6 6 150 4 100 2 1 1 27 50 11 0 0 Export Export Import Import - - - - Border Documentary Border Documentary Compliance Compliance Compliance Compliance Page 51 Doing Business 2020 Korea, Rep. Details – Trading across Borders in Korea, Rep. Characteristics Export Import Product HS 85 : Electrical machinery and equipment and HS 8708: Parts and accessories of motor vehicles parts thereof; sound recorders and reproducers, television image and sound recorders and reproducers, and parts and accessories of such articles Trade partner China Japan Border Incheon port Busan port Distance (km) 34 401 Domestic transport time (hours) 1 7 Domestic transport cost (USD) 216 568 Details – Trading across Borders in Korea, Rep. – Components of Border Compliance Time to Complete (hours) Associated Costs (USD) Export: Clearance and inspections required by 0.7 41.0 customs authorities Export: Clearance and inspections required by 0.0 0.0 agencies other than customs Export: Port or border handling 13.4 143.8 Import: Clearance and inspections required by 1.0 36.9 customs authorities Import: Clearance and inspections required by 0.0 0.0 agencies other than customs Import: Port or border handling 6.0 277.8 Page 52 Doing Business 2020 Korea, Rep. Details – Trading across Borders in Korea, Rep. – Trade Documents Export Import Bill of lading Bill of lading Packing list Delivery Order Customs export declaration Customs import declaration SOLAS certificate SOLAS certificate Page 53 Doing Business 2020 Korea, Rep. Enforcing Contracts The enforcing contracts indicator measures the time and cost for resolving a commercial dispute through a local first-instance court, and the quality of judicial processes index, evaluating whether each economy has adopted a series of good practices that promote quality and efficiency in the court system. The most recent round of data collection was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Time required to enforce a contract through the courts The dispute in the case study involves the breach of a sales contract between two domestic (calendar days) businesses. The case study assumes that the court hears an expert on the quality of the goods in dispute. This distinguishes the case from simple debt enforcement. • Time to file and serve the case • Time for trial and to obtain the judgment To make the data on the time and comparable across economies, several assumptions about the case are used: • Time to enforce the judgment - The dispute concerns a lawful transaction between two businesses (Seller and Buyer), both Cost required to enforce a contract through the courts (% of located in the economy’s largest business city. For 11 economies the data are also collected for the claim value) second largest business city. - The Buyer orders custom-made furniture, then fails to pay alleging that the goods are not of • Average attorney fees adequate quality. • Court costs - The value of the dispute is 200% of the income per capita or the equivalent in local currency of USD 5,000, whichever is greater. • Enforcement costs - The Seller sues the Buyer before the court with jurisdiction over commercial cases worth 200% of income per capita or $5,000 whichever is greater. Quality of judicial processes index (0-18) - The Seller requests the pretrial attachment of the defendant’s movable assets to secure the • Court structure and proceedings (-1-5) claim. - The claim is disputed on the merits because of Buyer’s allegation that the quality of the goods • Case management (0-6) was not adequate. • Court automation (0-4) - The judge decides in favor of the seller; there is no appeal. • Alternative dispute resolution (0-3) - The Seller enforces the judgment through a public sale of the Buyer’s movable assets. Page 54 Doing Business 2020 Korea, Rep. Enforcing Contracts - Korea, Rep. Standardized Case Claim value KRW 67,251,997 Court name Seoul Central District Court City Covered Seoul Indicator Korea, Rep. OECD high income Best Regulatory Performance Time (days) 290 589.6 120 (Singapore) Cost (% of claim value) 12.7 21.5 0.1 (Bhutan) Quality of judicial processes index (0-18) 14.5 11.7 None in 2018/19 Figure – Enforcing Contracts in Korea, Rep. – Score 86.1 85.8 80.6 Time Cost Quality of judicial processes index Figure – Enforcing Contracts in Korea, Rep. and comparator economies – Ranking and Score DB 2020 Enforcing Contracts Score 0 100 84.1: Korea, Rep. (Rank: 2) 80.9: China (Rank: 5) 79.0: Australia (Rank: 6) 67.8: Regional Average (OECD high income) 65.3: Japan (Rank: 50) 64.1: Brazil (Rank: 58) Note: The ranking of economies on the ease of enforcing contracts is determined by sorting their scores for enforcing contracts. These scores are the simple