South Korea



About South Korea

South Korea has the fourth largest economy in Asia and the 11th largest in the world. While South Korea started out as one of the poorest nations following the Korean War, strong technological advancements brought about from its skilled labour force, propelled the market's economy into becoming one of the most developed economies in merely a generation. Currently, South Korea has been identified as one of the Next Eleven countries (countries projected to dominate the world economy by the mid-21st century).

The South Korean economy is characterised by its heavy reliance on exports, about 85% of its economy is export-driven especially in the electronics and automobile industries. Countries with which South Korea has free trade agreements together make up 73% of the world's economy, making South Korea a world leader in international trade.

Geographical proximity to China and Japan, the second and third largest world economies respectively, has also made South Korea the gateway to the East Asian economy, a region that accounts for 45% of international economic growth. China is also South Korea's largest trade partner.

With its competitive regulatory framework, culture of innovation, entrepreneurial activities can be carried out in South Korea with relative ease. Moreover, South Korea also boasts one of the most literate workforce in the world at relatively competitive wages as compared to most other developed nations. The South Korean financial sector has become increasingly stable and competitive with further regulatory reforms to improve FDI inflow.


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Corporate Treasury in South Korea

South Korea is one of the world's most dynamic economies. Its high level of foreign trade and continued deregulation make it an attractive market. Here, we highlight some of the key benefits relevant to treasury and cash management in South Korea.


Financial Market Development

  • The World Economic Forum ranks South Korea 87th in the world for financial market development in The Global Competitiveness Report 2015-2016.

  • It ranks South Korea 113th in the world for the soundness of its banks, and notes access to financing can be challenging.

  • South Korea has world-class business infrastructure, a highly skilled workforce, and an efficient legal system.

  • The Korean won cannot be traded outside of Korea.

  • South Korea has foreign-exchange controls. Foreign firms investing under the Foreign Capital Promotion Act (FCPA) can remit a substantial portion of their profits, but they must submit an audited financial statement to their foreign-exchange bank. Foreign companies not under the FCPA must obtain government approval to repatriate funds and must use authorized foreign exchange banks to do so. Advance reporting is required for most capital transactions.


Sophistication of Banking Systems

  • There are 19 banks operating in South Korea, including seven national commercial banks. There are 39 branches of foreign banks.

  • South Korea's foreign-exchange market has an average daily turnover of USD 48 billion, accounting for 0.7% of global turnover (Bank for International Settlements triennial global survey 2016).

  • South Korea has one of the largest bond markets in Asia, with both government and corporate bonds available. The local currency bond market was valued at KRW 2,066 trillion at the end of 2016.


Regulatory Bodies

  • The banking sector in South Korea is regulated by the Financial Supervisory Service, which is part of the Financial Services Commission. The central bank, the Bank of Korea (BoK), also carries out some supervisory functions, including overseeing foreign-exchange controls, which it manages with the Ministry of Strategy and Finance (MOSF).

  • Companies must notify MOSF of foreign currency financing exceeding USD 30 million.



  • Resident companies are taxed on worldwide income. Non-resident companies with a permanent establishment in South Korea are taxed on Korean-sourced income only.

  • Corporate income tax (CIT) is charged 10% on the first KRW 200 million, 20% on KRW 200 million to KRW 20 billion, and 22% for profits above this amount.

  • Companies are charged a 10% additional tax if their expenditure on investment, wage increases and dividends is below certain thresholds, typically 80% or 30% of adjusted taxable income.

  • Corporations also pay local income tax of 1% on the first KRW 200 million, 2% on KRW 200 million to KRW 20 billion, and 2.2% for profits above this amount.

  • Remittance of earnings from a Korean branch of a company to its head office must be reported to a designated foreign-exchange bank. A branch profit tax of 20% may be levied on top of CIT if tax treaties allow.

  • VAT is charged at 10%. Certain goods and services are VAT-exempt. Electronic VAT invoicing is compulsory.

  • Securities transaction tax of 0.15%, 0.3% and 0.5% is charged on the transfer of shares.

  • Interest income is typically included in taxable income. Interest expenses are generally deductible as long as loans are used for business purposes.

