Foreign Direct Investment - Tax Support - Business Start Up in South Korea

For foreign investment which meets a set of qualifications, corporate,income tax and customs duties on capital goods are exempted or reduced in accordance with the Restriction of Special Taxation Act. Acquisition tax, registration tax, and property tax on properties acquired or held for the operation of the business are exempted or reduced under local government ordinances mandated by the Restriction of Special Taxation Act.

• 1. Tax Support for Foreign-Invested Companies
• 2. Application for Tax Reduction or Exemption and Collection
• 3. Other Tax Support

1. Tax Support for Foreign-Invested Companies

 Corporate Tax Reduction 

Corporate tax reduction for foreign-invested companies applies to income generated from businesses that are subject to reduction under the Restriction of Special Taxation Act, with foreign investment ratio taken into account. However, in case that a Korean citizen (corporation) directly or indirectly holds 10% or more of the voting shares of a foreign company or a foreign corporation that has invested in a business subject to tax exemption or reduction, the invested shares are not subject to tax abatement or exemption. That is, tax reduction or exemption shall not apply to round trip investment by a person residing in Korea.

< Summary of the tax reduction of foreign-invested companies - Restriction of Special Taxation Act Article 121.2 and Enforcement Decree of the Restriction of Special Taxation Act Article 116-2 etc. >

Corporate tax and income tax reduction for seven years(100 percent for the first five years, 50 percent for the next two years)

Classification	Investment requirements
(No. 1) Industrial support services and advanced technology businesses * Notification No. 2012-17 of the Ministry of Strategy and Finance (Dec. 6, 2012)	Designated by the announcement if it is recognized by Foreign Investment Committee that the business is vital to the strengthening of the international competitiveness of domestic industries * Installation or operation of factories or business sites
(No. 2)Business, which requires review procedures and approval from relevant committees, and is run by a foreign-capital invested company located in a foreign investment zone (individual-type) under Article 18.1.2 of the Foreign Investment Promotion Act, free economic zones, Saemangeum area, Jeju Science Park and Jeju investment promotion zone. * Companies located in the previous free export zones will be treated the same as the companies located in a foreign investment zone (individual-type).	Manufacturing - Over USD 30 million System integration & management, document processing - Over USD 30 million Tourism & leisure - Over USD 20 million International convention facilities & teenagers training facilities - Over USD 20 million Logistics - Over USD 10 million SOC - Over USD 10 million R&D - Over USD 2 million Joint venture - Over USD 30 million

Corporate tax and income tax reduction for five years (100 percent for the first three years, 50 percent for the next two years)

Classification	Investment requirements
(No. 2-2)Business that is run by a foreign-capital company located in a free economic zone * Article 2.1 of the Act on Designation and Management of Free Economic Zones §2,1  (No. 2-8)Tenants in the Saemangeum area * Special Act on Promotion of the Saemangeum Project§2	Manufacturing - Over USD 10 million Engineering, system intergration and management - Over USD 10 million Tourism & leisure - Over USD 10 million International convention facilities & teenagers training facilities - Over USD 10 million Logistics - Over USD 5 million Medical institutes - Over USD 5 million R&D - Over USD 1 million
(No. 2-3)Business developer of the free economic zone * Article 8.3.1 & 2 of the Special Act on Designation and Management of Free Economic Zones  (No. 2-9)Business developer of the Saemangeum area * Article 8.1 of the Special Act on Promotion of the Saemangeum Project	When the total project development cost is over USD 500 million and the investment is over USD 30 million or the foreign investment accounts for more than 50 percent.
(No. 2-4)Business developer of the Jeju investment promotion zone * Article 217 of the Special Act on the Establishment of Jeju Special Self-Governing Province and the Development of Free International Cities	When the total project development cost is over USD 100 million and the investment is over USD 10 million or the foreign investment accounts for more than 50 percent.
(No. 2-5)Business that is run by any foreign-capital invested company located in the foreign investment area (complex-type) provided for in Article 18.1.1 of the Foreign Investment Promotion Act	Manufacturing - Over USD 10 million Logistics - Over USD 5 million
(No. 2-6)Tenants of the enterprise city development zone * Article 2.2 of the Special Act on the Development of Enterprise Cities	Manufacturing - Over USD 10 million Logistics - Over USD 5 million R&D - Over USD 2 million
(No. 2-7)Business developer of the enterprise city * Article 10.1 of the Special Act on the Development of Enterprise Cities	When the total project development cost is over USD 500 million and the investment is over USD 30 million or the foreign investment accounts for more than 50 percent.
(No. 3)Business to which tax reduction or exemption is inevitable * Article 10.1.2 & 5 of the Act on Designation and Management of Free Trade Zones	Manufacturing - Over USD 10 million Logistics - Over USD 5 million

