What are the reduced tax rates and how do they apply? 

Treaty-reduced tax rates set the maximum level of tax rates allowable for treaty partners in

 taxing certain types of income.

 The applicable tax rates for those types of income is always the rates that is the smaller of  

 the reduced treaty rates or treaty partner's domestic tax rates. For example, if a treaty

 partner's domestic tax rates is smaller than the treaty reduced rates, then the domestic tax 

 rates applies. If the treaty partner's statutory rates is greater than the treaty-reduced rate, then 

  the treaty-reduced rate applies.

In effect, treaty-reduced rates impose certain restrictions on a treaty partner's right to tax as

 provided for under its domestic tax law.

Treaty-reduced rates apply when taxing interest, dividend, and royalties earned by non-

 residents and foreign corporations from sources within Korea.

To be applied such treaty benefit, the following requirements must be met:

 - First, the beneficial owner of income must be a resident (both individual and corporation) of 
   the other Contracting State and that resident must not have a permanent establishment 
  
   in Korea.

 - Where the resident has a permanent establishment in Korea, the income in question must 
   
    not be effectively connected with or attributable to that permanent establishment.