Business Types
The dictionary definition of the lodging industry refers to the act of providing travelers with a temporary place to stay for sleep, including not only inns and hotels, but also vacation rentals, short-term rental accommodations, bed-and-breakfasts, and similar forms of lodging. However, a dictionary definition alone does not sufficiently explain Korea’s lodging businesses. So, what exactly is the lodging business in more concrete terms?
Table of Contents
1. Dictionary Definitions
The Standard Korean Language Dictionary defines the lodging business as “a business that provides accommodation to guests and charges fees, such as inns or hotels”. In addition, STR—widely regarded as the world’s largest lodging-industry database—defines “lodging” in its glossary as follows. Under STR’s definition, “lodging” may refer broadly to lodging facilities and also to the lodging business itself.
“Lodging” is an umbrella term that refers to a temporary place to stay, such as a hotel, motel, or hostel. It can also refer to a vacation rental, short-term rental, bed and breakfast, or any other type of accommodation that provides sleeping quarters for travelers. The term is often used in the hospitality industry to describe the act of providing accommodations to guests.
In summary, dictionary definitions describe the lodging industry as the provision of temporary accommodations for travelers’ overnight stays, including inns and hotels as well as vacation rentals, short-term rentals, bed-and-breakfasts, and other lodging formats. In other words, it can be understood as a business that provides travelers with space for temporary use.
However, dictionary definitions are broad and, depending on one’s perspective, may feel ambiguous. From a traveler’s perspective, it is sufficient to find a place where the necessary number of people can stay at the required time and location; there is no need to understand how that space is supplied. From a supplier’s perspective, however, in order to provide a place where the necessary number of travelers can stay at the required time and location, the operator must secure facilities and complete business registration in accordance with applicable laws and regulations.
2. Legal Framework
In Korea, there is no statute that explicitly defines the meaning of “business”. However, the meaning of “business operator” is defined as follows, from which the meaning of “business” can be inferred:
“A business operator means a person who, independently in the course of business, supplies goods or services, regardless of whether the purpose of the business is for profit or not.” (Value-Added Tax Act, Article 2(3))
Accordingly, “business” may be understood as the act of independently supplying goods or services, and to commence a business one must apply for business registration with the competent district tax office in accordance with relevant laws and regulations.
“A business operator shall, as prescribed by Presidential Decree for each place of business, apply for business registration to the head of the district tax office having jurisdiction over the place of business within 20 days from the date of commencement of the business. Provided, that a person intending to newly commence a business may apply for business registration even before the commencement date.” (Value-Added Tax Act, Article 8(1))
A person seeking business registration under Article 8(1) of the Value-Added Tax Act must submit an application for business registration for each place of business to the head of the competent district tax office, or to another head of a district tax office chosen for the applicant’s convenience (including submission via the National Tax Information and Communications Network), stating the following items: (Enforcement Decree of the Value-Added Tax Act, Article 11(1))
- Personal details of the business operator
- Reason for applying for business registration
- Year, month, and day of commencement of the business, or the year, month, and day on which installation of the place of business begins
- Other reference matters
1. For a business that requires a permit, registration, or report/filing under applicable laws: a copy of the business permit, a copy of the certificate of registration, or a copy of the confirmation of filing
Because lodging businesses require permits, registrations, or filings under individual statutes, an applicant must attach a copy of the business permit, certificate of registration, or confirmation of filing when applying for business registration. However, depending on which type of lodging business is involved, the required supporting documents, submission authority, and processing procedures may differ. What types of lodging businesses exist? In Korea, all businesses are subdivided in accordance with the Korean Standard Industrial Classification (KSIC), and the same is true for lodging businesses.
“Classification of businesses supplying goods or services shall, except where special provisions exist, follow the Korean Standard Industrial Classification as publicly notified by the Commissioner of Statistics Korea as of the start date of the relevant taxable period.” (Enforcement Decree of the Value-Added Tax Act, Article 4(1))
Lodging (55): This refers to industrial activities that mainly provide, on a short-term basis (typically contracted by number of days used), various forms of lodging facilities, campgrounds, and camping facilities to the general public or specific members. It also includes cases where a lodging facility is operated in combination with food-provision facilities (i.e., providing meals together) and cases where a separate enterprise, which does not conduct railway transportation, operates only sleeping cars. Most cases involve providing rooms for short periods, but cases in which some rooms are provided to specific customers for relatively longer periods are also classified as lodging. It includes temporary or long-term lodging supply such as gosiwon, boarding houses, and dormitories that are provided in the form of private rooms, group rooms, or dormitories in facilities without an independent residential form. It also includes travel- and leisure-related lodging facilities such as campsites and campgrounds. (Korean Standard Industrial Classification Explanatory Notes)
- General and Residential Lodging Property Operation (5510): Industrial activities that, for a fee, mainly provide lodging or camping facilities to the general public or specific members for short periods, generally not exceeding one month, and include hotels, inns, condos, and corporate retreat facilities. This includes both general lodging facilities that provide lodging only and residential lodging facilities that also provide cooking facilities.