The initial date of reckoning tax exemption or reduction is the date which comes first between taxable year wherein the first income was generated, or the taxable year whereto belongs the date on which five years lapse after the beginning date of the business.

※ Date of Business Commencement

 In manufacturing, the first date of manufacturing goods at each manufacturing facility

 In mining, the first date of commencing collection/mining of minerals at each work site

 In other businesses, the first date of supplying goods and/or services

In the case of capital increase, the date when capital increase is registered shall be considered the date of commencing business in applying the Restriction of Special Taxation Act. As regards the stocks, etc. acquired by a foreign investor due to the capitalization of a reserve, a reserve for revaluation, the tax reduction or exemption shall be made during the remainder of their reduction or exemption period and the ratio of reduction or exemption for the relevant remaining period, in conformity with the examples of reduction or exemption for stocks, etc. which form a ground for such occurrences. If an application for tax reduction is made by increasing the capital within 5 years after making the paid-in capital reduction, the decision on abatement or exemption shall be made only for the foreign investment ratio against the portion of net increase than before the capital reduction. If a paid-in capital decrease is made within seven years after the relevant capital increases, the portion of the increased capital is deemed to have decreased first. However, in the case where a purely domestic company receives an investment from a foreigner through a capital increase and becomes a foreign-invested company, the capital increase shall be considered new foreign investment, and not as a case of capital increase as described above.

As regards mergers, if a foreign-invested company is merged with a domestic company (excluding any other foreign-invested company under the application of the reduction or exemption period) during the period of tax reduction or exemption, resulting in a decrease in foreign investment ratio in the merged corporation, the foreign investment ratio in the foreign-invested company prior to the merger shall be applied in computing the tax amount subject to reduction or exemption.

Where stocks are equally apportioned by capitalization of a reserve for revaluation or a reserve, which is ineligible for new reduction or exemption, there shall be no changes to the reduction or exemption rate and period for the business year of the capital increase, or the next business year.

< How to compute reduced or exempted tax amount >

Category	Calculation method
1) In case of new investment
2 ) In case of capital increase or M&A	① In general case * tax reduction or exemption rate: 100%, 50% and 0% based on the reduction or exemption period
	② In case of businesses subject to tax reduction or exemption on their capital increase
	③ In case of foreign-invested companies that was not subject to tax reduction or exemption turning to be subject to tax reduction or exemption via capital increase or M&A * tax reduction or exemption period: 100%, 50% and 0% based on the reduction or exemption period *the total FDI ratio: the total foreign-invested capital ÷ the total capital

※ Limit of tax reduction

In case the total amount of the reduced income tax or corporate tax surpasses the combined amount (1 + 2), the combined one shall be the limit.