  • Companies are allowed to recognise unrealised gains and losses on foreign currency transactions.

  • Tax credits are available for qualified investment in facilities that increase productivity or safety, boost environmental protection or create jobs.

  • There is no withholding tax (WHT) on dividends for resident companies, WHT on interest is charged at 14% or 25%. For non-resident corporations from non-treaty countries WHT is 20% on dividends and 14% or 20% on interest. Where tax treaties are in place rates range from 5% to 15% on dividends and 0% to 15% on interest.

  • South Korea has tax treaties with more than 90 countries and territories.

  • South Korea is a signatory to the Organisation for Economic Co-operation and Development’s Multilateral Competent Authority Agreement, through which information is exchanged between tax administrations, to provide a single, global picture on some key indicators of economic activity within multinational enterprises.


Benefits for Regional Treasury Centres

  • South Korea is a leading financial services hub in Asia.

  • It has one of the largest bond markets in Asia.

  • South Korea has an extensive tax treaty network.

  • Cash concentration is permitted amongst participating accounts that belong to the same entity, and zero balancing is more commonly used. Notional pooling is not permitted.

  • South Korea has a real-time gross settlement system, the Bank of Korea Financial Wire Network, which is used for high-value and urgent electronic payments.

  • South Korea is a member of the Asian Payment Network.

  • Foreign banks have a significant presence in South Korea and offer the widest range of cash-management services.




Banking System

  • There are 54 commercial banks, of which 42 are branches of foreign banks, six are nationwide banks and six are local banks (as defined under the Banking Act). In addition, there are 3,593 credit cooperatives.
  • There are five 'specialised banks' that service industries not covered by commercial banks, and these include the Korea Development Bank, Export-Import Bank of Korea, Industrial Bank of Korea, Nonghyup Bank and Suhyup Bank.
  • South Korea aspires to be a leading Asian financial hub and has developed financial infrastructure and deregulation to provide global financial facilities.  
  • Historically, the government has had controlling stakes in many of its financial institutions, however, it is scaling back and working towards greater privatisation of its financial sector.


Bank Accounts

  • Residents may hold foreign exchange accounts domestically and overseas, although the Ministry of Strategy and Finance must be notified before the opening of an overseas foreign exchange account. Domestic currency accounts are not permitted overseas for residents and are not convertible into foreign currency for onshore domestic currency accounts.
  • Non-residents may hold foreign and domestic currency accounts, and domestic currency accounts are freely convertible into foreign currency. Non-residents may hold two types of domestic currency accounts: a non-resident free won (KRW) account (whereby overseas remittances may be done without supporting documents but local transactions are restricted) or a non-resident won account (whereby local transactions can be carried out freely but overseas remittances are restricted).    
  • Interest: Interest-bearing currency accounts are not available.


Legal and Regulatory

  • The Financial Services Commission (FSC) and the Financial Supervisory Service (FSS) oversee the banking sector, while the Bank of Korea (BoK) enacts various other supervisory functions in accordance with the Banking Act.
  • A resident company is one that has its headquarters, main office or central management operated as a domestic company.
  • Transactions between residents and non-residents have to be carried out at foreign-exchange banks in South Korea.
  • South Korea has anti-money laundering and counter-terrorism financing regulations in place.
  • Foreign exchange is managed by the Bank of Korea and the Ministry of Strategy and Finance. 
  • South Korea has set up a financial intelligence unit, the Korea Financial Intelligence Unit, which is operated through the FSC and is a member of the Egmont Group.




Payment Systems


Korea's Real-time Gross Settlement (RTGS) system

  • Operated by the BoK.
  • Processes high-value and urgent KRW interbank transfers. No value threshold except for third-party transfer of funds with a minimum threshold of KRW 1 billion.
  • Transactions settled in real time using SWIFT messages.
  • Final settlement done across participant banks'correspondent accounts at the BoK.
  • Also processes JPY and USD-denominated interbank payments for banks with a foreign currency deposit account at the BoK.
  • 132 participants: 56 are banks and 76 are non-banks.