- Hotel Business (55101): Industrial activities operating lodging facilities that generally provide concierge/front-desk services and individual services such as meals (room service), laundry, and interpretation, and provide two or more related ancillary facilities such as performance/conference facilities, entertainment/sports facilities, and sales of alcoholic beverages and merchandise.
- Yeogwan Business (55102): Industrial activities operating lodging facilities that provide none of the hotel services or provide only limited services.
- Resort Condo Operation (55103): Lodging facilities provided to specific members who have acquired usage rights by agreement, with surplus rooms sometimes offered to the general public; includes cases where leisure facilities such as ski resorts or golf courses are operated together.
- Minbak Business (55104): Industrial activities providing lodging services using ordinary residential housing such as single-family houses, multi-household houses, multi-family houses, and apartments; includes cases providing cooking facilities or meals together with lodging.
- Campsite Business (55105): Industrial activities that provide camping convenience facilities to users (guests, tourists, etc.) by equipping facilities and equipment suitable for camping.
- Other General and Residential Lodging Property Operation (55109): Industrial activities operating other general and residential lodging facilities excluding hotels, inns, resort condos, minbak facilities, and campsites.
- Other Lodging (5590): Includes industrial activities operating dormitories, gosiwon, boarding facilities, and other lodging facilities that provide meals and lodging or lodging services for relatively longer periods in facilities without an independent residential form.
- Dormitory and Gosiwon Operation (55901): Industrial activities operating dormitories and gosiwon that provide meals and lodging together. Dormitories generally serve members of a particular school, company, or organization, whereas gosiwon provide services to the general public.
- Other Miscellaneous Lodging (55909): Industrial activities such as boarding-house operations that provide meals and lodging together for an agreed period, or other unclassified lodging facility operations.
3. Subclassification of Lodging Businesses
1) Lodging Businesses under the Public Health Control Act
Among the laws that prescribe permit, registration, or filing requirements for each detailed lodging category, the Public Health Control Act is the most widely applicable. Lodging business is one of the “public health businesses” under the Act, and the competent supervising authority is the Ministry of Health and Welfare.
“‘Public health business’ means a business that provides hygienic management services to the public and refers to lodging business, public bath business, barber business, beauty business, laundry business, and building sanitation management business.” (Public Health Control Act, Article 2(1)1)
Public health businesses are subject to a filing system, and the filer must submit a report to the public health department (or equivalent) of the competent city, county, or district office. While permits or registrations are granted or refused based on administrative discretion, filings are in principle accepted automatically unless there is a specific ground for disqualification. In other words, lodging businesses under the Public Health Control Act have relatively low entry barriers and therefore account for the largest share of the lodging industry in Korea.
“A person who intends to engage in a public health business shall equip the facilities and equipment prescribed by Ordinance of the Ministry of Health and Welfare for each type of public health business and file a report with the head of a Si/Gun/Gu (limited to the head of an autonomous Gu; hereinafter the same shall apply). The same shall apply when a person intends to change important matters prescribed by Ordinance of the Ministry of Health and Welfare.” (Public Health Control Act, Article 3(1))
When filing a public health business report, the filer must attach the following documents, including documentation proving rights to use the business properties and equipment. This includes documents that can prove ownership, leasehold on a deposit basis, or lease rights, among others.
- Outline of the facilities and equipment
- Documents proving that the right to use the facilities and equipment has been secured; and, only where lodging business is reported for part of a building subject to the Act on the Ownership and Management of Aggregate Buildings, an insurance policy or notarized document securing the operator’s liability for accidents occurring in common areas
- Certificate of completion of education (only where education has been completed in advance under Article 17(2) of the Act)
- Deleted
- Permit for use of state property under Article 14(3) of the Enforcement Rule of the State Property Act (only where operating within state-owned railway station facilities or military facilities)
- Documents regarding a railway facility use agreement concluded with a railway operator (including an urban railway operator) (only where operating within railway station facilities other than state-owned railways)
- Deleted
The Public Health Control Act defines the lodging business as follows. Here, “lodging business” refers to lodging businesses subject to the Act.
“‘Lodging business’ means a business that provides services of facilities and equipment, etc. so that guests may sleep and stay. Provided, that this shall exclude cases prescribed by Presidential Decree, such as certain minbak located in rural areas.” (Public Health Control Act, Article 2(1)2)
In other words, not all subcategories of the lodging businesses under the KSIC are included here, and the following specific categories are excluded.
