Foreigner-owned businesses facing shutdown due to visa rule change

The immigration office in downtown Seoul / Korea Times file

By Jon Dunbar

Many foreign business owners are facing an abrupt end to their entrepreneurial careers, as sudden changes in how immigration offices are handling the F-2-7 visa are causing chaos.

Foreign business owners have been getting turned away at immigration offices when going in to renew their F-2-7 visas. Some have reported being told that they never should have been allowed to register their businesses in the first place, and have even been threatened retroactively with fines for activities that are supposedly now illegal.

However, there was no announcement of any such changes, nor has there been any grace period to allow long-term foreign residents the time to find alternative solutions to save their businesses, according to Jang Man-ik, a licensed immigration specialist who runs the visa consulting agency, Visa in Korea.

"It is harsh to retroactively eliminate benefits for foreigners who already have F-2-7 visas," he told The Korea Times. "There is no information about the changes. Even though visa policy has changed, there has been no grace period. Immigration had already accepted their businesses until last year, but they didn't reveal publicly how and when these rules changed."

The F-2-7 is a point-based, long-term residence visa, valid for five years. Applicants must live in Korea for three years prior to receiving the visa, as well as score enough points through requirements based on yearly income, age, education level and Korean language ability, among others.

Until recently, F-2-7 visa holders wishing to start a business only had to register it through their local tax office. This rule went into effect on June 1, 2016, opening the door to foreigners starting businesses on F-2-7 visas without a major lump sum of capital.

But after the visa rules were changed last Dec. 1, immigration officers have been refusing to recognize foreign-owned businesses in the F-2-7 renewal process, even though they had last year ― while tax offices are reportedly continuing to do so.

An F-2-7 holder, who wanted to be identified only as Ms. M, said that she applied for the visa almost five years ago in order to start her company, which promotes traditional Korean products.

"We registered the business in 2016 and have since had name changes and new business registrations without any problems," she told The Korea Times. "In fact, putting the work in to get the F-2-7 by completing the Korean Immigration Integration Program (KIIP) was entirely for the purpose of registering a business independently. It took a year just to complete the courses and tests required in order to qualify, so of course we crossed our T's and dotted our I's, with consultations at the Seoul Global Business Center, consultations concerning tax accounting, business community seminars, and classes. Not once did we consider that our business could one day be in jeopardy due to sudden rule changes."

The new visa rules introduced last December place higher emphasis on annual income over social integration programs like the KIIP. But as immigration officers have suddenly been refusing to recognize the visa holders' businesses, the incomes derived from their businesses are now not counted toward their visa points. So the affected business owners receive two hits at once: their visas no longer allow them to operate their businesses, and without their business activities, they are unlikely to qualify for the renewal of their visas.

This situation constitutes a major problem for full-time business owners, whose primary occupation is their business, and has "called into question whether small businesses can even continue to operate in Korea," according to Ms. M.

"The point system has fundamentally been changed to favor income rather than social integration, and F-2-7 holders attempting to renew are suddenly being told they are not legally able to operate a business license, despite having legal issuance from the tax office," she added.

"The original point system category was clearly designed for those who wanted to integrate into Korean society and make meaningful contributions to their communities here. The highest points were allocated to language ability, the KIIP, volunteer work and higher education in Korea. Now the points are unapologetically about income, age and potential earning power," she explained.

Under the changed way that the rules are being implemented, F-2-7 visa holders who own businesses face the closure of their businesses, and if they are also unable to renew their visas, they will drop to entry-level D-10-1 jobseeking visas.

Jang Man-ik, immigration consultant / Courtesy of Visa in Korea

According to Jang, the main issue is changing interpretations of a presidential decree regarding F-2-7 visa holders' employment criteria, which is being held in higher regard over the articles. Article 23 of the Presidential Enforcement Decree of the Immigration Control Act, which reads, "F-2-7 visa holders are not restricted from employment activities according to the classification of stay qualifications."

Article 23 releases F-2-7 visa holders from employment restrictions placed on other visa holders, allowing them to work in almost all industries. But the point of contention is whether it also allows for business activities, such as opening and operating a private company.

Jang cited a statement by the Ministry of Justice's innovation and public administration officer, obtained through epeople.go.kr, dated Jan. 25, 2018, claiming that the presidential decree makes it possible "to operate a business in an industry that is not restricted by other laws." This statement was what immigration offices had been following, at least until recently.

"As such, there were no restrictions in immigration offices on foreigners holding an F-2-7 visa to engage in business activities before Dec. 1 of last year," Jang said.

But Articles 47 and 49-2 of the Enforcement Regulations of the Immigration Control Act, which went into effect last December, now require F-2-7 visa holders to report their jobs including businesses owned and business income at an immigration office in order to renew their visas.

Thus, without a single warning or any grace period, the administration of the rule has been altered, although many immigration officials, F-2-7 holders and applicants may still be unaware.

Unless the rules confusion is clarified in a way favorable to the foreign business owners, those who want to continue their careers ― and likely their ability to stay in Korea ― will have to switch to another visa, such as an F-6 marriage visa, F-5 permanent residence visa or a D-8 foreign investor visa. But to qualify for a D-8-1 visa, which allows one to establish a local corporation, the applicant must invest 100 million won (90,000 US dollars), far too high an amount for most of the affected business owners.

"The high investment cost of a business visa is not a viable option, especially considering the pandemic's impact on my business, which was tourism- and event-based, so the timing of the change is just more salt in the wound," Ms. M pointed out.

"Not everyone has hundreds of thousands of dollars to invest, nor does everyone have the option to marry a Korean national ― but many do want to have meaningful and successful businesses that create value and contribute to benefitting Korean society. It's tough to be a long-term resident and do business if your visa status can change on a dime. So many people in the community are now rethinking their lives and time investment in Korea, as the stress of instability is becoming just too much," she continued.

"I have been working to make a life in Korea for many years, several of which have been dedicated to promoting Korean culture through my business. This is the first time I have felt like that just doesn't matter."

"The population of Koreans began to decline for the first time last year in 2020," Jang added. "The decrease in population is related to national power, and the continued decline in the population results in a decrease in the productive population. I believe that if Korea continues to offer opportunities in various industries for foreigners to do business in Korea through the F-2-7 visa, their presence and contributions to society will constitute a driving force to offset the population decline."