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 Taxation
for Residents |
A resident, as defined under the Income Tax
Law, is an individual who has a permanent
residency in Korea or has resided in Korea
for a minimum of one year. |
·
Persons employed by a resident individual
or a domestic corporation but working overseas
are deemed as having residency
in Korea.
· Such residents, regardless of their nationality,
are taxed at graduated rates on net income
from
Korean sources.
· Resident individuals are taxed on their
worldwide income but non-resident individuals
are taxed
only on Korean-source
income.
|
|
The income tax system for both individuals
and companies is unitary: income from all
sources is added together and taxed at progressive
rates. |
·
For the purposes of corporate income tax,
companies are primarily classified as domestic
or foreign entities.
|
The Income Tax Law specifies two categories
of income: global, and schedular income.
|
·
Global or gross income includes interest income, dividend
income, rental income, business
income, wage and salary, pension income,
temporary property income and other income. Global incomes are aggregated
and taxed at progressive rates. |
·
Schedular income comprises capital gains, retirement, and timber income.
The tax amount is separately calcuated on each schedular income.
|
|
A person paying interest, dividends, business
income or wages and salary is required to
withhold income tax at the relevant rates
at the time when payment is made. |
(Unit:million
won)
 |
|
| Category
of Income |
Tax
Base |
Tax
Rate |
Global
(Gross) |
Aggregate
income from interest, dividends (including
deemed dividends), rental, business
activities, wage and salary, pension,
temporary property and others |
maximum
10
10 - 40
40 - 80
greater than 80 |
8
percent
0.8+17 percent of amount exceeding 10
5.9+26 percent of amount exceeding 40
16.3+35 percent of amount exceeding
80 |
| Non-global |
Capital gains |
Real
estate held for 2year or more |
maximum
10
10 - 40
40 - 80
greater than 80 |
9
percent
0.95+18 percent of amount exceeding 10
6.3+27 percent of amount exceeding 40
17.1+36 percent of amount exceeding
80 |
| Special
stocks and others |
| Real
estate held for less than 1 year |
50
percent |
|
| Real
estate held for more than 1 year and
less than 2 year |
40
percent |
|
| Assets
transferred without registration |
70
percent |
|
| Stocks
of large corporations held for less than
1 year by majority shareholder(except
special stocks being applied global
tax rate) |
30
percent |
|
| SME
stocks |
10
percent |
|
| Other
stocks (i.e. stocks other than the above two) |
20
percent |
|
| Retirement |
1.The
tax base, after being divided by the
amount of years worked, is subject to
global income tax rates.
2. The tax base is then multiplied again
by the amount of years worked. |
| Timber |
Same
as global income tax rates. |
Note: See section (3) below for capital gains
tax on stocks. |
| Interest
Income Tax |
|
Interest income tax is subject to two taxations: gross income tax and separate
withholding tax. |
|
In general, under the current tax law, a 14
percent withholding tax is applicable to interest
income. |
| Dividend
Income Tax |
|
Dividend income tax is in two types:
gross income tax and separate withholding
tax. |
|
A 14 percent withholding tax is applied to
dividends paid by the following sources: |
·
Dividends and distributions of profits and
retained earnings, and distribution of interest
received from a domestic or foreign
corporation
· Distributions of profits received from a
non-corporate entity such as a private association
· Distributions of profits arising from securities
investment trusts
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To avoid double taxation at both corporate
and individual income levels, a tax credit
for dividend income is applied. When dividend
income of a resident received from a domestic
corporation is included in global income,
the amount calculated as below is deducted
from the global income tax amount. |
·
19 percent of dividend income is added to
the amount of the dividend actually received
by
the shareholder
· Above figure is used to calculate the individual
income tax amount of the shareholder
· Then, the 19 percent of the dividend income, which was added
in the first line, is credited againest the individual income tax amount calculared in the second line above.
|
When the amount of interest and dividend income
included in the global income tax of a resident
exceeds the amount indicated in the guideline
regarding global taxation (40 million won
per year), the amount of tax on global income
will be the larger of the two shown below.
The sum of the following: |
·
Amount of global income tax calculated on
the sum of the amount by which interest and
dividend income exceeds 40 million
won, and the amount of global income other
than interest
or dividend income;
· Amount of tax calculated by applying a withholding
tax rate of 14 percent to 40 million won.
|
|
The sum of the following: |
·
14 percent of the total interest and dividend
income;
· Amount of tax computed on global income
other than interest or dividend income. |
| Capital
Gains Tax |
|
No capital gains tax on listed
stocks is levied for minority shareholders
holding less than 3 percent of total shares
or market value of less than 10 billion
won. However this tax is levied when stocks
are traded on the Free Board. |
|
As for majority (controlling) shareholders,
if stocks of large corporations are held for
less than one year, a 30 percent capital gains
tax rate is levied; otherwise, 20 percent
is applied. |
·
Majority shareholders are defined as follows:
those holding more than 3 percent of issued
stocks as
of the fiscal year's end just prior
to the transaction date; or shareholders holding
more than
10 billion won of market capitalization,
including specially related person's stock
holdings.
|
|
As for small to medium size enterprises (SMEs),
10 percent is applied. |
| Type
|
Shareholder
Status
|
Application
of Capital Gains Tax |
Tax
Rate |
| Listed |
Majority
|
Shareholders
of large-sized enterprises
(Stocks held less than one year) |
30
percent |
| Shareholders
of SMEs |
10
percent |
| Other
cases |
20
percent |
| Minority
|
No
application of capital gains tax |
|
| Unlisted
|
Majority |
Same
as listed stocks |
|
| Minority
|
Shareholders
of SMEs |
10
percent |
| Other
cases |
20
percent |
Note: Minority shareholders are those who hold less
than 3 percent or 10 billion won of market capitalization. |
| Corporate
Income Tax |
|
A corporation with its head office in Korea
is subject to corporate tax on its total income
for each fiscal year. |
|
The tax rate varies depending on a corporation's
taxable income |
| Tax
Base |
Tax
Rate |
| 0 - 100 |
13 percent |
| over 100 |
13 percent for up to 100 + 25 percent
of amount exceeding 100 |
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