Facilities excluded from lodging businesses under the proviso to Article 2(1)2 of the Act are: (Enforcement Decree of the Public Health Control Act, Article 2)
- Facilities used for rural minbak businesses under the Agricultural and Fishing Villages Improvement Act
- Facilities installed within natural recreation forests under the Forestry Culture and Recreation Act
- Youth training facilities under Article 10(1)1 of the Youth Activity Promotion Act
- Facilities for foreign tourist urban minbak businesses and hanok stay businesses registered under Article 4 of the Tourism Promotion Act
Rural minbak, urban minbak, and hanok stay businesses fall under “lodging” in KSIC, but are subject to laws other than the Public Health Control Act. Conversely, lodging facilities within natural recreation forests and youth training facilities are not included in KSIC lodging.
Lodging businesses subject to the Public Health Control Act correspond to “general and residential lodging property operation”. The key distinction is whether cooking facilities are installed in guest rooms. General lodging properties without cooking facilities typically serve short-stay travelers, whereas residential lodging properties with cooking facilities typically serve longer-stay travelers.
Under Article 2(2) of the Public Health Control Act, lodging businesses are subdivided as follows: (Enforcement Decree of the Public Health Control Act, Article 4)
- Lodging business (general): A business that provides services of facilities (excluding cooking facilities) and equipment, etc. so that guests may sleep and stay
- Lodging business (residential): A business that provides services of facilities (including cooking facilities) and equipment, etc. so that guests may sleep and stay
When registering a lodging business under the Public Health Control Act at the tax office, general lodging businesses are registered as yeogwan businesses under the KSIC, while residential lodging businesses are registered as other general and residential lodging property operation under the KSIC.
Meanwhile, under the Act on Restriction on Special Cases Concerning Taxation, the yeogwan business is classified as a ‘consumption-oriented service business‘, whereas the other general and residential lodging operation is not. Therefore, the residential lodging business is eligible for special taxation, whereas the general lodging business is not.
According to Article 29, Paragraph 3 of the Enforcement Decree of the Act on Restriction on Special Cases Concerning Taxation, hotel and yeogwan businesses (excluding tourist lodging businesses under the Tourism Promotion Act) are considered consumption-oriented service businesses. However, the other general and residential lodging operation under the KSIC of Statistics Korea is not considered a consumption-oriented service business.
2) Lodging Businesses under the Tourism Promotion Act
There are cases where a lodging business is included in KSIC lodging and also in lodging under the Public Health Control Act, but is registered and supervised under the Tourism Promotion Act rather than the Public Health Control Act. This is particularly the case when various ancillary facilities are operated together with guest rooms, where integrated administration improves licensing efficiency and tourism resource management. A tourism business operator seeking to engage in lodging business under the Tourism Promotion Act must apply to the tourism department (or equivalent) of the competent Si/Gun/Gu. The competent supervising authority is the Ministry of Culture, Sports and Tourism.
“If a Special Self-Governing City Mayor, Special Self-Governing Province Governor, head of Si/Gun/Gu registers a tourism business after deliberation by the committee, the tourism business operator shall be deemed to have filed reports or obtained permits/approvals for each of the following matters that were subject to deliberation by the committee:” (Tourism Promotion Act, Article 18(1))
- Filing of lodging, public bath, barber, beauty, or laundry business under Article 3 of the Public Health Control Act
- Permit or filing for certain food service businesses prescribed by Presidential Decree under Article 36 of the Food Sanitation Act
- License or filing for liquor sales business under Article 5 of the Liquor License Act, etc.
- Registration of foreign exchange business under the Foreign Exchange Transactions Act
- Designation of tobacco retailer under the Tobacco Business Act
- Deleted
- Filing for sports facility business under the Installation and Utilization of Sports Facilities Act
- Permit for marine leisure activities under the Sea Traffic Safety Act
- Filing or permit for establishment of an affiliated medical institution under the Medical Service Act
For tourism business registration, the applicant must attach the following documents, including documentation proving rights to use the relevant real estate. This includes documents that can prove ownership, leasehold on a deposit basis, or lease rights, among others.
A person seeking tourism business registration under Article 3(1) of the Enforcement Decree of the Tourism Promotion Act must submit an application in the prescribed form to the head of the competent local government, attaching the following documents: (Enforcement Rule of the Tourism Promotion Act, Article 2(1))
- Business Plan
- If the applicant (or, in the case of a corporation, its representative and officers) is a Korean national, documents stating name and resident registration number
- Where the applicant (or, in the case of a corporation, its representative director and executives) is a foreign national, one of the documents set forth in the following subparagraphs evidencing that such applicant does not fall under any of the grounds for disqualification prescribed in Article 7(1) of the Tourism Promotion Act (hereinafter referred to as the “Act”) (including Article 11-2(1) of the Act in the case of a travel business). Provided, however, that where a person has registered a business and is operating the relevant business or undertaking upon obtaining the required authorization, permission, or approval under the Act or other applicable laws and regulations (in the case of a corporation, limited to cases where there has been no change in its representative director or executives during the period from the payment of corporate income tax within the most recent one year to the date of application for registration), such person may omit submission of the documents set forth in the following subparagraphs only with respect to those grounds for disqualification under each subparagraph of Article 7(1) of the Act (including Article 11-2(1) of the Act in the case of a travel business) that overlap with the grounds for disqualification prescribed in the relevant laws and regulations governing the business or undertaking being operated, if the person submits documents evidencing that the required authorization, permission, or approval for such business or undertaking has been obtained, together with documents evidencing payment of income tax (or, in the case of a corporation, corporate income tax) within the most recent one year.
