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FDI InformationTax Guide for Foreign CompaniesBasic Tax Information | Interest income | 20 percent of the payment |
|---|---|
| Dividend income | 20 percent of the payment |
| Ship rental income & business income from domestic sources |
2 percent of the payment |
| Personal service income | 20 percent of the payment |
| Capital gains | Less amount between the 10 percent of sale proceeds and 20 percent of gains on transfer |
| Royalty income | 20 percent of the payment |
| Income from transfer of securities | Less amount between the 10 percent of sale proceeds and 20 percent of gains on transfer |
| Miscellaneous income | 20 percent of the payment |
| U.S. | ● Local income tax should be additionally imposed ● Interest income: 12% ● Dividend income: 10% for holding more than 10% of shares, 15% for other cases ● Royalty income: 10% for films with copyright, 15% for other cases ● Personal services: offering services for a period or periods not exceeding in the aggregate 183 days, earning profits exceeding $3,000 it is taxable in a contracting state |
|---|---|
| China | ● Interest income: 10% ● Dividend income: 5% for holding more than 25% of shares, 10% for other cases ● Royalty income: 10% ● Personal services: offering services for a period or periods not exceeding in the aggregate 183 days, it is taxable in a contracting state |
| Japan | ● Interest income: 10% ● Dividend income: 5% for holding more than 25% of shares, 10% for other cases ● Royalty income: 10% ● Personal services: offering services for a period or periods not exceeding in the aggregate 183 days, it is taxable in a contracting state |
| Vietnam | ● Interest income: 10% ● Dividend income: 10% ● Royalty income: 5% of the royalties for patent right, license for drawing, confidential process, industrial, commercial, academic experience or equipment. 10% for other cases ● Independent personal services: independent services without fixed base are taxable in a contracting state ● Dependent personal services: in case of offering services for more than 183 days, it is the subject to taxation from the contracting country |
| Process 1 | Where income of a foreign corporate occurs it should be decided whether the income is taxable under the Korean tax law. If it is international tax treaties also should be considered as the next step. However the income is not the subject to income tax if it is not taxable under the Koran tax law nor international tax treaties. |
|---|---|
| Decide whether the income is taxable | |
| Process 2 | In case of taxable income the source of income should be considered. Where the income was generated from domestic place of business the income is the subject to composite income tax. Provided that the income did not come from domestic place of business the income is the subject to withholding tax under separate taxation. However, capital gains are not the case for this. |
| Decide how to levy taxes | |
| Process 3 | Where domestic tax rates are lower than those of international tax treaties tax should be levied based on domestic tax rates. In the case of the opposite, tax rates of international tax treaty should be applied. |
| Decide applicable rates under separate taxation system |
| VAT received (Output tax amount) - VAT paid (Input tax amount) = VAT payable tax amount (' + ' payable, ' - ' refundable) |
| National Pension (NP) |
National Health Insurance (NHI) |
Employment Insurance (EI) |
Industrial Accident Comp Ins (IACI) |
|
|---|---|---|---|---|
| Employee portion (deduct from monthly payroll) |
4.5% | ⓐ NHI: 3.23% | ⓐ Unemployment: 0.65% | n/a |
| ⓑ Long-Term Care: 8.51% of NHI | ⓑ Security etc: n/a | |||
| Employer portion | 4.5% | ⓐ NHI: 3.23% | ⓐ Unemployment: 0.65% | 0.7% ~ 3.2% ** |
| ⓑ Long-Term Care: 8.51% NHI | ⓑ Security. Etc.: 0.25% | |||
| Calculation based on | Total Income (standard table) |
Total Income (standard table) |
Total Income | Total Income |
| Remarks | Ceiling amount for monthly standard KRW4,490,000 | * different based on the type of business and/or number of employee | ** different based on the business category and/or accident rate |
| Accounting Book | Corporate Tax | Evidential Documents |
|---|---|---|
| Sales | gross income | (Sales) Tax invoice |
| Cost of goods (-) | deductible expenses | (Purchase) Tax Invoice (cost) Payroll register (labor cost) Appropriate Receipts (other costs) |
| Gross profit (=) | ||
| Sales & Admin expense (-f) | deductible expenses | (Purchase) Tax Invoice (cost) Payroll register (labor cost) Appropriate Receipts (other costs) * |
| Operating profit | ||
| Non-operating profit (+) (-) | ||
| Net income | Taxable income for the business period | |
| 2018 ~ | ||
|---|---|---|
| Tax Base | Rate (%) | Amount of progressive deductions |
| Below KRW 200 million | 10% | |
| Above KRW 200 million ~ below 20 billion |
20% | 20,000,000 |
| Above KRW 20 billion ~ below 300 billion |
22% | 420,000,000 |
| Above KRW 300 billion | 25% | 9,420,000,000 |
| 2018 ~ | ||
|---|---|---|
| Tax Base | Rate (%) | Amount of progressive deductions |
| Below KRW 12 million | 6% | |
| Over KRW 12 million ~ below KRW 46 million |
15% | 1,080,000 |
| Over KRW 46 million ~ below 88 million |
24% | 5,220,000 |
| Over KRW 88 million ~ below 150 million |
35% | 14,900,000 |
| Over KRW 150 million ~ below 300 million |
38% | 19,400,000 |
| Over KRW 300 million ~ below 500 million |
40% | 25,400,000 |
| Over KRW 500 million | 42% | 35,400,000 |
| ② Rental payment - Purchase tax bill |
① Sales (profits) confirmed by filing for VAT returns |
| ③ Labor expense - Withholding tax return - Four key social insurance - Non-taxable income |
|
| ④ Expense - Receipts prescribed by the Korean tax law - Corporate credit card receipt - Penalty taxes imposed for inadequate evidentiary documents - Expenses with limitations |
|
| ⑤ Income (Income rate) For personal business operator income rate is calculated as it follows: 1-(simple expense rate) |
| Asset ⑥ Suspense payment |
Debt ⑦ Debt Ratio |
| Capital ⑧ Stocks for corporations - In transferring stocks stock evaluation should be taken before transferring - Share transfer agreement/ stock certificate contract - Report changes of stocks: gift tax & capital gains tax - Stockholder's list |
