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Blogs Cross-border · Dispute ResolutionForeign Trade Act Violations: When Rerouting Used Car Exports to Russia Becomes a Legal Problem, and How to Respond
1. Why Does Exporting Used Cars to Russia Raise Legal Issues? Not all used-car exports bound for Russia are uniformly prohibited, but a significant number of vehicles currently fall under situational licensing requirements, so item-by-item verification is necessary. Under Article 19-3 of the Foreign Trade Act, even goods that are not strategic items must obtain a situational license if there are certain grounds to believe they may be used or diverted for the manufacture, development, use, or storage of weapons of mass destruction and their delivery systems. Here, "strategic items" refers to goods and technologies separately designated as subject to export controls for the sake of international peace and national security. The law also identifies circumstances that must be checked in connection with situational licensing, such as when the price or payment terms fall outside the normal range, when the transport route is abnormal, or when it is unclear whether the goods will be used in the importing country or re-exported. [Foreign Trade Act Article 19-3 – Situational Licensing] This situational licensing system is also significant for export controls on Russia and Belarus, because a separate list of items subject to situational licensing currently applies specifically to those two countries. In February 2024, the criteria for situational licensing on automobiles exported to Russia were tightened, bringing passenger vehicles with an engine displacement over 2,000cc, among others, within scope. The current list of covered items includes a wide range of vehicles depending on their power source and HS code. The Korea Customs Service has likewise identified illegal exports of vehicles over 2,000cc to Russia as a key enforcement target. Korea's Trade Security Management Agency has also advised that exports of items subject to situational licensing for Russia and Belarus are prohibited in principle, and that a license is granted only after review in limited exceptional cases. Therefore, in an actual export transaction, the HS code, engine displacement, vehicle type, and detailed specifications of each vehicle must be individually checked against the notice that was in effect at the time of that export. 2. Does Exporting to Kyrgyzstan Avoid a Foreign Trade Act Violation? The mere fact that a vehicle was exported to Kyrgyzstan or Kazakhstan does not, by itself, constitute a violation of the Foreign Trade Act. Conversely, simply changing the destination stated on the export declaration to a third country does not allow an exporter to avoid Russia-related export controls, either. If a local Kyrgyz company genuinely purchased the vehicle for use within that country, this legitimate transaction must be distinguished from a circumvention export to Russia. However, the conclusion may differ if the actual Russian buyer was already determined from the outset of the deal, or if the exporter knew that the vehicle was to be moved on to Russia through a third-country intermediary. In March 2026, the Korea Customs Service disclosed, as a major type of detected violation, cases in which exporters declared vehicles as being exported to countries neighboring Russia such as Kazakhstan and Kyrgyzstan, but then actually brought the vehicles into Russia. The Customs Service also stated that, in addition to this method, it detected cases where vehicles over 2,000cc were falsely declared as being 2,000cc or under, and cases where new vehicles intended for the domestic market were disguised as used cars and declared as being exported to a third country. Accordingly, in an actual investigation, the key issue may not be limited to the destination country stated on the export declaration; the vehicle's actual final destination, judged from the transaction as a whole, can become the central point of contention. Key Points to Check When Assessing a Possible Circumvention Export to Russia Item to Check Key Points for Review Destination on the export declaration Whether the declared country matches the actual final destination Overseas buyer Whether the third-country company was the real buyer or merely an intermediary End user Who was actually intended to use the vehicle Contract, invoice, and B/L Whether the transaction structure on paper matches the actual transaction Vehicle's transport route Whether the vehicle moved on to Russia after arriving in the third country Transaction-related communications Whether there were communications about shipment to Russia or a Russian buyer Flow of funds Whether the contractual buyer matches the party that actually paid Ultimately, the mere fact that a transaction passed through a third country cannot, on its own, determine whether it was unlawful. It must be specifically determined whether the deal was a genuine third-country transaction or a structure designed to evade Russia-related export controls. 