- A document issued by the government of the relevant country or another competent authority, or a notarized statement of the applicant notarized by a notary public, which has been certified by the consular office of a diplomatic mission of the Republic of Korea stationed in the relevant country in accordance with the Act on Consular Notarization
- In the case of a country that is a party to the Convention Abolishing the Requirement of Legalisation for Foreign Public Documents, a document issued by the government of the relevant country or another competent authority, or a notarized statement of the applicant notarized by a notary public, which bears an Apostille issued by an authority of the relevant country authorized to issue Apostilles.
- Documents proving ownership or the right to use the real estate (only where such ownership/right cannot be confirmed through the real estate register)
- For hotel businesses and resort condominium businesses that plan to recruit members, where mortgages are set on the relevant real estate, documents proving subscription to guarantee insurance under the proviso to Article 24(1)2 of the Enforcement Decree
- Documents proving foreign investment under the Foreign Investment Promotion Act (only for foreign-invested companies)
Among lodging businesses classified under the KSIC, those subject to the Tourism Promotion Act are tourist lodging businesses and certain categories of tourist use facility businesses. Tourist lodging businesses are subdivided into hotel businesses and resort condo businesses, while, among tourist use facilities, those that fall under the lodging category in the KSIC are further classified into campsite businesses, urban minbak businesses, and hanok stay businesses.
Tourist lodging business (Tourism Promotion Act, Article 3(1)2)
- Hotel business: a business that provides facilities suitable for tourists’ lodging, and/or provides and enables use of related facilities suitable for food, exercise, entertainment, recreation, performances, or training associated with lodging
- Resort condo business: a business that provides facilities suitable for tourists’ lodging and cooking and provides such facilities to members, owners, or other tourists, and/or provides and enables use of related facilities suitable for food, exercise, entertainment, recreation, performances, or training associated with lodging
Tourist use facility business (Tourism Promotion Act, Article 3(1)3)
- A business that equips facilities suitable for food, exercise, entertainment, recreation, culture, arts, or leisure and enables tourists to use them
- A business that equips two or more facility types prescribed by Presidential Decree together with tourist accommodation facilities and enables members or tourists to use them
- Campsite business: a business enabling tourists to use facilities equipped for camping and providing camping conveniences (excluding youth campgrounds under the Youth Activity Promotion Act)
- Urban Minbak Business for Foreign Tourists: A business whereby a resident of an urban area as defined in Article 6(1)1 of the National Land Planning and Utilization Act (excluding rural areas and semi-rural areas under the Agricultural and Fishing Villages Improvement Act ; hereinafter the same shall apply in this Article) uses a housing unit prescribed by Presidential Decree in which such resident resides, and provides accommodation, meals, and related services to foreign tourists with appropriate facilities that enable them to experience Korean home culture (including cases where, in an urban area, a village enterprise as defined in Article 2(9) of the Special Act on Promotion of and Support for Urban Regeneration, in accordance with an urban regeneration activation plan under Article 2(6) of the same Act, provides accommodation, meals, and related services on a priority basis to foreign tourists, and, to the extent that such provision does not interfere with the use by foreign tourists, also provides accommodation, meals, and related services to domestic tourists visiting the area so that they may experience the area’s distinctive culture).
- Hanok stay business: a business that enables tourists to experience lodging in hanok(as defined under Article 2(2) of the Act on Value Enhancement of Hanok and Other Architectural Assets) equipped for lodging experiences and/or provides facilities suitable for traditional play and craft experiences
For business registration of a hanok stay business with the competent district tax office, an application may be made under KSIC as minbak operation or other general and residential lodging facility operation.
Meanwhile, the Enforcement Decree of the Tourism Promotion Act further subdivides the hotel business of tourist lodging businesses into tourist hotel, floating hotel, traditional hotel, family hotel, hostel, small hotel, and medical hotel businesses.