average of the scores for each of the component indicators. Page 55 Doing Business 2020 Korea, Rep. Figure – Enforcing Contracts in Korea, Rep. – Time and Cost Time (days) Cost (% of claim value) 900 30 801 Cost (% of claim value) 800 23.2 23.4 25 700 22.0 21.5 589.6 Time (days) 600 20 496 16.2 500 402 12.7 15 400 360 290 300 10 200 5 100 0 0 Australia Brazil China Japan Korea, OECD Rep. high income Page 56 Doing Business 2020 Korea, Rep. Figure – Enforcing Contracts in Korea, Rep. and comparator economies – Measure of Quality the Republic of Korea 3 4 4 3.5 Australia 2.5 5.5 3 4.5 Brazil 3 3 3 4.1 China 3 5.5 3 5 Japan 2.5 1 1 3 OECD high income 2.5 3.2 2.4 3.6 0 2 4 6 8 10 12 14 16 18 Sub-Indicator Score Alternative dispute resolution (0-3) Case management (0-6) Court automation (0-4) Court structure and proceedings (-1-5) Details – Enforcing Contracts in Korea, Rep. Indicator Time (days) 290 Filing and service 20 Trial and judgment 150 Enforcement of judgment 120 Cost (% of claim value) 12.7 Attorney fees 9 Court fees 3 Enforcement fees 0.7 Quality of judicial processes index (0-18) 14.5 Court structure and proceedings (-1-5) 3.5 Case management (0-6) 4.0 Court automation (0-4) 4.0 Alternative dispute resolution (0-3) 3.0 Page 57 Doing Business 2020 Korea, Rep. Details – Enforcing Contracts in Korea, Rep. – Measure of Quality Answer Score Quality of judicial processes index (0-18) 14.5 Court structure and proceedings (-1-5) 3.5 1. Is there a court or division of a court dedicated solely to hearing commercial cases? No 0.0 2. Small claims court 1.5 2.a. Is there a small claims court or a fast-track procedure for small claims? Yes 2.b. If yes, is self-representation allowed? Yes 3. Is pretrial attachment available? Yes 1.0 4. Are new cases assigned randomly to judges? Yes, automatic 1.0 5. Does a woman's testimony carry the same evidentiary weight in court as a man's? Yes 0.0 Case management (0-6) 4.0 1. Time standards 0.0 1.a. Are there laws setting overall time standards for key court events in a civil case? Yes 1.b. If yes, are the time standards set for at least three court events? No 1.c. Are these time standards respected in more than 50% of cases? Yes 2. Adjournments 0.0 2.a. Does the law regulate the maximum number of adjournments that can be granted? No 2.b. Are adjournments limited to unforeseen and exceptional circumstances? No 2.c. If rules on adjournments exist, are they respected in more than 50% of cases? n.a. 3. Can two of the following four reports be generated about the competent court: (i) time to disposition report; (ii) Yes 1.0 clearance rate report; (iii) age of pending cases report; and (iv) single case progress report? 4. Is a pretrial conference among the case management techniques used before the competent court? Yes 1.0 5. Are there any electronic case management tools in place within the competent court for use by judges? Yes 1.0 6. Are there any electronic case management tools in place within the competent court for use by lawyers? Yes 1.0 Court automation (0-4) 4.0 1. Can the initial complaint be filed electronically through a dedicated platform within the competent court? Yes 1.0 2. Is it possible to carry out service of process electronically for claims filed before the competent court? Yes 1.0 3. Can court fees be paid electronically within the competent court? Yes 1.0 4. Publication of judgments 1.0 4.a Are judgments rendered in commercial cases at all levels made available to the general public Yes through publication in official gazettes, in newspapers or on the internet or court website? 4.b. Are judgments rendered in commercial cases at the appellate and supreme court level made Yes available to the general public through publication in official gazettes, in newspapers or on the internet or court website? Alternative dispute resolution (0-3) 3.0 1. Arbitration 1.5 1.a. Is domestic commercial arbitration governed by a consolidated law or consolidated chapter or Yes section of the applicable code of civil procedure encompassing substantially all its aspects? 1.b. Are there any commercial disputes—aside from those that deal with public order or public policy— No that cannot be submitted to arbitration? 