3. How Do Investigative Authorities Determine Whether a Circumvention Export Occurred? Customs and investigative authorities do not rely on a single export declaration alone. They may also review a range of other materials that can reveal the vehicle's actual movement and the structure of the transaction. The Korea Customs Service has stated that it currently uses AI and big data, based on export declaration records and cargo information, to identify companies at high risk of illegally exporting vehicles to Russia, and that it is strengthening cooperation between its dedicated trade-security investigation unit and other relevant agencies such as the Ministry of Trade, Industry and Energy. Therefore, once an investigation begins, the authorities can confirm the actual transaction structure and final destination through materials such as the following. Export declaration certificates for each vehicle Sales contracts and invoices Bills of lading and other shipping documents Emails and messenger records exchanged with overseas buyers Records of the vehicle's shipment and movement Records relating to the overseas buyer and final consignee Domestic and international remittance and payment records Transaction data stored on mobile phones and work computers In particular, even if the export declaration listed the transaction as being with Kyrgyzstan or Kazakhstan, if other materials show that the price was negotiated directly with a Russian buyer, or that shipment and transport were discussed on the premise of arrival in Russia, the investigative authorities may challenge the actual transaction structure. Conversely, if the vehicle was genuinely sold to an independent third-country company and the exporter was not aware, at the time of export, that it would be re-exported to Russia, it is necessary to organize the contractual relationships and transaction records that support this. In actual legal determinations as well, specific transactional circumstances — such as the transport route, price and payment terms, and whether the goods were used in or re-exported from the importing country — play an important role. Therefore, rather than simply explaining during an investigation that "I didn't know it was going to Russia," it is necessary first to examine what the contracts, communications, and flow of funds from that time actually show about the transaction. 4. What Penalties Can Apply If a Foreign Trade Act Violation Is Detected? Exporting or filing an export declaration for an item subject to situational licensing without obtaining that license can be subject to criminal punishment. Under the current Foreign Trade Act, Article 53(2) provides that a person who exports or files an export declaration for an item subject to situational licensing under Article 19-3 without obtaining that license shall be punished by imprisonment for up to five years or a fine of up to three times the value of the exported goods. [Foreign Trade Act Article 53 – Penalty Provisions] In addition, if a person exports an unlicensed item subject to situational licensing with the intent to promote the international proliferation of strategic items, imprisonment for up to seven years or a fine of up to five times the value of the goods may apply under Article 53(1) of the same Act. However, the seven-year imprisonment provision does not automatically apply to every Foreign Trade Act violation case. It must be separately confirmed whether the requirements of that specific provision are met, such as whether there was intent to promote international proliferation. Furthermore, if a person files an export declaration and actually exports goods without having obtained the required situational license, the offense of unlawful export under the Customs Act may be at issue together with the Foreign Trade Act violation. Article 270(3) of the Customs Act punishes exporting goods without satisfying the licensing or other conditions required by law, or satisfying those conditions through fraudulent means. [Customs Act Article 270] Therefore, when assessing the possibility of punishment, it is necessary to look not only at the export value, but also at whether the vehicle was subject to situational licensing at the time of export, who the actual buyer was and what the final destination was, and how the exporting company perceived these facts. 