Types of hotel business (Enforcement Decree of the Tourism Promotion Act, Article 2(1)2)
- Tourist hotel business: a business that equips facilities suitable for tourists’ lodging and provides them, together with ancillary facilities suitable for food, exercise, entertainment, recreation, performances, or training
- Floating hotel business: a business that fixes or moors structures or vessels on water and equips lodging facilities and/or ancillary facilities for tourists
- Traditional hotel business: a business that equips lodging facilities and/or ancillary facilities for tourists in traditional Korean buildings
- Family hotel business: a business that equips facilities suitable for family tourists, including cooking utensils, and/or equips ancillary facilities suitable for food, exercise, recreation, or training
- Hostel business: a business that equips facilities suitable for individual tourists such as backpackers, including convenience facilities such as showers and kitchens, and cultural/information exchange facilities for foreign and domestic tourists
- Small hotel business: a business that equips lodging facilities on a small scale and equips ancillary facilities suitable for food, exercise, recreation, or training
- Medical hotel business: a business that equips facilities and cooking utensils suitable for medical tourists and/or equips facilities suitable for food, exercise, or recreation, and provides them mainly to foreign tourists
3) Lodging Businesses under the Agricultural and Fishing Villages Improvement Act
Among lodging businesses classified under the Korean Standard Industrial Classification, rural minbak businesses, which do not fall under lodging businesses regulated by the Public Health Control Act, are classified as one type of rural tourism and recreation business under the Agricultural and Fishing Villages Improvement Act. The competent authorities responsible for their administration and supervision are the Ministry of Agriculture, Food and Rural Affairs and the Ministry of Oceans and Fisheries. Rural minbak businesses were separated from the Public Health Control Act as part of a policy aimed at increasing rural incomes, in order to enable more efficient administration and supervision in conjunction with related policies.
“Rural tourism and recreation business means any of the following businesses:” (Agricultural and Fishing Villages Improvement Act, Article 2(16))
- Rural tourism and recreation complex business: a business that utilizes rural natural environments and local specialties to equip and provide facilities such as exhibition halls, learning halls, specialty product sales facilities, sports facilities, youth training facilities, recreational facilities, and that may also provide lodging facilities such as resort condominiums and food
- Tourist farm business: a business that uses rural natural resources and agricultural/forestry/fishery production bases to provide specialty product sales facilities, farming experience facilities, sports facilities, recreational facilities, lodging facilities, food, or services, and other ancillary facilities
- Weekend farm business: a business that leases farmland or provides services to users seeking weekend or experiential farming, and provides ancillary facilities
- Rural minbak business: a business in which residents of rural or semi-rural areas use houses they own and reside in to provide guests with lodging, cooking facilities, breakfast, etc. for the purpose of increasing rural income
Like lodging under the Public Health Control Act, rural minbak business is also subject to a filing system. In practice, filings may be handled together with Public Health Control Act lodging filings at the public health department of the competent local government, or delegated to agricultural technology centers.
“A person who intends to operate a rural minbak business shall file a report as a rural minbak business operator with the head of the Si/Gun/Gu in accordance with Ordinance of the Ministry of Agriculture, Food and Rural Affairs or the Ministry of Oceans and Fisheries. The same shall apply when the reported matters are changed or when the business is closed.” (Agricultural and Fishing Villages Improvement Act, Article 86(1))
When filing a rural minbak report, the filer must attach the following documents, including documentation proving rights to use the house. This includes documents that can prove ownership, leasehold on a deposit basis, or lease rights, among others.
A person intending to operate a rural minbak business under the main clause of Article 86(1) must submit a report (including an electronic report) in the prescribed form to the head of the Si/Gun/Gu, attaching the following documents: (Enforcement Rule of the Agricultural and Fishing Villages Improvement Act, Article 49(1))
- Documents proving the right of use, such as a copy of a housing lease contract (limited to cases where the reporter is not the owner of the house)
- A water quality test report issued within the past two years by an authorized drinking water quality testing institution under the Drinking Water Management Act (limited to cases where groundwater, rather than tap water, is used as drinking water or for food preparation to provide breakfast)
- Documents proving heir status (limited to cases where a person inheriting a house used for rural minbak seeks to report as the operator; excluding cases where heir status can be verified solely through the family relationship registration information system)
4) Lodging-like Operations under the Forestry Culture and Recreation Act
Lodging facilities within natural recreation forests are not independent lodging businesses, but ancillary facilities of the natural recreation forest. Operators run them together with the natural recreation forest under the Forestry Culture and Recreation Act without separate lodging permits, registrations, or filings. The competent supervising authority is the Ministry of Agriculture, Food and Rural Affairs.
“The types and standards, etc. of recreational facilities that may be installed within a natural recreation forest shall be prescribed by Presidential Decree.” (Forestry Culture and Recreation Act, Article 14(4))
- There shall be no risk of landslides, etc.
- Facilities shall be placed in areas with ample sunlight, and arranged so that external views are possible
Operating a natural recreation forest is not classified as “lodging” under KSIC; rather, it falls under “natural park operation” within botanical garden, zoo, and natural park operations.
Natural Park Operation (90232): Industrial activities engaged in conservation and exhibition of natural areas. (Examples: natural parks for recreation, recreation forest operation, nature reserves, management of wildlife conservation areas)
Natural recreation forests are designated by the head of the Korea Forest Service. For national forests, designation may be made directly; for shared or private forests, designation is made upon the owner’s application. Designation is similar to a permit in that acceptance is determined through administrative discretion; however, unlike a permit—where authority is exercised in response to an application—designation may also be initiated proactively by the competent authority as needed. Applications for designation are submitted to the forestry department (or equivalent) of the competent local government.
