There have recently been some serious allegations made against AFEK and AFEK founder Mike Yates on a prominent expat blog. Korea’s defamation laws make it a criminal offence to harm the reputation of another person, even when defending yourself. For this reason, there will be no statement on the allegations made at this time. We fully expect to be able to give a full statement in future, but until that time arrives, we cannot comment directly on this matter.

There are also rumours circulating that AFEK is a ‘for profit’ organisation, and that AFEK is now charging membership fees. We are able to clarify these points.

Is AFEK charging for membership?

Not exactly. Over the past year, one former-member has enjoyed causing problems for AFEK. He has admitted to getting AFEK advertising ‘pulled’ in order to prevent us attracting new members, and he has gained access to personal information from the AFEK site. AFEK is a place where people post their names, addresses, telephone numbers, and photographs of their families. Membership privacy is something that we take VERY seriously. Copying anything that includes personally identifiable information results in permanent revocation of membership.

The former-member claimed to have access to the site, and provided proof by copying a recent post and sending it in PM via another forum. It can only be assumed that the person passing on membership details was somebody who didn’t care enough about the AFEK community to want to stay. A decision was then made to block access to all people who do not care enough about the community to participate.

• Any inactive member (not logged in for 6 months) would have their account blocked. It can be reactivated via email request.
• Anybody who accesses the site, posts the (very) occasional post, and is able to provide assistance, insight, or spark interesting discussion is not asked to pay.
• Anybody who accesses the site and rarely posts has been blocked from accessing the site. They are then given an option to either pay a small fee to help with the substantial hosting costs, or leave. That is the cost of reading without contributing.

All AFEK members are asked to make an introductory thread before full access is granted. Over 80% of people blocked from the site had ONLY posted in their introduction thread, yet continued to access the site, and read intimate details of people’s private lives.

Only lurkers are being asked to pay. Everybody else is granted full access, as they were before. If you wish to join AFEK and participate, you will not be asked to pay any membership fees. If a lurker chooses to pay once, then becomes active, they will not be asked to pay again.

If anybody believes they have been blocked in error, they can contact us (follow the instructions logging in to the site) and the account will be reviewed.

Is AFEK a ‘for-profit’ organisation?

Almost. As clearly stated at the bottom of every page on the AFEK website, AFEK is operated by ILW Korea, a tax-paying company registered in the Republic of Korea. ILW Korea is a licensed consulting company that primarily works on short-term projects involving presentations, speeches, and leadership coaching.

AFEK was brought under the domain of ILW Korea in 2011, and the ILW Korea business licence was altered to include revenue raised online. This was necessary so that the site could accept the sponsorship necessary to host the 2011 Business Conference, and so that some of the ever-rising server costs could be offset by advertising revenue.

It was initially hoped that AFEK could attract sponsorship by registering as an NGO, but due to the nature of the organisation, it would never qualify as an NGO in Korea. Any NGO must have Korean members on the board, and a Korean would never qualify as a member of AFEK.

Although ILW Korea is a profit-making organisation, AFEK as a standalone entity does not break even. Nor is it likely to. AFEK is a private site, so potential advertisers are not able to judge how active the site is. This means that advertising revenue will never cover costs. Very few advertisers are willing to sponsor the site without being able to login and see how active it is. In order to protect member privacy, almost every request to advertise on AFEK is refused because the potential advertiser insists on logging in to see the site for themselves. Any request for access from non-members are always refused.

The account lockout actually means that revenue is expected to decrease. In the world of online advertising, the value of the advertising space is directly related to the amount of traffic it attracts. The site would be more profitable with lurkers than it will be without them. In 2011, Advertising revenue covered around 60% of AFEK’s expenses. With the drop in traffic it’s expected that advertising revenue will drop to 2010 numbers, or around 20% of expenses. Revenues raised from the members are not expected to make up this shortfall.

COMMENTS ARE CLOSED ON THIS POST.

The AFEK Bookstore has recently launched a must-have guide for anybody doing business in Korea. Written by Mike Yates, the owner of a small consulting company in Korea, the book seeks to lead you through everything you need to know about being a business owner in South Korea.

The 7 chapters cover the following:

1. Your Visa
2. Establishing your Company
3. Employment
4. Taxes
5. Intellectual Property
6. Property
7. Bureaucracy and Administration: Practical Advice.

In addition, there are numerous appendixes and pages of useful contact numbers.

Although the book is written as a guide to doing business in Korea, it’s also filled with useful information for just about anybody living (or planning to live) in Korea. The visa section deals with the D-8 investment visa, as well as the various F-visas, and the routes to acquiring them.

The Taxes section deals not only with income taxes, but also covers all taxes you have to pay if you live in Korea (all up to date as of 2011). The Employment section covers a number of laws that employers must adhere to, and the minimum standards that employees can expect.

At 129 A4 pages, the book covers just about everything you need to know when doing business in Korea.

There have been a lot of rumors this week surrounding some ‘new’ regulations regarding criminal background checks in Korea. The grapevine has been reporting that, from next week, all foreign employees must be checked for every job they work.