5. What Should You Do If You Have Already Exported, or Have Been Contacted by Customs or the Police? If an investigation has already begun, the first step is to identify the vehicles at issue and organize, vehicle by vehicle, the regulations that applied at the time of each transaction along with the actual transaction structure. It is advisable to organize the materials in the following order. ① First, identify the vehicles at issue Based on the export declaration certificate, organize information such as the vehicle registration number, vehicle type, engine displacement, HS code, export date, and destination country. Even vehicles exported by the same company cannot automatically be assumed to be subject to the same regulations, so each vehicle needs to be reviewed individually. ② Confirm the situational licensing rules that applied at the time of export The list of items subject to Russia-related situational licensing has been expanded several times. Current standards should therefore not be applied retroactively to past exports; whether an item is covered must instead be checked against the Public Notice on the Export and Import of Strategic Items that was in effect on the actual export date of each vehicle. ③ Organize the actual transactional relationship with the third-country buyer You should confirm who the buyer was under the contract, who actually paid for the vehicle, and whether the third-country company is a genuinely operating business. In particular, if the issue is whether the overseas counterparty merely served as a paper consignee, it is necessary to secure materials that can demonstrate the actual transaction. ④ Review communications and shipping records from the time of the transaction Rather than arbitrarily deleting or altering KakaoTalk, Telegram, WhatsApp, or email records, it is important to preserve them so that the circumstances of the transaction at the time can be verified. Invoices, bills of lading, and shipping records should also be organized together. ⑤ Organize the facts for each vehicle before questioning When multiple transactions are at issue, giving statements without distinguishing the transaction history of each individual vehicle can result in explanations that differ from what actually happened. Therefore, before questioning, you should at least separately organize, for each vehicle, whether it was subject to regulation, the buyer, the party who paid, the destination country, its subsequent travel route, and related communications. If you have already received a summons from customs or the police, or a search and seizure has taken place, you should not merely prepare an explanation that you "exported normally to Kyrgyzstan." Instead, you should first review which aspects are likely to become contested issues between the materials the investigative authorities have obtained and the actual transaction structure. 6. Frequently Asked Questions (FAQ) Q1. If a vehicle exported to Kyrgyzstan later ends up in Russia, will I automatically be punished? Not necessarily. A case in which the vehicle was genuinely sold to a Kyrgyz company that later resold it to Russia on its own initiative must be distinguished from a case in which the transaction was routed through Kyrgyzstan from the outset on the premise that it would be sold to Russia. Both the exporter's understanding of the final destination and the actual transaction structure must be examined together. Q2. Customs hasn't contacted me yet — can I review my past transactions in advance? Yes, you can. In particular, if you are continuing to export used cars to countries neighboring Russia, it is advisable to check in advance which vehicles in your past transactions were subject to situational licensing, and whether your end-user verification and transaction documentation are sufficient. For transactions currently in progress, it is necessary to confirm the item classification and whether a situational license is required before export. Q3. After a search and seizure, what should I do first? You should first check the alleged offenses and items listed in the warrant, as well as the materials actually seized. After that, you need to identify the vehicles and transactions at issue and compare the materials obtained by the investigative authorities with what actually happened, in order to organize your approach to giving statements before questioning. 7. Summary and Key Takeaways The mere fact that a vehicle was exported to a country neighboring Russia does not, by itself, establish a violation of the Foreign Trade Act. However, if a third country was used from the outset merely as a nominal destination on the premise that the goods would ultimately go to Russia, the investigation may extend beyond the contents of the export declaration to cover the actual buyer, the final destination, the flow of funds, and the entire transaction process. In these cases, it is important to review, vehicle by vehicle, both the regulations that applied at the time of export and the actual transaction structure. In particular, if you are facing an upcoming customs or police investigation, you should first organize how your contracts, invoices, shipping records, payment records, and messenger communications connect to the actual transaction. Decent Law Firm reviews all of these factors together — whether the vehicles at issue were subject to situational licensing, the actual transaction structure, the exporter's awareness of the final destination, and the materials obtained by the investigative authorities — to promptly work out a response strategy. If you have already received a summons to appear or a search and seizure has taken place, we recommend seeking professional assistance before your first round of questioning to organize the specific facts and prepare your response.