“The head of the Korea Forest Service may designate national forests under his/her jurisdiction as natural recreation forests.” (Forestry Culture and Recreation Act, Article 13(1))
For shared or private forests, the applicant must have secured rights to use the relevant forest.
“The head of the Korea Forest Service may, upon an application by the owner of a shared forest or private forest (including a person entitled to use and benefit therefrom) or a person who has obtained (or seeks to obtain) a lease or permission to use a national forest, designate the forest owned or leased/used (including the forest to be leased/used) as a natural recreation forest. The procedures for such application shall be prescribed by Ordinance of the Ministry of Agriculture, Food and Rural Affairs.” (Forestry Culture and Recreation Act, Article 13(2))
Separately, the head of the Korea Forest Service or the head of a local government may entrust operation of natural recreation forests, including cases operated by farming cooperatives or farming corporations.
“The head of the Korea Forest Service or the head of a local government may, when necessary for the efficient creation or management of natural recreation forests, entrust the creation or management of natural recreation forests to local governments or legal entities/organizations prescribed by Presidential Decree, such as forest cooperatives.” (Forestry Culture and Recreation Act, Article 22)
Under Article 22, “legal entities/organizations prescribed by Presidential Decree, such as forest cooperatives” refers to the following entities with financial capacity necessary for creation or management of natural recreation forests, forest bathing sites, healing forests, forest campgrounds, or forest leisure sports facilities: (Enforcement Decree of the Forestry Culture and Recreation Act, Article 10(1))
- Korea Mountaineering and Trekking Support Center under Article 27-2(1) of the Act
- National Federation of Forest Cooperatives or a forest cooperative under the Forestry Cooperatives Act
- Korea Forest Welfare Promotion Institute under Article 49(1) of the Forest Welfare Promotion Act
- A non-profit corporation established under the Civil Act for the purpose of forest culture and recreation with permission of the head of the Korea Forest Service or a provincial governor
- A local public corporation or local public enterprise established under the Local Public Enterprises Act
- A legal entity/organization composed of five or more independent foresters, forestry successors, or forestry engineers
5) Lodging-like Operations under the Youth Activity Promotion Act
Youth training facilities are a category of youth activity facilities provided for youth activities, and the operation of youth training facilities is not classified as lodging under KSIC. Under KSIC, youth training facility operation is classified under education services business. However, the nature of their business operations overlaps in certain respects with those of the lodging business.
“Youth activities mean activities necessary for the balanced growth of youth, including training activities, exchange activities, and cultural activities, among others, that use such activities as their subject matter.” (Framework Act on Youth, Article 3(3))
“Youth activity facilities mean facilities provided for youth activities such as youth training activities, youth exchange activities, and youth cultural activities, and refer to the facilities under Article 10.” (Youth Activity Promotion Act, Article 2(2))
The types of youth activity facilities are as follows: (Youth Activity Promotion Act, Article 10)
- Youth training facilities
- Youth Center: a comprehensive training facility equipped with various facilities and equipment to conduct diverse youth training programs
- Youth Training Center: a comprehensive training facility equipped with residential facilities with lodging functions and various facilities and equipment to conduct diverse youth training programs
- Youth Culture House: an information/culture/arts-centered training facility equipped to conduct simple youth training activities
- Youth Specialized Facility: a training facility equipped to provide specialized youth activities for specific purposes such as career experience, culture/arts, science information, and environment
- Youth Campsite: a training facility equipped for camping and providing youth programs or camping conveniences
- Youth Hostel: a facility equipped for youth lodging and stay, including ancillary convenience facilities, providing lodging conveniences and supporting traveling youth (youth training support is limited to the scope of facilities and equipment permitted under Article 11)
- Youth-use facilities: facilities other than training facilities that may be used within their installation purpose for youth activities and sound youth use
Youth Training Facility Operation (85614): Industrial activities operating training facilities equipped with sports, culture, entertainment, recreation, and nature experience facilities for youth education and physical and mental training; includes cases where lodging facilities (including campsites and campgrounds) are provided as ancillary facilities for the provision of educational services.
In addition, the state and local governments have an obligation under the Youth Activity Promotion Act to supply youth training facilities, and the competent supervising authority is the Ministry of Gender Equality and Family.
“The state and local governments shall install and operate the following training facilities pursuant to Article 18(1) of the Framework Act on Youth:” (Youth Activity Promotion Act, Article 11(1))
- The state shall install and operate national youth training facilities usable by youth of two or more provinces/cities or nationwide.
- Provincial governors and heads of Si/Gun/Gu shall each install and operate at least one youth training center under Article 10(1)1(a).
