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| 1. Taxes in Korea | |||||||||
| The national internal taxes consist of direct and indirect | |||||||||
| taxes, and each consists of five internal taxes. Of these ten taxes, | |||||||||
| the Income Tax, Corporation Tax, and Value Added Tax make up the bulk | |||||||||
| of the Korean tax revenue. There also exist three national earmarked | |||||||||
| taxes, the Transportation Tax, Education Tax, and Special Tax for | |||||||||
| Rural Development; the revenues from these sources go directly to | |||||||||
| pre-designated government programs. | |||||||||
| There are sixteen local taxes, and they are divided into | |||||||||
| province and city & county taxes. At the province level, there are | |||||||||
| four ordinary taxes and three earmarked taxes. At the city & county | |||||||||
| level, there are seven ordinary taxes and two earmarked taxes. In | |||||||||
| the six large specially designated cities that are run as autonomous | |||||||||
| local administrative units (independent of the provinces they | |||||||||
| appertain to), the tax composition is slightly different from that of | |||||||||
| the provinces and cities or counties, although the residents are | |||||||||
| required to pay the same taxes. | |||||||||
| A person is either a resident or a non-resident of Korea | |||||||||
| depending on residence or domicile. A resident is liable to income | |||||||||
| tax on items of income derived from sources both within and outside | |||||||||
| Korea. On the other hand, a non-resident is liable to income tax only | |||||||||
| on items of income derived from sources within Korea. | |||||||||
| Under the income tax law, income earned by both residents and | |||||||||
| non-residents is subject to global and schedular taxation. Under | |||||||||
| global taxation, real estate rental income, business income, earned | |||||||||
| income, temporary property income, and miscellaneous income | |||||||||
| attributed to a resident are aggregated and taxed progressively. | |||||||||
| Interest and dividends are subject to tax withholding. Non-residents | |||||||||
| are similarly taxed on income from Korean sources. The tax rates on | |||||||||
| individual income range from 8% to 35%. | |||||||||
| When a company is incorporated in Korea, it is deemed a | |||||||||
| domestic corporation and is liable to tax from worldwide income | |||||||||
| whereas a foreign corporation is liable to tax on Korean source | |||||||||
| income. The corporate income tax rates are 13% and 25%. A foreign | |||||||||
| corporation without a permanent establishment in Korea is subject to | |||||||||
| withholding tax. | |||||||||