2026-08-20 -
Blogs Cross-border · Dispute Resolution
Domestic Agent Requirements for Overseas Businesses under Korea’s PIPA
If your company is headquartered outside Korea and provides SaaS, platform, e-commerce, AI, or other online services to users in Korea, Korea’s Personal Information Protection Act (PIPA) may apply to your processing of personal information. Certain overseas businesses are required to appoint a domestic agent in Korea. Since October 2, 2025, the rules have become more stringent. If an overseas business has a qualifying Korean corporation that it established or over which it exercises dominant influence, it must appoint its domestic agent from among those Korean corporations. The overseas headquarters is also required to manage and supervise the domestic agent. 1. Can Korea’s PIPA Apply to an Overseas Business? Yes. An overseas business may be subject to Korea’s PIPA when it provides goods or services to data subjects in Korea or when its processing of personal information affects data subjects in Korea. The fact that a company does not have a Korean subsidiary, or that its servers and data-processing infrastructure are located outside Korea, does not by itself place the company outside the scope of Korean privacy regulation. Overseas SaaS providers, online platforms, AI services, gaming companies, content providers, and e-commerce businesses that process account information, payment information, access data, or other personal information of users in Korea should assess whether PIPA applies to their operations. The Personal Information Protection Commission (PIPC), Korea’s data protection authority, has also issued guidance specifically for foreign businesses on compliance with PIPA, including privacy policies, data breach notification, data subject rights, cross-border transfers, and the appointment of a domestic agent. PIPC – Guidelines on Applying the Personal Information Protection Act to Foreign Business Operators 2. Which Overseas Businesses Must Appoint a Domestic Agent? Not every overseas business is required to appoint a domestic agent. Under Article 31-2 of the Personal Information Protection Act and Article 32-3 of the Enforcement Decree of the Personal Information Protection Act, a personal information controller without an address or place of business in Korea must appoint a domestic agent if it falls within any of the following categories. 🔹 When Is a Domestic Agent Required? Category Threshold Annual revenue Total revenue for the previous year of KRW 1 trillion or more Number of data subjects in Korea Personal information of an average of at least 1 million data subjects in Korea per day was stored or managed during the three months immediately preceding the end of the previous year PIPC determination The business has received a request to submit materials and the PIPC determines, through deliberation and resolution, that appointment of a domestic agent is necessary The revenue threshold is based on the business’s total worldwide revenue for the previous year, not only revenue generated in Korea. Foreign-currency revenue is converted into Korean won using the average exchange rate for the previous year. Accordingly, a global business should not assume that it is exempt simply because its Korean revenue is relatively small. Its worldwide revenue and the scale of personal information it processes in Korea should both be reviewed. Article 31-2 of the Personal Information Protection Act – Appointment of Domestic Agent Article 32-3 of the Enforcement Decree – Scope of Businesses Required to Appoint a Domestic Agent 3. If an Overseas Business Has a Korean Corporation, Must It Appoint That Corporation as Its Domestic Agent? If the overseas business is required to appoint a domestic agent and has a Korean corporation that meets the statutory requirements, the domestic agent must be appointed from among those qualifying Korean corporations. Since October 2, 2025, Article 31-2 of PIPA requires an overseas business to appoint its domestic agent from among Korean corporations that it has established or over which it exercises dominant influence. The relevant Korean corporations include: a Korean corporation established by the overseas business; a Korean corporation whose representative director may be appointed or removed by the overseas business; a Korean corporation in which the overseas business appoints, or has the authority to appoint, at least 50% of the officers; or a Korean corporation in which the overseas business holds at least 30% of the total issued shares or total capital contributions. The latter criteria are further defined in Article 32-3 of the Enforcement Decree. Accordingly, where an overseas business subject to the domestic-agent requirement has one or more subsidiaries or affiliated companies in Korea, it should review its ownership structure, governance rights, and appointment authority before determining which entity should serve as the domestic agent. A six-month transitional period was provided for businesses that had already appointed a domestic agent when the amended law took effect. That transitional period has now expired. Article 31-2 of the Personal Information Protection Act – Appointment of Domestic Agent Article 32-3 of the Enforcement Decree – Qualifying Korean Corporations and Supervision Requirements Supplementary Provision, Article 2 – Transitional Measure for Appointment of Domestic Agents 4. What Does a Domestic Agent Do? A domestic agent is not merely a local contact point. It must perform specific functions required under PIPA. A domestic agent is responsible for handling matters including: complaints and remedies relating to the processing of personal information; notification and reporting of personal information breaches; and responding to requests from the PIPC for the submission of documents, records, and other materials. The overseas business must also disclose specified information about its domestic agent in its privacy policy, including the agent’s name or corporate name, representative, address, telephone number, and email address. If the domestic agent violates PIPA while performing these statutory functions, the violation is treated as an act of the overseas personal information controller itself. For this reason, businesses should not treat the appointment as a documentation exercise. The domestic agent should be capable of responding in practice to requests from users in Korea, data breach incidents, and regulatory inquiries from the PIPC. Article 31-2 of the Personal Information Protection Act – Appointment and Duties of Domestic Agent 5. Must the