SPECIAL TAX FOR RURAL DEVELOPMENT

1. Objective of Special Tax for Rural Development (STRD)

The objective of the Special Tax for Rural Development is to support the rural community

and the agricultural industry. As a result of the UR negotiations, the farming industry in

Korea is subject to market opening. Due to the low productivity of the Korean agricultural

industry, the government enacted the Special Tax for Rural Development in July 1994 in

order to raise tax revenue to fund various rural development programs.

2. Taxpayer

(1) An individual or corporation whose tax liability (individual income tax, corporation tax,

customs duty, acquisition tax, or registration tax) is reduced under the Tax Exemption

and Reduction Control Law, Local Tax Law, or Customs Law

(2) Taxpayers of certain categories of special excise tax

(3) Taxpayers of securities transactions tax

(4) Taxpayers of acquisition tax, and horse race tax

(5) Taxpayers of comprehensive real estate holding tax

3. Tax Base & Tax Rate

Basically, Special Tax for Rural Development is a surtax levied on the amount of

exemption of corporation tax, individual income tax, customs duty, special excise tax,

and securities transaction tax. The tax base of STRD is the exempted amount of the

above mentioned taxes, where the exemptions are stipulated in the Tax Exemption and

Reduction Control Law, Local Tax Law, or Customs Law.  Therefore, the exemptions of

the above mentioned taxes which are stipulated in the Corporation Tax Law, Income Tax

Law, or Foreign Investment Promotion Law are not part of the tax base of STRD.

Tax Base

Tax Rate

Reference

Exemptions of corporation

20%

Except for tax reduction for

tax, individual income tax,

development of technology,

customs duties, acquisition

public projects, etc.

tax, and registration tax

Reduction of eligible interest

10%

from savings account

Securities transaction tax

0.15%

Special excise tax

10%

Admission to golf courses: 30%

Acquisition tax

10%

Except for small houses or

farmhouses

Comprehensive real estate

1~ 4%

House and its accessory building 1~3%

holding tax

Land subject to comprehensive real

estate holding tax 1~4%

Race-parimutuel tax

20%

4. Effective Period

Special Tax for Rural Development (STRD) took effect on July 1, 1994. The limitation

period is 10 years; therefore it is scheduled to end on June 30, 2004

5. Exemption

(1) State and local autonomous bodies

(2) Tax reduction for newly organized small and medium sized enterprises

(3) Tax reduction for foreign financial institutions (Tax Exemption and education Control

Law, Article 94)

(4) Acquisition tax reduction for small houses or farmhouses prescribed by the

Presidential Decree

(5)

Customs duty reduction by multilateral or bilateral agreement prescribed by the

Presidential Decree.