Tax Withholding

1. Obligation of Tax Withholding

A person who pays one of the followings income categories to residents or non-residents is required to withhold income tax thereof and pay it the competent tax office by 10th of the following month.

1)     Interest income

2)     Dividend income

3)     Business profits prescribed by §184 of the Enforcement Decree of Income tax Act

4)     Wage and Salary income

*Wage/salary income received from a foreign organization, the UN forces residing in Korea, overseas non-residents, or foreign corporation is excluded.

5) Pension income

6) Other income

7) Retirement income

8) Gross Revenue of service charge under Enforce Decree of Income Act §184-2

However, a businessman who has not more than 20 employees on average at the end of every month of preceding year may pay taxes withheld th the government by the tenth day of the following month each half-year, after obtaining the approval of the head of the tax office concerned.

2. Rates of Withholding

n  Interest income : 14 %

☞ Interest from non-commercial loans: 25 %

n  Dividend income : 14 %

☞ Dividend income paid to co-investors as specified in § 17 ① 8 of the Income Tax Act: 25 %

Even though the rates of withholding is specified by the Income Tax Act, the actual rates can be changed if the beneficiary (Foreign entities) is stayed outside of Korea. If both countries are signed the Convention Treaty, the tax rates have to adopt the agreed rates.

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