1.c. Are valid arbitration clauses or agreements usually enforced by the courts? Yes Page 58 Doing Business 2020 Korea, Rep. 2. Mediation/Conciliation 1.5 2.a. Is voluntary mediation or conciliation available? Yes 2.b. Are mediation, conciliation or both governed by a consolidated law or consolidated chapter or Yes section of the applicable code of civil procedure encompassing substantially all their aspects (for example, definition, aim and scope of application, desig 2.c. Are there financial incentives for parties to attempt mediation or conciliation (i.e., if mediation or Yes conciliation is successful, a refund of court filing fees, income tax credits or the like)? Page 59 Doing Business 2020 Korea, Rep. Resolving Insolvency Doing Business studies the time, cost and outcome of insolvency proceedings involving domestic legal entities. These variables are used to calculate the recovery rate, which is recorded as cents on the dollar recovered by secured creditors through reorganization, liquidation or debt enforcement (foreclosure or receivership) proceedings. To determine the present value of the amount recovered by creditors, Doing Business uses the lending rates from the International Monetary Fund, supplemented with data from central banks and the Economist Intelligence Unit. The most recent round of data collection was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Time required to recover debt (years) To make the data on the time, cost and outcome comparable across economies, several assumptions about the business and the case are used: • Measured in calendar years • Appeals and requests for extension are included - A hotel located in the largest city (or cities) has 201 employees and 50 suppliers. The hotel experiences financial difficulties. Cost required to recover debt (% of debtor’s estate) - The value of the hotel is 100% of the income per capita or the equivalent in local currency of USD 200,000, whichever is greater. • Measured as percentage of estate value - The hotel has a loan from a domestic bank, secured by a mortgage over the hotel’s real estate. • Court fees The hotel cannot pay back the loan, but makes enough money to operate otherwise. • Fees of insolvency administrators In addition, Doing Business evaluates the quality of legal framework applicable to judicial • Lawyers’ fees liquidation and reorganization proceedings and the extent to which best insolvency practices have • Assessors’ and auctioneers’ fees been implemented in each economy covered. • Other related fees Outcome • Whether business continues operating as a going concern or business assets are sold piecemeal Recovery rate for creditors • Measures the cents on the dollar recovered by secured creditors • Outcome for the business (survival or not) determines the maximum value that can be recovered • Official costs of the insolvency proceedings are deducted • Depreciation of furniture is taken into account • Present value of debt recovered Strength of insolvency framework index (0- 16) • Sum of the scores of four component indices: • Commencement of proceedings index (0-3) • Management of debtor’s assets index (0-6) • Reorganization proceedings index (0-3) • Creditor participation index (0-4) Page 60 Doing Business 2020 Korea, Rep. Resolving Insolvency - Korea, Rep. Indicator Korea, Rep. OECD high income Best Regulatory Performance Recovery rate (cents on the dollar) 84.3 70.2 92.9 (Norway) Time (years) 1.5 1.7 0.4 (Ireland) Cost (% of estate) 3.5 9.3 1.0 (Norway) Outcome (0 as piecemeal sale and 1 as going concern) 1 .. .. Strength of insolvency framework index (0-16) 12.0 11.9 None in 2018/19 Figure – Resolving Insolvency in Korea, Rep. – Score 90.8 75.0 Recovery rate Strength of insolvency framework index Figure – Resolving Insolvency in Korea, Rep. and comparator economies – Ranking and Score DB 2020 Resolving Insolvency Score 0 100 90.2: Japan (Rank: 3) 82.9: Korea, Rep. (Rank: 11) 78.9: Australia (Rank: 20) 74.9: Regional Average (OECD high income) 62.1: China (Rank: 51) 50.4: Brazil (Rank: 77) Note: The ranking of economies on the ease of resolving insolvency is determined by sorting their scores for resolving insolvency. These scores are the simple average of the scores for the recovery rate and the strength of insolvency framework index. Page 61 Doing Business 2020 Korea, Rep. Figure – Resolving Insolvency in Korea, Rep. – Time and Cost Time (years) Cost (% of estate) 4.5 25 4.0 22.0 4 Cost (% of estate) 3.5 20 Time (years) 3 15 2.5 12.0 2 1.7 1.7 9.3 8.0 1.5 10 1.5 1.0 1 0.6 4.2 3.5 5 0.5 0 0 Australia Brazil China Japan Korea, OECD Rep. high income Page 62 Doing Business 2020 Korea, Rep. Figure – Resolving Insolvency in Korea, Rep. and comparator economies – Measure of Quality the Republic of Korea 5.5 2.5 1 3 Australia 5 2.5 3 0.5 Brazil 5.5 2.5 3 2 China 6 3 2 2.5 Japan 6 3 1 3 OECD high income 5.3 2.8 2.1 1.9 0 2 4 6 8 10 12 14 16 Sub-Indicator Score Management of debtor's assets index (0-6) Commencement of proceedings index (0-3) Creditor participation index (0-4) Reorganization proceedings index (0-3) Note: Even if the economy’s legal framework includes provisions related to insolvency proceedings (liquidation or reorganization), the