(Korea Financial Telecommunications & Clearings Institute)


Multilateral net settlement system

  • Final settlement done through BOK-Wire+ across the participants' accounts held at the BoK.
  • Operates the B2C and B2B Electronic Commerce Payment systems, which use e-commerce.
  • Operates nine other retail payment systems, explained below:

Cheque Clearing System


Cheque and paper-based truncation system

  • Operated by KFTC.
  • Comprises of 50 regional clearing houses.
  • 27 direct bank participants
  • Settles KRW-denominated current account cheques, cashier's cheques, bills of exchange and promissory notes.
  • No value threshold.
  • Final settlement done across participants' accounts at the BoK through BOKWire+ next day.

Bank Giro System


Korea's giro system

  • Operated by KFTC.
  • Giros can be paper-based, electronic or internet giros.
  • No value threshold.
  • Final settlement done across participants' accounts at BoK through BOKWire+, available to recipients in two/three business days.
  • 25 participants



(Interbank Funds Transfer Network)


  • Operated by KFTC.
  • Maximum threshold of KRW 100 million per transaction.
  • Settlement done next day.
  • Instant debit and credit when payment is made.
  • Final settlement done across participants' accounts at the BoK through BOK-Wire+, with funds available to recipients next day.
  • 17 domestic participants and 13 special participants



(Housing Finance Information Network)


Electronic banking/firm banking system

  • Operated by KFTC.
  • Maximum threshold of KRW 1 billion per transaction.
  • Processes KRW payments made through firm banking (mobile, internet and phone banking).
  • Payments settled usually within two-to-three business days.
  • 24 participants, 18 of which are domestic direct participants, two are foreign banks and four are specialist institutions.
  • Final settlement done across participants'accounts at the BoK through BOKWire+, with funds available to recipients within three working days.


(Interbank Cash Dispenser/ATM) system



  • Operated by KFTC.
  • Processes payments made through cash dispensers (CDs)/ATMs.
  • There is a maximum threshold of KRW 6 million.
  • Participants include all Korean domestic banks (except the Export-Import Bank of Korea), Post Office, cooperative members of the National Agricultural Cooperative Foundation and the National Federation of Fisheries Cooperatives, Korean Federation of Community Credit Cooperatives, National Union Federation of Korea, Korea Federation of Savings Banks and domestic branches of HSBC, in addition to eight special participants.
  • Final settlement done across participants' accounts at the BoK through BOK-Wire+ next day.
  • Maximum threshold of KRW 10 million per fund transfer.


(Electronic Funds Transfer at the Point of Sale)



  • Operated by KFTC.
  • Minimum threshold of KRW 1000 per transaction.
  • 17 direct participants
  • Processes all transactions made at POS terminals.



(Cash Management Service)


  • Operated by KFTC.
  • Consolidates funds from payee's accounts into one selected account.
  • 18 domestic bank participants, with one foreign bank participant and four special participants.
  • Processes all credit and debit transfers (no threshold).
  • Consolidates funds from payee's accounts into one account held in customer's main bank.
  • Final settlement done across participants' accounts at the BoK through BOK-Wire+.



Local Bank Information Network

  • Operated by KFTC.
  • Allows local banks without a nationwide network to carry out transactions with other participating local banks.
  • No value threshold
  • 6 local bank participants



Online credit-transfer system

  • Operated by KFTC.
  • Enables transactions by credit transfer between customers and institutions, activated online or by smartphone.
  • Used by government websites and many retailers.
  • 21 participants




E-money card system

  • Operated by KFTC.
  • Processes interbank credit and debit transfers.
  • For registered cards, maximum rechargeable value of KRW 500,000 and for unregistered cards, maximum of KRW 50,000.


B2C system

Business-to-customer system

  • Operated by KFTC.
  • Uses e-commerce supported by KFTC.
  • Processes customer-to-seller transactions and enquiries in real time.
  • 15 participants


B2B system

Business-to-business system

  • Operated by KFTC.
  • Uses e-commerce supported by KFTC.
  • Payment system for the online registered bill (ORB), the most common payment facility for B2B, using a cheque as a bill with credit.
  • 15 participants
  • Issues and processes ORBs and interbank fund transfers, based on contract information between businesses.