1. Limit based on investment
(1) 70% of the accumulated foreign investment for industrial support service providers, companies holding the high-end technology and companies doing operation in individual-type foreign investment zones
(2) 50% of the accumulated foreign investment for foreign-invested companies subject to tax reduction due to causes other than FDI

2. Smaller amount based on employement
(1) The number of regular workers in the tax year x KRW 10 million
(2) 20% of the accumulated foreign investment

* Accumulated foreign investment: capital paid by a foreign investor (based on Foreign Investment Promotion Act) and injected into a foreign-invested company by the end of the concerned tax year during reduction period

 Local Tax (acquisition/registration/property tax) Reduction or Exemption 

As regards properties acquired or held by a foreign-invested company to do business subject to tax reduction or exemption, acquisition tax, registration tax, and property tax are exempted by 100% or reduced by 50%, or are deducted from the tax base during the same reduction or exemption period of corporate tax.

As for acquisition tax, registration tax, and property tax on properties acquired after the commencement of business, a foreign-invested company shall, within five years from the date of the starting of business, be allowed an exemption from the total of an amount obtained by multiplying a computed amount of tax on the properties concerned by the ratio of foreigner's investment (tax amount subject to reduction or exemption) and a tax amount equivalent to the 50/100 of the tax amount subject to reduction or exemption shall be reduced within two years thereafter. Where there exists any tax amount already paid prior to a decision on reduction or exemption, the relevant tax amount shall not be refunded, though a foreign-invested company has acquired properties subject to taxation after starting the business.

A foreign-invested company, who has acquired properties after a decision on tax reduction or exemption and prior to the date of the starting of business, may be allowed an exemption from the tax amount subject to reduction or exemption as for acquisition and registration taxes. As for property tax, the foreign-invested company may be allowed an exemption from the tax amount subject to reduction or exemption within five years from the date the properties were acquired, and a tax amount equivalent to the 50/100 of the tax amount subject to reduction or exemption within two years thereafter.

Under ordinances, the local tax reduction or exemption period may be extended up to 15 years, or the reduction or exemption rate or deduction rate may be increased.

 Exemption of Customs Duties etc. 

Under the Restriction of Special Taxation Act, customs duties etc. shall be exempted for the following capital goods which are used directly in the business subject to reduction or exemption of corporate tax or income tax, and are reported as foreign investment by acquisition of newly issued stocks, etc.

 Capital goods that a foreign-invested company brings in with a foreign or domestic means of payment it has obtained as equity investment from a foreign investor

 Capital goods that a foreign investor brings in as object of investment

Exemption of customs duties etc. shall only be applied to capital goods whose import declaration under the Customs Act has been completed within 5 years from the date when the foreign investment report has been made. Where it is impossible to make the import declaration within the scope of three years due to a delay in approval for factory establishment or other causes, the exemption of customs duties shall be applied after the approval of the Minister of Strategy and Finance is obtained within 1 year thereafter.

Customs duties, special excise tax, and value-added tax shall be exempted for the industry-supporting service business vital to strengthening the international competitiveness of domestic industries, the business accompanying high technologies, or businesses operated by foreign-invested companies in individual-type foreign investment zones under the Foreign Investment Promotion Act. Customs duties shall be exempted for businesses operated by foreign-invested companies in complex-type foreign investment zones, certain companies in free trade zones, foreign-invested companies in free economic zones, foreign-invested companies which execute free economic zone development project, executors of the Jeju investment promotion district development project etc.

※ Application Institution: Entry point customs office

 Required documents

- Application form of customs duties exemption

- A copy of confirmation certificate of the specification of the imported capital goods

- Documents certifying capital goods imported through investment in kind or cash

- Documents certifying that the business is subject to reduction or exemption of corporate tax etc.

- Invoice, bill of lading (B/L) or air waybill (AWB), price declaration, packing list, certificate of origin etc.

※ Special Taxation for Investment In Kind: Confirmation of In-Kind Investment Completion

 Where a foreign investor makes an investment in kind, an inspector shall write an inspection report on the performance of the investment in kind and submit the report to the court as prescribed by the Commercial Act. As for investment in kind with capital goods, notwithstanding the provisions of the Commercial Act, the certificate of in-kind investment completion confirmation which confirms the performance of investment in kind and the type, quantity, price etc. of the object of investment, issued by the Commissioner of the Korea Customs Service, shall be considered as the inspector's inspection report under Article 80 of Commercial Registration Act.