economy receives 0 points for the strength of insolvency framework index, if time, cost and outcome indicators are recorded as “no practice.” Figure – Resolving Insolvency in Korea, Rep. and comparator economies – Recovery Rate Recovery rate(cents on the dollar) 100 92.1 90 84.3 82.7 80 70.2 70 60 50 40 36.9 30 18.2 20 10 0 Korea, Rep. Australia Brazil China Japan OECD high income Page 63 Doing Business 2020 Korea, Rep. Details – Resolving Insolvency in Korea, Rep. Indicator Answer Score Proceeding reorganization Mirage would initiate reorganization (rehabilitation) as it is the best way to preserve the value of the hotel and keep the supplier/employee network. The Mirage management will file a petition to the Seoul Bankruptcy Court. As a result, Mirage will most likely continue operating as a going concern, retain most of its employees and maintain its business relationships. Outcome going concern The reorganization plan will likely get approved by the creditors and the company will continue operating as a going concern. Time (in years) 1.5 The main procedural steps required to complete the entire rehabilitation process includes (i) filing of the petition; (ii) court’s order for commencement of the rehabilitation proceeding; (iii) submission and investigation of claims; (iv) submission of the rehabilitation plan; (v) approval of the rehabilitation plan (during meeting of interested parties, i.e., creditors and equity holders) and court’s approval of same; and (vi) closing of the rehabilitation proceeding. The rehabilitation proceedings may commence as fast as on the same day the petition is filed and usually within 30 days from the date the petition is filed. The court sets the deadline for submission and investigation of claims, which is between 3 weeks and 3 months from the date of commencement for claims submission. The timeframe for claims investigation is between 1 week and 1 month thereafter. The rehabilitation plan is submitted thereafter, within the deadline set by the court, which must not exceed 4 months from the deadline for claims investigation. Confirmation of the rehabilitation plan by creditors must take place within 1 year from commencement of the proceedings, and the court usually approves the plan on the same day. The deadline for plan confirmation may be extend for up to 6 months. Therefore, the entire rehabilitation proceeding may take up to 18 months. Cost (% of estate) 3.5 The cost associated with the case would amount to approximately 3.5% of the value of the debtor's estate. The cost incurred during the entire insolvency process mainly includes attorneys' fees (3%) and insolvency representative fees (0.5%). Other fees are insignificant. Recovery rate 84.3 (cents on the dollar) Page 64 Doing Business 2020 Korea, Rep. Details – Resolving Insolvency in Korea, Rep. – Measure of Quality Answer Score Strength of insolvency framework index (0-16) 12.0 Commencement of proceedings index (0-3) 2.5 What procedures are available to a DEBTOR when commencing insolvency proceedings? (a) Debtor may file for 1.0 both liquidation and reorganization Does the insolvency framework allow a CREDITOR to file for insolvency of the debtor? (b) Yes, but a creditor 0.5 may file for liquidation only What basis for commencement of the insolvency proceedings is allowed under the insolvency framework? (a) (c) Both (a) and (b) 1.0 Debtor is generally unable to pay its debts as they mature (b) The value of debtor's liabilities exceeds the value options are available, of its assets but only one of them needs to be complied with Management of debtor's assets index (0-6) 5.5 Does the insolvency framework allow the continuation of contracts supplying essential goods and services to the Yes 1.0 debtor? Does the insolvency framework allow the rejection by the debtor of overly burdensome contracts? Yes 1.0 Does the insolvency framework allow avoidance of preferential transactions? Yes 1.0 Does the insolvency framework allow avoidance of undervalued transactions? Yes 1.0 Does the insolvency framework provide for the possibility of the debtor obtaining credit after commencement of Yes 1.0 insolvency proceedings? Does the insolvency framework assign priority to post-commencement credit? (a) Yes over all pre- 0.5 commencement creditors, secured or unsecured Reorganization proceedings index (0-3) 3.0 Which creditors vote on the proposed reorganization plan? (b) Only creditors 1.0 whose rights are affected by the proposed plan Does the insolvency framework require that dissenting creditors in reorganization receive at least as much as Yes 1.0 what they would obtain in a liquidation? Are the creditors divided into classes for the purposes of voting