For resident F-Pats, that could cause problematic. Getting a background check for each and every short-term position they take would kill any possibility of taking temporary teaching jobs in Korea. Unsurprisingly, there has been some concern.

It doesn’t help that the Korean herald went ahead and posted conflicting information in an article (later amended to be somewhat more accurate). Here are the key quotes:

English language private institutions will be required to check the passports, visas and foreign registration cards of foreign teachers before employment, according to a revised law related to private institutions, the Education Ministry said Tuesday.

The law is intended to obligate hagwon owners to double check foreign teachers before they hire, but will not make foreign teachers submit the documents every time they move to a new hagwon or every year, said Yoo Byung-gil, official of Justice Ministry in charge of immigration.

The members over at AFEK decided to check for themselves. This comes from a source more reliable than Dave’s or the Herald:

또한, 학원에서 외국인강사를 채용할 경우에는 법에서 정한 범죄경력조회서, 건강진단서, 학력증명서 외 여권ㆍ비자 및 외국인등록증도 추가로 확인하여 불법 체류자에 대한 검증도 할 수 있도록 하고, 이를 이행하지 아니할 경우에는 행정처분(교습정지 등) 및 과태료(300만원 이하)를 부과하도록 하였다.

So what does it  mean?

Prior to this act, schools that hired illegal teachers were happy to blame immigration when caught. Their defense was something like “Hey, not my fault. Blame immigration, they’re the people who are supposed to do the checks!”

The amendment simply puts employers on the hook, formally. They are now responsible for checking the ARC, Passport and Criminal Background (Korean) of the teacher BEFORE they hire them, and before they register the teacher with the Ministry of Education, Science & Technology.

They are being made to act as the first line of defense. For teachers, nothing has changed. You still have to provide a CBC from your home country prior to arrival, and you still have to provide a Korean CBC for all job changes after you have arrived.

A number of F-Pats own their own schools here in Korea. The conventional method is to start your own school from scratch. This is the method that involves the least start-up cash, yet means that reaching your break-even point is going to take longer.

For some people, buying a school may be a more attractive proposition. An established school will come with students, and will (hopefully) be making a profit. As long as you are sure you can retain your existing students, you could be making a profit from the outset.

When buying a school, costs are pretty standard:

• 3 months gross income is the standard asking price for the business.
• Key money is an additional payment, but one you get back when you sell or close the business.
• 권리금 (a ‘goodwill’ payment) may also need to be paid. That’s a kind of premium for the location and goodwill.

If you’re looking to buy a school, there are a few places you may want to look.

• Hakwonmore is a dedicated hagwon sales site, and is very popular.
• Jikgure is a site that caters for all kinds of businesses. The school listings are light at the moment, but there are plenty of other businesses there, if you want something different.

Finally, anybody thinking about opening a business of any kind in Seoul would do well to check out the AFEK Guide to Business in South Korea, and if you qualify, join the AFEK site and ask about the Firestarter forums.

This is a topic that comes up a LOT, both on AFEK and on other forums. Here’s how it works…

On an E-2, you can work at one workplace. If you go to immigration, you can have a second workplace added. Everybody seems to know that. There’s a popular misconception that an F-visa holder can teach any privates legally. As usual, that’s only half of the story.

If you have an F-visa, you may legally teach private lessons to adults. You can go through an agent (sub-contract), or you can get your own students. If you get your own students, and you earn more than 12 million won each year from privates, you MUST get a business license. You need a license for any business in Korea once you cross the 12 million threshold. That’s the law.

If you earn less than 12 million, you don’t need a license, but you MUST declare your income and pay taxes on it.

If you want to teach privates to kids, it gets real messy. First off, you must have both a business license and a tutoring license. The tutoring license requires that you have a bachelors degree and a clean criminal record. You get your tutoring license from the Ministry of Education, and when you apply, you must state how much you are going to charge per hour. Each area has different guidelines in place, and the more affluent areas allow you to charge more money.

THE HOURLY RATE IS PER STUDENT!

This is important. Some areas impose a limit of 9 or 10,000 per student. If you have 4 students, you charge the same amount for each of them, even if you teach them at the same time! 10K becomes 60K if you have 6 students in a class.

You should register all places that you teach with the Ministry of Education. This means that you should register your home if you teach there. If you teach at a students home, you should register that too.

Education is a tax-exempt business, so you won’t have to charge VAT.

If you have an F-visa and want to talk about F-visa jobs or self-employment opportunities, join AFEK today!

 Paypal is awesome. It’s a nice cheap payment solution for anybody providing an online service. A lot of people would love to use it in Korea, but there are a few headaches, especially as a foreigner.

First off, Paypal won’t accept your ARC number if you want to get verified as a merchant (or even a verified buyer). It just won’t. An obvious solution for many F-pats is this was to create an account in your spouse’s name, and link it to their bank account or card. If you’re a single F-4, obviously, this won’t work too well for you.

If you get a business license, something that’s painless enough, you can open a business bank account. If you have a business bank account, you can link it to Paypal with ease. Instead of your ID number, you use your business number. It works just fine!