(Asian Payment Network)

Asia-wide retail payment settlement system
  • Operated in South Korea by KFTC.
  • Member countries are: Australia, China, Japan, Indonesia, Malaysia, New Zealand, the Philippines, Singapore, South Korea, Thailand and Vietnam.
  • Allows ATM withdrawals at participant banks of all APN member countries via linked ATM network.


Payment Instruments


Credit transfers:

  • Credit transfers may be paper-based or automated, although automated is by far the most common.
  • High-value and urgent interbank transfers settled through BOK-Wire+ same day.
  • Low-value, non-urgent and bulk transfers processed through any of the nine retail payment systems operated through the KFTC next day.


Direct debits (autodebits):

  • There are two types of direct debit: bank giro system direct debit for low-value transactions and CMS debit transfer for high-value commercial transactions.
  • Processed through the Bank Giro System, with final settlement done using BOK-Wire+.



  • Common form of payment for retail and commercial transactions, although becoming less popular with the increasing use of electronic payments.
  • Cheques are truncated and cleared through the Cheque Clearing system, with final settlement done through BOK-Wire+ next day. There are two types of cheque: cashier's cheque and current account cheque (corporate cheque).
  • Cashier's cheques (similar to bearer-form bank drafts) do not require a preset value to be issued and can be issued by ATMs. May be used as an alternative for cash transactions.
  • Current account cheques are used for high-value commercial transactions.


Card payments:

  • The use of cards has become very common in South Korea, with 35 domestic card-issuing companies in use as well as Visa and MasterCard, all EMV-compliant.
  • The use of the debit card is limited by the operating hours (08.00 to 23.00), and as a result the cheque card is used as a more convenient alternative because it allows 24-hour use and offers rewards and discounts from specific retailers.
  • The LG Pay White Card can be used as a credit card as well as for ATM withdrawals and for payments in shops.
  • There is no credit card interbank settlement system, therefore, each bank determines what settlement system is used. Visa and MasterCard use their own international bank schemes.


E-money schemes:

  • There are many e-money cards available which are reloadable online, by credit card, bank transfer or at selected outlets.

  • T-money and Cashbee cards can be used on many public transport options throughout South Korea.

  • M-commerce is widely used in South Korea, with Samsung Pay and Kakao Pay (available through Kakaotalk, an instant messaging service) the two most popular mobile wallet apps.




Recent developments


South Korea Leads in Cashless Transactions

South Korea is one of only two countries in the world that has seen a significant decline in the use of cash since 2011. Only 14% of point-of-sale transactions in the country are now carried out in cash, compared with 80% in Europe, according to a survey of 47 countries by security services company G4S. The research suggests government initiatives to reduce coin circulation and reliance on physical cash are having an impact.

Read more about the development here


FinTech MOU with Vietnam Signed

The Financial Services Commission, South Korea’s financial regulator, has signed a memorandum of understanding with the State Bank of Vietnam to promote cooperation on financial innovation. The agreement, which is part of the Vietnam-Korea Financial Cooperation Forum, provides a legal basis for the two countries to exchange information on FinTech and other innovations to modernise the banking system. It is the first agreement the State Bank of Vietnam has signed in this area with a foreign partner.

Read more about the development here


Internet Banking Hits Record High

The number and value of daily internet banking transactions carried out in South Korea hit a new high in 2017. Internet or mobile banking service users, including individuals and corporations, rose by 10.2% during the year to a record 135 million, according to the Bank of Korea. Average daily transaction numbers increased by 8.8% to 94.9 million, with the value of these transactions growing by 2.7% to Korean Republic won 43.56 trillion.

Read more about the development here



This Market Profile is brought to you by DBS. Get in touch with us for further insights on doing treasury in South Korea and take advantage of our innovative solutions to empower your business. Click here to find out more.



Sources: IMF World Economic Outlook database, October 2016; CIA World Factbook; Trading Economics; PwC

Please note that the information contained in this document, assembled based on information available and accurate as at July 2017, is of a general nature only and is subject to change whether for economic, political, social or other reasons.


Last updated on 20 May 2018