Business Structures in North Korea

North Korea offers several business entity types for foreign investors. The choice of structure depends on the nature of the business, the sector, and the location (including special economic zones). This guide outlines the available business structures.

Available Business Structures for Foreign Investors

Joint Venture (JV)

The most common structure for foreign investment in North Korea. A joint venture involves a partnership between a foreign investor and a DPRK entity.

• Foreign Ownership: Typically up to 70% (negotiable)
• DPRK Partner: State-owned enterprise or cooperative
• Management: Shared control, board representation
• Profit Distribution: Based on ownership share
• Tax Rate: CIT at 25%

Wholly Foreign-Owned Enterprise (WFOE)

Permitted in special economic zones and certain sectors. The foreign investor holds 100% ownership.

• Ownership: 100% foreign
• Approval: Requires special approval from investment authorities
• Sectors: Typically manufacturing, technology, and export-oriented industries
• Tax Rate: CIT at 25%

Cooperative Enterprise

A contractual arrangement between foreign and DPRK parties without creating a separate legal entity.

• Structure: Contractual, no separate legal entity
• Flexibility: More flexible than JV for specific projects
• Duration: Typically project-based

Domestic Business Structures

State-Owned Enterprise (SOE)

The primary business structure for domestic economic activity. SOEs operate under state planning.

• Ownership: 100% state-owned
• Management: Appointed by state authorities
• Tax Rate: ~10% CIT

Cooperative (Collective Enterprise)

Worker-owned enterprises common in agriculture and light industry.

Special Economic Zones

North Korea has established several special economic zones with more flexible business structures:

• Rason Economic and Trade Zone: Coastal free trade zone
• Kaesong Industrial Complex: Industrial park (current status varies)
• Wihwa Island Economic Zone: Joint project zone

Registration Requirements

• Feasibility study and business plan
• Joint venture agreement (for JVs)
• Approval from Foreign Investment Bureau
• Registration with the Registry of Companies
• Tax registration and business license

Compliance Obligations

• Annual tax filings
• Financial reporting to regulatory authorities
• Social security contributions
• Sanctions compliance and reporting