Introduction
If you have started your startup journey under the OASIS program in Korea, you might find it challenging to receive payments in a foreign currency. This is especially true if your clients and customers are not based in Korea. Why? The Korean banking system is quite a closed ecosystem, and it’s easy to handle payments in Korea but not outside.
This article provides some international payment options to help you navigate this situation and show you how you can get paid!
As someone who has clients based in both Germany and other countries, I understand the complexities of handling accounting and taxation in an international context. It took me quite some time to figure out all the technicalities. My goal was to make the experience as smooth as possible for my clients and to avoid having them go the extra mile to wire me payments. After extensive research, I found that there weren't many straightforward, off-the-shelf payment options for receiving payments from abroad to Korea, especially for foreigners. However, today, I am going to share the options that I did find.
Payments from Korean and Foreign Clients
Receiving payments when somebody is in Korea and buys your service is not a problem.
However, if you offer your work and have clients abroad, it becomes a bit trickier. I have found this out in my own experience.
Your foreign clients may have to wire you funds to your Korean business account via the SWIFT network. This method can be rather inconvenient as it's not universally supported in all systems, which could potentially make it more difficult for your clients to issue payments. This method could also result in higher transaction fees for both parties involved.
Opening a Foreign Currency Account at a Korean Bank
You might consider going to a bank and asking them to open a foreign currency account for you. However, if you've ever dealt with a Korean bank, you'll know that the process can be slow and complicated. They often require many documents and ask numerous questions, which can seem unnecessary. Communicating your needs can also be difficult if you don't have a translator. Therefore, while this is an option, it might not be the most efficient or user-friendly solution.
Paypal - Online Payment Processor
The first option for receiving payments in Korea is Paypal. Paypal is a globally supported platform, making it easy to receive payments from various countries. If you have a Korean business account, you are eligible to receive payments from abroad in different currencies. Moreover, it offers integrations with other services. I personally linked Calendly, which automates booking consultations with me. However, it's important to note that Paypal's fees and exchange rates to Korean Won are not so great.
Wise Business Account (Transferwise) - Multi Currency Bank Account
Another option is to set up a Wise Business Account, formerly known as Transferwise. With this service, you can easily receive payments from various countries and set up local accounts in different currencies.
I have used Wise personally throughout my travels and rarely face payment issues.
Unfortunately, you won't get a debit card that you can use in Korea for purchases. You will need to transfer the funds to your Korean business account. However, the exchange rates and fees are superior to any other service.
Setting up a Wise Business account will costs you 50 Euro and you will also have to submit your company registration documents. But receiving money in various currencies and bank account is very straightforward.
Lemon Squeezy - Payment Gateway (Stripe Alternative in Korea)
If you are building a Software as a Service (SaaS) product and are in need of a reliable payment gateway for managing monthly subscriptions or one-time purchases, your initial thought might be to use Stripe.
However, it's important to note that Stripe is currently not available in Korea.
I discovered an excellent alternative called Lemon Squeezy. This platform is fully supported in Korea and offers a comprehensive solution for handling payments. What sets Lemon Squeezy apart is its capability to manage all aspects of taxation and VAT on your behalf, significantly simplifying the process and reducing administrative workload. This feature can be particularly beneficial for startups and small businesses that may not have extensive resources to dedicate to tax management. Therefore, it's worth considering Lemon Squeezy as a viable solution for your payment gateway needs in Korea.
Gumroad - Selling Digital Goods
Gumroad is yet another option for receiving payments from foreign clients. This platform is particularly suited for selling digital goods and supports direct payments into your Korean business account. It's a user-friendly solution that might fit your business needs, especially if you're dealing with digital products or services.
No 10% VAT on Foreign Clients
One important aspect of conducting business in Korea with foreign clients is the taxation process. As per Korean tax law, if your clients are based outside of Korea and have no entity in Korea, you are not required to issue the standard 10% Value-Added Tax (VAT) on your services. This is a significant advantage, making transactions smoother and more straightforward for both parties. However, it's essential to keep in mind that tax laws may differ in your clients' countries, so it's advisable to work with a tax professional and accountant to ensure compliance.
Conclusion
In conclusion, receiving foreign payments in Korea as a startup with foreign clients can be a complex process due to the closed nature of the Korean banking system. However, several options are available to ease this process, including Paypal, Wise Business Account, Lemon Squeezy and Gumroad. Each option has its own set of advantages and limitations, so it's crucial to assess your business needs and choose the one that best aligns with them. Furthermore, understanding the tax implications, such as not needing to issue a 10% VAT on services for foreign clients, can make the transaction process smoother. Navigating these complexities can be challenging, but with the right knowledge and tools, you can effectively manage foreign transactions in your business.
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About the Author
Kim Ninja (Huy-Kim Nguyen)
Cloud Engineer / WebApp Developer 💻
Content Creator Bridging Korea 🇰🇷 to the World 🌎
Startup Founder based in Seoul, South Korea 🚀
The blog published by Kim Ninja (Huy-Kim Nguyen) is available for informational purposes only and is not considered legal advice on any subject matter.
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