Therefore, where a foreign investor intends to register capital at a jurisdictional court after he/she has imported capital goods acquired through investment in kind, he/she shall receive a confirmation of in-kind investment completion from an officer of the Korea Customs Service dispatched to KOTRA.

 Required Documents

- Two copies of application form of in-kind investment completion confirmation

- Import declaration certificate

< Customs Clearance Procedures for Capital Goods >

Procedures	Relevant Institution
Report of foreign investment	KOTRA, a foreign currency bank Two copies of certificate of investment report
Confirmation of the specifications of imported capital goods	The foreign currency bank to which the foreign investment report is made, KOTRA Capital goods subject to exemption from customs duties shall be confirmed. Three copies of application form, documents certifying monetary values (offer sheet, contract, etc.)
Customs clearance	Certificate of business registration under the name of a foreign-invested company Application form for exemption (customs), investment report form Certificate of the decision on tax reduction or exemption, invoice, certificate of the country origin (when required), bill of lading (B/L) Confirmation of adoption of capital goods
Confirmation of in-kind investment completion	Application and confirmation: an officer of the Korea Customs Service dispatched to KOTRA Application form of confirmation of in-kind investment completion Import declaration certificate
Registration of company establishment	Registry office Application form for registration, certificate of in-kind investment completion confirmation
Registration of foreign-invested company	The institution where the investment report was first made Certified copy of corporation registration, certificate of in-kind investment completion confirmation

2. Application for Tax Reduction or Exemption and Collection

 Application for Tax Reduction or Exemption 

1. Confirmation of Whether a Business is Subject to Tax Reduction or Exemption

A foreign investor or a foreign invested-company may request the Minister of Strategy and Finance to confirm whether a business intended to run is subject to tax reduction or exemption, before he/she/it reports foreign investment under the Foreign Investment Promotion Act. The Minister shall decide on the matter and notify the applicant accordingly within 20 days from the application is made.

A foreign-invested company shall apply for tax reduction or exemption after foreign investment is reported, since the confirmation mentioned above is to simply verify whether the business concerned accompanies high technology and the effect of the decision is invalid.

2. Application for Tax Reduction or Exemption

A foreign investor or a foreign-invested company shall apply for the tax reduction or exemption to the Minister of Strategy and Finance (to the authorized administrator concerned in case of foreign investment in the free economic zone).

In case of new corporations, a foreign investor or a foreign-invested company shall make an application for tax reduction or exemption by not later than the closing date of the taxable year whereto belongs the date of commencing the business of the relevant foreign-invested company. Meanwhile, decision on tax reduction or exemption for capital increase is made under the provisions on tax reduction or exemption for new investment of the Restrictions of Special Taxation Act (Article 121-2, 121-3). In case where any foreign-invested company increases its capital within the scope of the reported investment amount that has been confirmed upon the decision on the tax reduction or exemption prior to the date on which three years lapse from the date on which the first notice concerning the decision on the tax reduction or exemption is served after the foreign investment registration, even if no application is filed for reducing or exempting the tax, the foreign-invested company shall be deemed eligible for the decision on the tax reduction or exemption for the portion of the increased capital. Where any foreign investor or foreign-invested company alters the business contents subject to a decision on tax reduction or exemption and intends to have any reduction or exemption applied to the modified business, he/she/it shall make an application for modification of contents of tax reduction or exemption not later than the date on which two years lapse from the date on which the causes for the relevant modification occur. (The content of relevant decision on modification shall apply only to the remainder of the reduction or exemption period.) Where a foreign investor or foreign-invested company obtains a decision on reduction or exemption by applying for reduction or exemption after an expiry of the time limit for application of reduction or exemption, the relevant decision shall be applied only to the taxable year whereto belongs the date of such application, and to the remainder of reduction or exemption period thereafter. In such cases, where there exists any tax amount already paid prior to a decision on reduction or exemption, the relevant tax amount shall not be refunded.