- Provincial governors and heads of Si/Gun/Gu shall each install and operate at least one youth culture house under Article 10(1)1(c) in each Eup/Myeon/Dong.
- Provincial governors and heads of Si/Gun/Gu may install and operate youth specialized facilities, youth campgrounds, and youth hostels under Article 10(1)1(d) through (f).
Instead of directly supplying youth training facilities, the state or local governments may have individuals, corporations, or organizations supply them and may provide subsidies. In such cases, an individual, corporation, or organization seeking to install and operate a youth training facility must apply to and obtain permission from the head of the competent Si/Gun/Gu (typically through the education/youth department).
“Any individual, corporation, or organization intending to install and operate a training facility shall obtain permission from the head of a Special Self-Governing City, Special Self-Governing Province, Si, Gun, or Gu. The same shall apply when attempting to change important matters prescribed by Presidential Decree, such as large-scale changes in land area or increases/decreases in total floor area.” (Youth Activity Promotion Act, Article 11(3))
An applicant must satisfy all of the following requirements: (Youth Activity Promotion Act, Article 12(1))
- Conformity with facility, safety, and operation standards under Articles 17, 18, and 19
- Ability to procure funds necessary for installation and operation
- Ownership of, or rights to use, the real estate necessary for installation
- Conformity with other standards prescribed by Ordinance of the Ministry of Gender Equality and Family
The state or local government may subsidize part of the costs necessary for installation and operation of a training facility operator. (Youth Activiy Promotion Act, Article 11(4))
6) Lodging Businesses under Other Laws
Although it is included in the lodging businesses under the KSIC, the dormitory and gosiwon operation is not subject to the Public Health Control Act, the Tourism Promotion Act, or the Agricultural and Fishing Villages Improvement Act.
Among these, gosiwons are subject to the Special Act on the Safety Control of Publicly Used Establishments. The Special Act on the Safety Control of Publicly Used Establishments was enacted to comprehensively manage safety of multi-use businesses where there is a high risk of casualties or property damage in disasters such as fires or other emergencies. The competent supervising authority is the Ministry of the Interior and Safety.
“‘Multi-use business’ means a business used by an unspecified number of people which, as prescribed by Presidential Decree, has a high risk of damage to life, body, or property in the event of a disaster such as fire.” (Special Act on the Safety Control of Publicly Used Establishments, Article 2(1)1)
Gosiwon business [a business form that equips partitioned rooms with facilities for learners to study and provides lodging or meals and lodging] (Enforcement Decree of the Special Act on the Safety Control of Publicly Used Establishments, Article 2 subparagraph 7-2)
Multi-use businesses, including gosiwon, are required to install safety facilities pursuant to statutory standards, ensure completion of fire safety education for operators and employees, and maintain liability insurance. Business registration is possible only when these requirements are satisfied.
“A multi-use business operator and a person intending to engage in a multi-use business shall install and maintain safety facilities, etc. prescribed by Presidential Decree in the business premises in accordance with standards prescribed by Ordinance of the Ministry of the Interior and Safety. In addition, in business premises falling under any of the following categories, and other business premises prescribed by Presidential Decree, simplified sprinkler systems among fire-fighting facilities shall be installed in accordance with standards prescribed by Ordinance of the Ministry of the Interior and Safety:” (Special Act on the Safety Control of Publicly Used Establishments, Article 9(1))
- Business premises of multi-use businesses that provide lodging
- Enclosed-structure business premises
“Multi-use business operators, their employees, and persons intending to engage in a multi-use business shall receive fire safety education conducted by the Commissioner of the National Fire Agency, the head of a fire headquarters, or the head of a fire station. Provided, that this shall not apply where the operator or employee has received any of the following education within the relevant year:” (Special Act on the Safety Control of Publicly Used Establishments, Article 8(1))
- Training or practical education for fire safety managers under the Act on Fire Prevention and Safety Control
- Education for hazardous materials safety managers under the Act on the Safety Control of Hazardous Substances
“A multi-use business operator and a person intending to engage in a multi-use business shall subscribe to liability insurance (fire liability insurance) under which the operator is liable to pay the amount prescribed by Presidential Decree to victims (or persons entitled to claim damages in the event of death) even in the absence of fault, where another person dies or is injured, or incurs property damage, due to fire (including explosions) at the multi-use business establishment.” (Special Act on the Safety Control of Publicly Used Establishments, Article 13-1(1))
Meanwhile, for dormitories where a school or company directly operates an affiliated dormitory for employees or enrolled students, no separate business registration is required. However, if an individual or legal entity operates a dormitory under consignment from a school or company, they must register as a dormitory and gosiwon operation business. Furthermore, if the dormitory is operated as shared housing (co-living) targeting unspecified one- or two-person households, they must register as a rental business operator in accordance with the Special Act on Private Rental Housing. Dormitories are classified into “general dormitories” (directly operated by schools or companies, or by third-party operators) and “leased dormitories” (operated as independent shared housing by individuals or corporations).