Overseas Headquarters Manage and Supervise the Domestic Agent? Yes. An overseas business that appoints a domestic agent is also required to manage and supervise the agent’s performance of its duties. The Enforcement Decree requires the overseas personal information controller to take measures including: providing relevant training to the domestic agent at least once a year; checking whether the domestic agent has established a work plan; reviewing whether that work plan has been properly implemented; and confirming that any issues identified during the review have been corrected. This means that the compliance obligation does not end once a domestic agent has been formally appointed. The overseas headquarters should establish practical procedures for handling privacy-related inquiries, responding to personal information breaches, communicating with the PIPC, and obtaining the documents and information needed for regulatory responses in Korea. Article 32-3 of the Enforcement Decree – Management and Supervision of Domestic Agents 6. What Are the Consequences of Failing to Comply with the Domestic Agent Requirements? Administrative fines may be imposed if an overseas business fails to appoint a domestic agent or fails to comply with the statutory appointment, disclosure, or supervision requirements. The current administrative fine schedule includes the following. 🔹 Key Administrative Fines Violation Administrative Fine Failure to appoint a required domestic agent KRW 20 million Failure to appoint a domestic agent from among the qualifying Korean corporations KRW 20 million Failure to properly manage and supervise the domestic agent KRW 20 million Failure to disclose required domestic-agent information in the privacy policy Amount varies depending on the number of violations For failure to disclose the required domestic-agent information in the privacy policy, the current Enforcement Decree provides for fines of KRW 2 million for a first violation, KRW 4 million for a second violation, and KRW 8 million for a third or subsequent violation. In addition, appointing a Korean corporation or an external service provider as a domestic agent does not transfer the overseas headquarters’ liability under PIPA to that agent. Article 75 of the Personal Information Protection Act – Administrative Fines Enforcement Decree, Appendix 2 – Standards for Administrative Fines 7. What Should an Overseas Business Review Before Appointing a Domestic Agent? The first step is not simply choosing a domestic agent. The business should determine whether the appointment requirement applies to its operations and corporate structure in Korea. Key points to review include: whether the business processes personal information of data subjects in Korea; whether the overseas headquarters can be regarded as having an address or place of business in Korea; whether its total worldwide revenue meets the statutory threshold; the scale of personal information relating to data subjects in Korea that it stores or manages; whether it has established, or exercises dominant influence over, a Korean corporation; whether its current domestic agent can actually perform the duties required under PIPA; whether the required domestic-agent information is accurately reflected in the privacy policy; and whether appropriate training, monitoring, and reporting procedures are in place between the overseas headquarters and the domestic agent. For global groups with multiple Korean affiliates, the analysis should go beyond shareholding percentages. Rights relating to the appointment of the representative director and other officers may also affect which Korean corporation must be appointed. 8. Frequently Asked Questions (FAQ) Q1. If our revenue in Korea is below KRW 1 trillion, are we exempt from appointing a domestic agent? Not necessarily. The KRW 1 trillion threshold refers to total revenue, not only Korean revenue. In addition, a business may still be required to appoint a domestic agent if it stores or manages personal information of an average of at least 1 million data subjects in Korea per day during the relevant three-month period, or if the PIPC determines that a domestic agent is necessary after requesting the submission of materials. Q2. If we have a subsidiary in Korea, do we automatically have to appoint a domestic agent? No. The business must first determine whether it falls within the scope of businesses required to appoint a domestic agent under PIPA. If the requirement applies and the business has a Korean corporation that falls within the statutory categories, the domestic agent must then be appointed from among those qualifying Korean corporations. Q3. Can we appoint an external professional service provider as our domestic agent? Potentially, if the business does not have a Korean corporation that is required by law to serve as its domestic agent. If the overseas business has established a qualifying Korean corporation or exercises the level of dominant influence specified under PIPA and its Enforcement Decree, however, the agent must be selected from among those Korean corporations. Q4. Do we need to file a separate government registration after appointing a domestic agent? PIPA requires the domestic agent to be appointed in writing and requires specified information about the agent to be included in the business’s privacy policy. Accordingly, businesses should focus not only on preparing the appointment document but also on updating the privacy policy and establishing an operational framework that allows the domestic agent to perform its statutory duties. 9. Key Considerations for Overseas Businesses Appointing a Domestic Agent in Korea Appointing a domestic agent should not be treated as simply designating a local contact person in Korea. An overseas business should first determine whether it is subject to the domestic-agent requirement. If it has Korean subsidiaries or affiliated companies, it should also assess which entity must be appointed based on the statutory requirements. Once appointed, the domestic agent must be able to respond effectively to privacy complaints, personal information breaches, PIPC investigations, and requests for documents. The overseas headquarters must also maintain an appropriate management and supervision framework. Since the strengthened rules on appointing qualifying Korean corporations and supervising domestic agents took effect on October 2, 2025, businesses that appointed a domestic agent under the previous regime should also review whether their current appointment and operating structure remains compliant with the amended PIPA.