on the reorganization plan, does each class vote Yes 1.0 separately and are creditors in the same class treated equally? Creditor participation index (0-4) 1.0 Does the insolvency framework require approval by the creditors for selection or appointment of the insolvency No 0.0 representative? Does the insolvency framework require approval by the creditors for sale of substantial assets of the debtor? No 0.0 Does the insolvency framework provide that a creditor has the right to request information from the insolvency No 0.0 representative? Does the insolvency framework provide that a creditor has the right to object to decisions accepting or rejecting Yes 1.0 creditors' claims? Note: Even if the economy’s legal framework includes provisions related to insolvency proceedings (liquidation or reorganization), the economy receives 0 points for the strength of insolvency framework index, if time, cost and outcome indicators are recorded as “no practice.” Page 65 Doing Business 2020 Korea, Rep. Employing Workers Doing Business presents detailed data for the employing workers indicators on the Doing Business website (http://www.doingbusiness.org). The study does not present rankings of economies on these indicators or include the topic in the aggregate ease of doing business score or ranking on the ease of doing business. The most recent round of data collection was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Hiring To make the data comparable across economies, several assumptions about the worker and the (i) whether fixed-term contracts are prohibited for permanent business are used. tasks; (ii) maximum cumulative duration of fixed-term contracts; (iii) length of the maximum probationary period; (iv) minimum The worker: wage;(v) ratio of minimum wage to the average value added per - Is a cashier in a supermarket or grocery store, age 19, with one year of work experience. worker. - Is a full-time employee. - Is not a member of the labor union, unless membership is mandatory. Working hours (i) maximum number of working days allowed per week; (ii) The business: premiums for work: at night, on a weekly rest day and overtime; - Is a limited liability company (or the equivalent in the economy). (iii) whether there are restrictions on work at night, work on a - Operates a supermarket or grocery store in the economy’s largest business city. For 11 weekly rest day and for overtime work; (iv) length of paid annual economies the data are also collected for the second largest business city. leave. - Has 60 employees. - Is subject to collective bargaining agreements if such agreements cover more than 50% of the Redundancy rules food retail sector and they apply even to firms that are not party to them. (i) whether redundancy can be basis for terminating workers; (ii) - Abides by every law and regulation but does not grant workers more benefits than those whether employer needs to notify and/or get approval from third mandated by law, regulation or (if applicable) collective bargaining agreements. party to terminate 1 redundant worker and a group of 9 redundant workers; (iii) whether the law requires employer to reassign or retrain a worker before making worker redundant; (iv) whether priority rules apply for redundancies and reemployment. Redundancy cost (i) notice period for redundancy dismissal; (ii) severance payments, and (iii) penalties due when terminating a redundant worker. Data on the availability of unemployment protection for a worker with one year of employment is also collected. Page 66 Doing Business 2020 Korea, Rep. Employing Workers - Korea, Rep. Details – Employing Workers in Korea, Rep. Answer Hiring Fixed-term contracts prohibited for permanent tasks? No Maximum length of a single fixed-term contract (months) 24.0 Maximum length of fixed-term contracts, including renewals (months) 24.0 Minimum wage applicable to the worker assumed in the case study (US$/month) 1284.0 Ratio of minimum wage to value added per worker 0.4 Maximum length of probationary period (months) 3.0 Working hours Standard workday 8.0 Maximum number of working days per week 6.0 Premium for night work (% of hourly pay) 50.0 Premium for work on weekly rest day (% of hourly pay) 50.0 Premium for overtime work (% of hourly pay) 50.0 Restrictions on night work? No Restrictions on weekly holiday? No Restrictions on overtime work? No Paid annual leave for a worker with 1 year of tenure (working days) 15.0 Paid annual leave for a worker with 5 years of tenure (working days) 17.0 Paid annual leave for a worker with 10 years of tenure (working days) 19.0 Paid annual leave (average for workers with 1, 5 and 10 years of tenure, in working days) 17.0 Redundancy rules