 Required documents

 Description of concerned technologies (translated into Korean): Catalogues and other reference materials on products and services produced or provided with the technology
 Documents stating the scope of usage of products and services produced or provided with the technology
 Production methods and work schedule (only for the manufacturing technology)
- The schedule shall include every step of the process, and the steps requiring high technology shall be marked.
- Whether production is carried out in Korea shall be marked by individual process.
 Documents certifying economic effects or technological performance
- Comparison in performance, quality, or cost reduction between 'products and services produced or provided with the technology' and 'products and services in the same or similar category'
 Documents certifying the technology concerned is high technology
- Certificates, test results, evaluations reports etc. from foreign governments and other authorized institutions on the products and services produced or provided with the technology
- Documents on industrial property rights such as patent etc. regarding the technology (or services)
- Documents on the development of the technology (or services) (R&D institution, developers, development costs and period etc.)
- Investments in or contribution to a third party country to utilize the technology, or a technology in the same category (or services)
- Other documents certifying the high degree of technology
 Copy of the foreign investment registration certificate
 Copy of the official document on the decision concerning tax reduction or exemption
 Copy of the official document on the initial decision on tax reduction or exemption, in case where a company, which is the subject to tax reduction or exemption, applies for modification

2. Decision and Notification of Tax Reduction or Exemption

The Minister of Strategy and Finance shall, upon receipt of an application for tax reduction or exemption or an application for the revision to the tax reduction or exemption, examine whether the relevant application meets the standards for tax reduction or exemption, make a decision on whether to grant the reduction or exemption or whether to make any revision to the reduction or exemption within 20 days, and notify the applicant thereof. The Minister may, where deemed inevitably requiring a long period for making a decision on whether to grant the abatement or exemption or whether to make any revision to the reduction or exemption, extend the said review period within 20 days. In such cases, he shall notify the applicant of the relevant causes and review period.

The Minister of Strategy and Finance shall, where he has made a decision on whether to grant the reduction or exemption or whether to make any revision to the reduction or exemption, notify the Commissioner of the National Tax Service, the Commissioner of the Korea Customs Service and the head of local government.

The Minister of Strategy and Finance shall, when he intends to determine a business as the one ineligible for reduction or exemption upon receiving an application, give a preliminary notice of such determination within 20 days from the application date. A person who receives the preliminary notice of determination may file a request with the Minister of Strategy and Finance, in writing, for review on the properness of the determination so notified within 20 days from the date on which the notice is delivered, with supporting materials attached thereto. The Ministry of Strategy and Finance shall make a decision on whether to grant the abatement or exemption or whether to make any revision to the reduction or exemption within 20 days from the date on which the request is delivered, and shall notify the applicant of the result thereof.

< Detailed Procedures of Applying for Tax Reduction or Exemption for a Foreign-Invested Company >

Step 1	Application for confirmation of whether a business is eligible for tax reduction or exemption	Ground law: Article 121-2 (7) of the Restriction of Special Taxation Act
		The technology concerned shall be included in the list of business accompanying high technology and industry-supporting service business in the Annex 1 of the Regulations on Tax Reduction or Exemption for Foreign Direct Investment.
Step 2	Notification of foreign investment by the acquisition of new stocks, etc.	Ground law: Article 5 of the Foreign Investment Promotion Act
		Competent institution: Investment Policy Team of the Ministry of Trade, Industry and Energy (82-2-2110-5351) Entrusted institution: KOTRA Investment Consulting Center (82-2-3497-1967), a foreign exchange bank (headquarters-branches)
Step 3	Application for tax reduction or exemption	Ground law: Article 121-2 (6) of the Restriction of Special Taxation Act
		International Economic Affairs Division of the Ministry of Strategy and Finance (82-2-2150-7626)
		Application period 1. New investment: The end date of the taxation year whereto belongs the date of commencing the business eligible for tax reduction or exemption 2. Capital increase is considered the equivalent to new investment 3. Modification: Up to 2 years from the date on which the cause for modification occurs
		Required documents 3 copies of report form for foreign investment by the acquisition of new stocks, etc 3 copies of application form of tax reduction or exemption (Form # 80) 3 copies of documents certifying high technology
Step 4	Decision on whether to grant tax reduction or exemption	Ground law: Article 121-2 (8) of the Restriction of Special Taxation Act
		Delegated institution: The Minister of Strategy and Finance & competent Minister
		Decision method: The Minister of Strategy and Finance consults with the competent Minister to make a decision. Decision to reduce or exempt tax is made when they agree on the matter.
		Processing period: Within 20 days from the application date (In case where materials on technology are insufficient or consultation among competent Ministries is delayed, requests for additional materials and extension of processing period will be made).
Step 5	Notification of decision on whether to grant tax reduction or exemption	Ground law: Article 121-2 (8) of the Restriction on Special Taxation Act
		Delegated institution: The Ministry of Strategy and Finance