2026-08-19 -
Blogs Cross-border · Dispute Resolution
Setting Up an SPC in Korea as a Foreign Investor — What You Need to Know
■ Why Are More Foreign Investors Using SPCs in Korea? As global capital continues to flow into Korean real estate, infrastructure, digital assets, and private equity, the use of Special Purpose Companies (SPCs) with foreign shareholders has grown significantly. Whether you are a foreign investor looking to enter the Korean market, or a Korean investor structuring offshore exposure through an overseas SPC, these vehicles have become a practical standard in cross-border investment. An SPC is essentially a project-specific legal entity designed to isolate risk and create a clean capital structure. Used correctly, it is one of the most effective tools available for managing liability, tax exposure, and exit planning across multiple jurisdictions. That said, many investors focus almost entirely on the incorporation process and overlook the regulatory, tax, and dispute risks that come with the structure — often until something goes wrong. ■ The Foreign Investment Promotion Act: What Foreign SPC Shareholders Need to Know When a foreign national establishes or participates in an SPC in Korea, the primary legal framework that applies is the Foreign Investment Promotion Act (FIPA). Here is what matters in practice. If a foreign investor acquires 10% or more of the voting shares in a Korean company — including an SPC — or exercises substantive influence through board appointments even below that threshold, the investment is classified as foreign investment under FIPA. The entity then becomes a registered foreign-invested company, subject to specific reporting obligations and post-establishment management requirements. It is also worth noting that FIPA looks beyond the immediate shareholder on record. Regulators use the concept of the Ultimate Controlling Parent (UCP) to identify who is actually behind the SPC. A layered ownership structure does not shield investors from this scrutiny. This means the question of whether your SPC will be treated as a foreign-invested company or a standard domestic entity needs to be answered — and designed for — before incorporation, not after. ■ Four Things to Check Before Setting Up a Foreign SPC First, define the legal character of the SPC clearly. Whether it is a holding company, a project company for a specific development, or an asset securitization vehicle determines which regulatory frameworks apply. In some cases, the actual funding and decision-making structure may bring the entity within the scope of collective investment or discretionary investment regulations — regardless of how it is labeled. Second, assess your FIPA reporting and registration obligations. Depending on your ownership percentage, voting rights structure, and ultimate controlling entity, your SPC may qualify as a foreign-invested company with corresponding benefits — such as tax incentives and location support — and obligations, including ongoing reporting and change notifications. Third, look at the tax picture across all relevant jurisdictions simultaneously. Structuring purely around headline tax rates is no longer sufficient. South Korea's tax authority, along with its treaty partners, applies substance requirements and BEPS principles aggressively. A structure that looks tax-efficient on paper can be unwound at audit if the SPC lacks genuine economic substance in its jurisdiction of incorporation. Fourth, put the shareholder arrangements in writing. SPCs are by nature multi-party platforms. Without a properly drafted shareholders agreement covering voting rights, dividend policy, transfer restrictions, exit mechanisms, and dispute resolution — including a clear choice of governing law and arbitration venue — even straightforward disagreements can escalate into complex cross-border litigation. ■ You Should Seek Legal Advice If Any of These Apply You are a foreign investor planning to establish or participate in a Korean SPC You are a Korean investor structuring overseas investment through a foreign SPC You are uncertain whether your current structure triggers FIPA registration requirements Your shareholder arrangements are based on a handshake understanding or a non-binding MOU You have received inquiries or document requests from a tax authority or financial regulator When issues arise in cross-border SPC structures, they rarely stay contained to one jurisdiction. Regulatory scrutiny, tax reassessment, and shareholder disputes can surface simultaneously across multiple countries. Early legal review is significantly less costly than managing a dispute after the fact. ■ How Decent Law Firm Can Help Decent Law Firm's International Legal and Virtual Asset Team advises on the full lifecycle of SPC structures involving foreign investors — from initial structuring and jurisdiction selection, to FIPA compliance, shareholder agreement drafting, tax risk assessment, and dispute resolution. If you are considering establishing an SPC in Korea, participating as a foreign shareholder in an existing structure, or simply want to know whether your current setup is legally sound, we are happy to help you work through it.