Dormitory: A building falling under any of the following, which conforms to standards on spatial composition and scale determined and publicly announced by the Minister of Land, Infrastructure and Transport; provided that individually partitioned unit rooms under separate ownership are excluded. (Enforcement Decree of the Building Act, Annex Table 1, Item 2(l))
- General dormitory: used for students or employees of a school or factory, etc., where households using common cooking facilities constitute 50% or more of total households (including student welfare housing under Article 27(2) of the Framework Act on Education)
- Leased dormitory: used for rental business by a public housing project operator under the Special Act on Public Housing or a rental business operator under the Special Act on Private Rental Housing, where there are at least 20 rooms provided for rental purposes and households using common cooking facilities constitute 50% or more of total households
“A person intending to lease housing may apply for registration with the mayor/governor/head of Si/Gun/Gu. Provided, that a foreign national may apply for registration only where the foreign national is staying in Korea and falls under a status of stay prescribed by Presidential Decree, considering the scope of activities under the relevant status of stay under Article 10 of the Immigration Control Act.” (Special Act on Private Rental Housing, Article 5(1))
In fact, gosiwons and dormitories—premised on long-term stays—may be viewed as lying at the boundary between lodging and rental businesses. In particular, although KSIC classifies dormitory operation as a lodging business, general dormitories do not require separate business registration, and leased dormitories require registration as private rental businesses. Accordingly, dormitories may be closer to residential building leasing than to lodging businesses.
Residential Building Leasing (68111): Industrial activities leasing residential buildings or parts of buildings, typically contracting lease periods exceeding one month, and leasing may include furniture and fixtures. (Korean Standard Industrial Classification Explanatory Notes)
4. Lodging Business vs Leasing Business
Lodging and leasing businesses share the same essential nature in that they provide third parties with the ability to use a specific space for a defined period. The key difference lies in the length of the use period. Leasing business provides space on a monthly or annual basis, while lodging business may be understood as “daily leasing”.
“Facility Use Period: Where the facility use period is less than one month, it may be viewed as closer to lodging; however, even where the use period exceeds one month, it cannot be conclusively determined that it is not lodging.” (2025 Public Health Control Business Guidance, p.13)
However, it is ambiguous to distinguish lodging and rental businesses solely by use period, because housing may be leased short-term, and lodging businesses may also accommodate long-term stays. In this regard, there is a decision by the Tax Tribunal in which the distinction was made based not only on use period but also on how the space was provided and used—i.e., the pattern of use.
The Tribunal found that: (i) ancillary services such as parking, housekeeping, domestic help, and laundry were provided through a related company; (ii) each unit was equipped with living conveniences necessary for accommodation, such as cooking facilities, tableware, appliances, and beds, and operational processes such as move-in/move-out “set-up checklists” were used; (iii) the building was provided to the general public or specific persons for short-term accommodation and was internally operated as such, as evidenced by internal reports, move-in guides, group move-in confirmations, reservation request letters to travel agencies, and remittance records; and (iv) certain “lease contracts” had blanks for key terms (deposit, payments, rent, and term), and foreign tenants often had no separate written lease agreements. In light of these circumstances, the tax authority’s assessment of VAT—treating the provision of short-term (under 30 days) rental services as lodging—was not erroneous. (Tax Tribunal Decision, Josim-2019-Seo-1644)
Under the Value-Added Tax Act, lodging is a taxable business, whereas residential building leasing is a VAT-exempt business. In other words, lodging operators must pay VAT, while residential leasing is exempt from VAT. Therefore, to earn the same revenue from the same space, a lodging business must generally charge an additional 10% corresponding to VAT.
“VAT shall be exempted for the supply of the following goods or services:” (Value-Added Tax Act, Article 26)
12. Leasing services of housing and land appurtenant thereto, as prescribed by Presidential Decree
Where lodging and residential leasing coexist within the same building, if the residential leasing area exceeds 50%, the entire building is treated as housing leasing. If the residential area is 50% or less, the uses are separated and VAT is imposed only on the portion used for lodging.
“Where housing and a business-use building to which VAT is imposed are installed together, the scope of housing and land appurtenant thereto shall be as follows:” (Enforcement Decree of the Value-Added Tax Act, Article 41(2))
- Where the floor area of the housing portion is larger than the floor area of the business-use building portion, the whole shall be deemed leasing of housing. In such case, the scope of land appurtenant thereto shall be as provided in paragraph (1).
- Where the floor area of the housing portion is equal to or smaller than the floor area of the business-use building portion, the business-use building portion other than the housing portion shall not be deemed leasing of housing. In such case, the area of land appurtenant thereto shall be calculated by multiplying the total land area by the ratio of the housing portion area to the total building area, and the scope shall be as provided in paragraph (1).