 Additional Collection of Abated or Exempted Tax Amounts 

Tax reduction or exemption stipulated by the Restriction of Special Taxation Act is granted only when requirements for tax reduction or exemption are met for a certain period of time. In case where such requirements are not met, abated or exempted tax amounts shall be additionally collected as follows:

< Additional Collection of Abated or Exempted Tax Amounts >

Cause for collection	Taxes	Range of collection
Where a registration is revoked or a business is closed down	Corporate (Income) tax, customs duties, individual consumption tax, value added tax, local tax	Abated or exempted tax amount within 5 years (customs duties: 3 years) retroactively from the date of revocation or closure
Where the standards for tax reduction or exemption are not satisfied	Corporate (income) tax	Abated or exempted tax amount within 5 years retroactively from the date on which the standards are not satisfied
Where the payment of investment object fall short of the standards for the tax reduction or exemption within 5 years fter making report on foreign investment	Corporate (income) tax	Abated or exempted tax amount within 5 years retroactively from the date on which the standards are not satisfied (3 years in case of tax reduction or exemption on employment)
Where a person, who has received a corrective order as he failed to implement the contents of reports, fails to comply with it	Corporate (income) tax	Abated or exempted tax amount within 5 years retroactively from the expiration of a corrective order period
Where a foreign investor transfers the stocks, etc. which he owns to national or a corporation of the Republic of Korea	Corporate (income) tax	Tax amount calculated by multiplying the reduced tax amount within five years by the ratio of transferred stocks of the foreign-owned stocks, retroactive to the transfer date.
	Customs duties, individual consumption tax, value added tax	AThe reduced tax amount on capital goods, which exceeds the scope of a foreign investor’s remaining investment amount, within three years of the transfer of the retroactively reduced tax amount.
	Acquisition tax, property tax	Abated or exempted tax amount within 5 years retroactively from the date on which stocks are transferred * stock transfer ratio.
If the ratio of a foreign investor’s stocks falls short of that of at the time of tax reduction	Acquisition tax, property tax	The collected tax amount = reduced tax amount within five years before the stock in transit date x stock in transit ratio

The additional collection of taxes shall not be made in the following cases:

 Where the registration of a foreign-invested company is revoked, since the foreign-invested company is dissolved due to merger.

 Where imported capital goods customs duties on which were exempted cannot be used for the reported purposes due to natural disasters and other reasons corresponding thereto, depreciation, advancement of technologies, or other change to economic conditions, and the capital goods concerned are used for purposes other than reported ones or disposed of after obtaining the approval of the Minister of Strategy and Finance.

Where transferring shares etc. to a citizen or corporation of the Republic of Korea to open the foreign-invested company to the public under the Financial Investment Services and Capital Markets Act.

Where a foreign investor, who invests in the industry-supporting service business or business accompanying high technology, transfers his stocks, etc. to a Korean national or Korean corporation, and the Minister of Strategy and Finance confirms that there is no difficulty for the relevant enterprise in providing independently in Korea such products or services produced or provided by the relevant industry-supporting service business or the business accompanying high technology.