2026-04-14 Naver Blog -
Blogs Cross-border · Dispute Resolution
Setting Up a Company in Dubai: Mainland, Freezone, and Tax Structure Explained
Inquiries about setting up a company in Dubai have increased noticeably in 2026. The ability for foreigners to hold 100% ownership, a relatively streamlined incorporation process, and a wide range of Free Zone options have made Dubai a particularly attractive destination for businesses in IT, fintech, and digital assets. Mainland, Freezone, Offshore — What Is the Difference? Dubai company structures fall into three main categories. A Mainland company is essentially a standard operating entity that can trade directly in the local UAE market. A Free Zone company offers 100% foreign ownership, packaged licensing options, and bundled office and visa arrangements — making it the most popular choice among Korean businesses. An Offshore company is generally used for holding structures, investment vehicles, or asset management purposes rather than local operations, and is typically only considered when the purpose is clearly defined. Type Key Features Best For Mainland Direct access to UAE local market; local sponsor may be required depending on industry Local retail, F&B, service businesses Freezone 100% foreign ownership, tax benefits, straightforward visa processing IT, trading, consulting — most popular among Korean companies Offshore No local operations permitted; used for holding and asset management Holding companies, investment vehicles, asset management The 9% Corporate Tax Era — Are Free Zones Still Tax-Efficient? The old assumption that Dubai means zero corporate tax no longer tells the full story. The UAE has introduced a federal corporate tax of 9%, which applies in principle to all Dubai-registered companies. However, Free Zone entities that meet certain conditions may still qualify for a 0% tax rate on specific categories of income. The key point is that Free Zone status does not automatically guarantee a 0% rate. The outcome depends on which Free Zone is selected, where the revenue is generated and from which clients, and where the actual staff and office are located. This is why tax structuring should be part of the incorporation process from the outset, not an afterthought. What to Check Before Choosing a Free Zone Selecting a Free Zone based solely on cost can create serious complications down the line — particularly when it comes to license renewals and opening a corporate bank account. Industry fit: For crypto and Web3 businesses, a Free Zone with a well-developed regulatory sandbox (such as those aligned with VARA) is essential. Operational substance: Consider the office requirements, the number of visas needed, and how demanding ongoing compliance will be in practice. Scalability: Whether the business is service-based or trade-focused will determine which type of license is appropriate — and the right answer varies significantly between the two. Why Crypto and Web3 Projects Choose Dubai Establishing a Dubai entity goes beyond simply setting up an overseas company. It is closer to building a global base of operations — a hub through which to engage international partners, exchanges, and investors. In practice, a common structure involves a Korean entity handling development and operations, while the Dubai entity serves as the contracting and relationship hub for global counterparties. How the token issuance vehicle is structured will significantly affect the regulatory, tax, and governance picture, making early-stage design essential. Decent Law Firm's International Practice Team Decent Law Firm's international practice team provides integrated structural design that accounts for international tax, foreign exchange regulations, and digital asset compliance — drawing on hands-on experience with Dubai Free Zones, local banks, and regulatory authorities. This is not a filing service. We work with clients to design a structure across Korea, the UAE, and other jurisdictions that minimizes risk and maximizes utility. If you are considering a Dubai entity — even at the early idea stage — please reach out, and we will map out the options that fit your situation.