Dismissal due to redundancy allowed by law? Yes Third-party notification if one worker is dismissed? Yes Third-party approval if one worker is dismissed? No Third-party notification if nine workers are dismissed? Yes Third-party approval if nine workers are dismissed? No Retraining or reassignment obligation before redundancy? No Priority rules for redundancies? No Priority rules for reemployment? Yes Redundancy cost Notice period for redundancy dismissal for a worker with 1 year of tenure (weeks of salary) 4.3 Notice period for redundancy dismissal for a worker with 5 years of tenure (weeks of salary) 4.3 Notice period for redundancy dismissal for a worker with 10 years of tenure (weeks of salary) 4.3 Notice period for redundancy dismissal (average for workers with 1, 5 and 10 years of tenure, in weeks of salary) 4.3 Severance pay for redundancy dismissal for a worker with 1 year of tenure (weeks of salary) 4.3 Severance pay for redundancy dismissal for a worker with 5 years of tenure (weeks of salary) 21.7 Page 67 Doing Business 2020 Korea, Rep. Severance pay for redundancy dismissal for a worker with 10 years of tenure (weeks of salary) 43.3 Severance pay for redundancy dismissal (average for workers with 1, 5 and 10 years of tenure, in weeks of salary) 23.1 Unemployment protection after one year of employment? Yes Page 68 Doing Business 2020 Korea, Rep. Business Reforms in Korea, Rep. From May 2, 2018 to May 1, 2019, 115 economies implemented 294 business regulatory reforms across the 10 areas measured by Doing Business. Reforms inspired by Doing Business have been implemented by economies in all regions. The following are reforms implemented since Doing Business 2008. =Doing Business reform making it easier to do business. = Change making it more difficult to do business. DB2020 Paying Taxes: The Republic of Korea made paying taxes easier by introducing additional features to its online filing system for corporate income tax and value added tax. DB2017 Starting a Business: The Republic of Korea made starting a business faster by eliminating post-registration procedures. DB2016 Paying Taxes: The Republic of Korea made paying taxes more complicated and costly for companies by requiring separate filing and payment of the local income tax and by increasing the rates for unemployment insurance and national health insurance paid by employers. DB2015 Registering Property: The Republic of Korea made transferring property easier by reducing the time needed to buy housing bonds and to register the property transfer. Protecting Minority Investors: The Republic of Korea strengthened minority investor protections by increasing the level of transparency expected from companies on managerial compensation. DB2014 Getting Credit: Korea revised its secured transactions framework by creating new types of security rights that can be publicized through registration. DB2013 Getting Electricity: Korea made getting electricity less costly by introducing a new connection fee schedule and an installment payment system. Protecting Minority Investors: Korea strengthened investor protections by making it easier to sue directors in cases of prejudicial related-party transactions. Paying Taxes: Korea made paying taxes less costly for companies by reducing the profit tax rate. Resolving Insolvency: Korea expedited the insolvency process by implementing a fast track for company rehabilitation. DB2012 Starting a Business: Korea made starting a business easier by introducing a new online one-stop shop, Start-Biz. Paying Taxes: Korea eased the administrative burden of paying taxes for firms by merging several taxes, allowing 4 labor taxes and contributions to be paid jointly and continuing to increase the use of the online tax payment system. Enforcing Contracts: Korea made filing a commercial case easier by introducing an electronic case filing system. DB2011 Resolving Insolvency: Korea made it easier to deal with insolvency by introducing postfiling financing, granting superpriority to the repayment of loans given to companies undergoing reorganization. DB2010 Starting a Business: Korea made starting a business easier by reducing costs, allowing online payment of registration taxes, setting time limits for value added tax registration and eliminating the minimum capital requirement and notarization requirements. Paying Taxes: Korea accelerated its corporate income tax reduction program, shortening it from 5 years to 3. DB2009 Trading across Borders: Korea made trading across borders easier by upgrading the electronic data interchange system. Employing Workers: Korea increased the maximum duration of fixed-term contracts. Page 69 Doing Business 2020 Korea, Rep. Page 70