 Where a foreign investor transfers his stocks, etc. to a Korean national or Korean corporation pursuant to other Acts and subordinate statutes or government policies and such transfer is confirmed by the Minister of Strategy and Finance.

3. Other Tax Support

 Tax Support for Foreign Engineers (Article 18 of the Restriction of Special Taxation Act)

A foreign engineer shall be entitled to the 50% reduction of income tax on earned income derived from the offer of his services to a Korean national within Korea until the month whereto belongs the date on which 2 years have passed since the first date on which the foreign engineer concerned offered his service in Korea. The initial date on which a foreign engineer provides his services shall be prior to December 31, 2012 (Persons with permanent residency of a foreign country shall not be deemed foreign engineers or foreign workers).

Also, income tax shall be reduced 50% for the income paid to a foreign engineer who provides high technology under a technology introduction contract to a foreign-invested company subject to the reduction or exemption of corporate tax, etc. in Korea under the Foreign Investment Promotion Act by December 31, 2011.

 Special Taxation for Foreign Workers (Article 18.2 of the Restriction of Special Taxation Act)

Foreign executive or employees (referring to persons who are not daily workers) may choose between the following taxation methods. Special taxation shall be applied to workers of a domestic branch of a foreign corporation. (However, it will only apply for five years from the work starting date in Korea. If a foreign-invested company does not meet the requirements of corporate tax reduction, workers with special relationship with the company shall not receive flat tax rate of 17 percent.)

 A single income tax rate, set to be 15/100 of the income, which a foreign worker earns for his services in Korea and is paid by December 31, 2012, shall applied (Tax reduction or exemption, tax credit, and other regulations on income tax are not applied.)

 Aggregate income tax rate shall be applied (In case that the foreigner concerned is a non-resident, personal exemption or special deduction is not applied besides basic deduction.)

※ The eligibility for tax benefits can differ according to the details of the business. Therefore, the recipient should identify the eligibility after a sufficient review process, including confirming relevant laws and businesses that are subject to tax benefits, making the best use of tax experts and utilizing the advance tax ruling system.

※ Advance Tax Ruling System

A taxpayer may inquire about the interpretation and application of tax laws such as whether tax is imposed on 'a specific transaction' associated with his/her business. The taxpayer shall file an application along with documents on detailed fact relevance "under his/her own name" in advance. The National Tax Service of Korea shall provide a clear answer only to "the taxpayer directly concerned."

* Specific transaction: Transactions which have already occurred or are likely to occur in the near future, which is certified by documents

 Effect

 Advance Tax Ruling reduces uncertainties concerning the interpretation of tax laws, and increases the predictability of business activities.

 The answer provided by the National Tax Service based on documents on fact relevance is binding.

 Qualifications and Requirements

 The interpretation of tax laws related to specific transactions of a business owner (including persons who will bear the tax obligation derived from future transactions) is the subject to Advance Tax Ruling.

 The following is ineligible for Advance Tax Ruling:

Matters unrelated to the application of tax laws

Matters concerning determination of facts

Matters concerning fact relevance of assumption

Where transactions for which the application is made are (possibly) against Acts or subordinate statutes

Where the application is made after the application period is expires

Where the purpose of application is to evade taxes, etc.

 How to apply

 Download the application form from the National Tax Service website (http://www.nts.go.kr/eng/). Fill it out and submit the form to the NTS Commissioner (Manager of Legal Affairs Division) via mail.

   * Download the form at NTS web site (in Korean) - National tax info. or Tax info. links - Tax law advance ruling system

 Application shall be filed by the business owner. However, a delegated agent (tax accountant, certified public accountant, or lawyer), if consigned by the business owner, may submit the application on his/her behalf.

<Original Source : http://www.investkorea.org/ikwork/iko/eng/cont/contents.jsp?code=102040302>

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