2026-03-23 Naver Blog -
Blogs Cross-border · Dispute Resolution
China’s Export Controls on Japan, Three Critical Risks Korean Companies Must Address
At the beginning of 2026, a major shift in the global supply chain landscape has emerged. On January 6, 2026, the Chinese government announced sweeping export control measures targeting Japan, citing national security and national interest concerns. This development is not merely a bilateral issue between China and Japan. For Korean companies operating subsidiaries in China or sourcing key Chinese materials for transactions involving Japan, the impact is direct and potentially severe. Proactive legal and compliance preparation is now essential. China’s 2026 Export Control Announcement No. 1 Targeted Export Restrictions Against Japan On January 6, 2026, China’s Ministry of Commerce and the General Administration of Customs jointly issued “Announcement No. 1 of 2026,” imposing comprehensive export controls on Japan. This marks the first instance in which China has explicitly targeted a specific country through export control measures, signaling a structural shift in China’s trade and security policy. Key Measures Comprehensive ban on military-related exports All exports of dual-use items to Japanese military end users (MEU) or for military purposes are prohibited. Broad scope of controlled items Including rare earth elements, gallium, germanium, graphite, semiconductor manufacturing equipment, high-performance sensors, and drones. Catch-all controls Even non-listed items may be restricted if they are deemed capable of military end use. Prohibition of indirect or circumvention exports Supplies routed through third countries, including Korea, to Japan are subject to enforcement. Three Key Risks for Korean Companies China’s export controls extend beyond China–Japan trade and directly affect Korean businesses embedded in China-centered supply chains. 1. Export Restrictions on China-Based Korean Subsidiaries Korean companies manufacturing in China may face significant barriers or outright denial of export licenses when shipping products or components to Japan. If the Japanese counterparty is linked—directly or indirectly—to the defense sector, companies may encounter contractual non-performance risks and potential legal disputes. 2. Heightened End-User and End-Use Certification (EUC) Requirements Even where Japanese customers are civilian entities, Chinese authorities are likely to require strict and detailed proof that the goods will not be diverted to military use. This may result in: Prolonged licensing reviews Requests for supplementary documentation License denials All of which can disrupt delivery schedules and commercial relationships. 3. Sanctions and Blacklist Risks from Indirect Exports This is the most critical risk area. Where Korean companies import Chinese-origin materials, process them, and re-export finished products to Japan, Chinese authorities may view the transaction as an attempt to circumvent export controls. Such a determination could expose companies to: Regulatory investigations Inclusion on control or blacklist regimes Long-term restrictions on operations involving China Practical Compliance Checklist for Corporate Decision-Makers China’s export control regime should now be treated as a permanent compliance issue, not a temporary disruption. Korean companies should prioritize the following reviews: Classification of products based on HS codes, CAS numbers, and technical specifications Systematic management of end-user and end-use documentation Advance legal review of licensing requirements and regulatory exposure Review of force majeure and liability clauses in international contracts Export Controls Require Structural Legal Planning Decent Law Firm’s International Practice Team provides tailored legal solutions based on extensive experience in cross-border regulatory compliance. Our advisory services include: Export control and sanctions risk assessments Structuring of re-export and third-country transaction models Legal support for overseas investments and China-based subsidiaries International contract risk management and dispute resolution As China’s export control regime continues to reshape global supply chains, early legal assessment and well-structured transactions are critical to maintaining business continuity and regulatory certainty. Decent Law Firm stands ready to support your export control and international compliance strategy.
2026-01-21 Naver Blog