Using Paypal is great, because the transaction charges are so cheap. Other payment solutions in Korea come with a set-up fee, a monthly fee, transaction fees, and a severe allergic reaction to anything that isn’t a Korean credit card. Paypal has none of these problems.

What you will find is that Paypal does have a aversion to Korean won. You can’t accept payment in won, and must complete your transactions in another currency (US dollars being the obvious choice). When you come to withdraw your funds, Paypal will convert the currency into Korean won, and then deposit it into your business account. At least that’s painless enough. There’s no transaction fee either, as long as you withdraw ₩150,000 or more. If you withdraw less than that, it’s only ₩1,500.

An interesting point came up on AFEK this week. If you come to Korea and work at a public school, you can work tax-free for the first 2 years. It sounds awesome, right?

Well yes, and no.

What happens is, during your first month working at public school in Korea, you are given a piece of paper to sign “for taxes.” Usually, that’s all you are told, and being new to Korea, you tend to sign it.

What you are actually signing is a declaration that you are a “non-resident” for tax purposes, and you will be reporting any income you earn for taxes in your home (resident) country. Obviously, there could be repercussions when you go back home. If you get found out.

In the UK, you are considered non-resident if you are out of the country for most of the year, so you wouldn’t normally be taxed on income overseas. You are supposed to declare non-resident status, but the Inland revenue won’t usually follow this up. If you make that declaration in UK (even after the fact) and sign paper in Korea saying you will declare the income at home, that’s tax avoidance. Or fraud.

This system is in place due to double-taxation agreements that are in place in most countries. Here’s what wikipedia has to say about it:

It is not unusual for a business or individual who is resident in one country to make a taxable gain (earnings, profits) in another. This person may find that he is obliged by domestic laws to pay tax on that gain locally and pay again in the country in which the gain was made. Since this is inequitable, many nations make bilateral double taxation agreements with each other. In some cases, this requires that tax be paid in the country of residence and be exempt in the country in which it arises. In the remaining cases, the country where the gain arises deducts taxation at source (“withholding tax”) and the taxpayer receives a compensating foreign tax credit in the country of residence to reflect the fact that tax has already been paid. To do this, the taxpayer must declare himself (in the foreign country) to be non-resident there. So the second aspect of the agreement is that the two taxation authorities exchange information about such declarations, and so may investigate any anomalies that might indicate tax evasion.

It’s complicated, especially in the case of US residents, who can be taxed wherever they live (with the first $90,000 or so exempt).

Like I said, for some people, it may be awesome. Usually, you would be taxed much more at home than in Korea, so it may not make sense to sign that paper. This is especially true if you get caught…

The subject came up on AFEK because many members had benefited from this in the past, before they had their F-2 or F-5 visa. The real problem, as we see it, would be if an F-4 visa holder was asked to sign the paper. An F-4 will typically come to Korea knowing little about the country. As people of Korean heritage, they can apply for their F-4 visa without ever having been here before, and they may well find themselves in a public school job, being asked to sign the form.

The problem? An F-4 is a residence visa. If that paperwork (declaring non-residence) gets submitted to the tax office, you may well find youself dealing with a multitude of problems!

(As to why you can’t do this when working at a hagwon… would YOU trust them to do it right?)

If you want to join in the F-Pat conversation, all you need is an F-2, F-4 or F-5 visa!

This week, the Korean government immediately ordered seven savings banks to cease operations. A number of AFEK members were concerned that they may have been affected (and indeed some were), and there was a little confusion about some of the banks involved.

Yonhap reported the news in English, and listed these banks:

• Jeil Savings Bank
• Jeil 2 Savings Bank
• Prime Savings & Finance Co.
• Daeyeong Savings Bank
• Ace Mutual Savings Bank
• Parangsae Savings Bank
• Tomato Savings Bank

The most confusion came from the listing of Jeil Savings bank (제일은행). Jeil is a name exempt from copyright in South Korea. This means it can be used just about anywhere, and is used almost as often as ACME in a Warner Brothers cartoon.

The “original” Jeil bank was bought by Standard Chartered a few years ago, and they use the brand SC제일은행 on a lot of their Korean literature, with the English name SC First Bank . After the takeover, a savings banks started to use the name Jeil Bank (제일은행). If you bank with SC, you’re fine. At times like this, it really pays to check the Korean press before panic sets in!

The list of banks (in Korean) is as follows (source):

• 토마토(경기)
• 제일(서울)
• 프라임(서울)
• 제일2(서울)
• 에이스(인천)
• 대영(서울)
• 파랑새(부산)

Apparently, some people are going to be able to get some of their money back at the end of the week. Right now, it’s up to the banks to sort out their capital reserves if they are to start trading. If they are unable to resume trading, their assets will remain frozen. Thankfully, deposits at these banks are insured by the Korea Deposit Insurance Company (KDIC), so individual savers will (eventually) be reimbursed for up to ₩50,000,000.

Before you sign up for any savings account in Korea, it pays to check with the KDIC, and make sure the bank is insured. You can see the full list of insured banks here.

If you want to join the conversation about this, and just about anything else that’s happening in Korea, join AFEK… it’s FREE!