The South Korean government passed the Tax Revision Bill in January 2013, which brings in significant changes to corporate and individual taxation provisions, for companies and foreign nationals working in the country, says Nair & Co.’s International Tax Consulting Team.

1. South Korea Enacts Tax Revision Bill: Update from Nair & Co. International Tax Compliance
Services Team
(Sunnyvale, CA)- The South Korean government passed the Tax Revision Bill in January 2013, which brings in
significant changes to corporate and individual taxation provisions, for companies and foreign nationals working in
the country, says Nair & Co.’s International Tax Consulting Team. Majority of these new provisions are effective
from January 1, 2013 unless otherwise stated.
Key Highlights: South Korean Tax Revision
Corporate taxation
 Increase in the minimum tax imposed on business entities except small and medium size corporations as
mentioned below:
 For companies with a maximum of 10 billion South Korean Won (KRW) taxable incomes, the minimum
tax rate remains at 10%.
 For companies with a taxable income in the range of KRW10 billion to 100 billion, the minimum tax rate
has been increased to 12% from 11%.
 For companies having a taxable income in excess of KRW100 billion, the minimum tax rate has been
hiked to 16% from 14%.
 A foreign business operating in South Korea would be considered as a foreign corporation if it meets
following criteria:
 If it possess “corporate entity” status;
 If its owners only have limited liability and
 If a similar national business/company is considered as a corporation under the domestic law.
These criteria would be used to determine the class and type of foreign companies by the National Tax Services in
order to issue a notification categorizing various foreign entities.
 A foreign business which is not considered as a foreign corporation, was taxed under the Presidential Decree
of the Personal Income Tax Law (PITL) applying the following approach:
 In case where profits are not dispersed, the foreign entity is deemed as a single non-resident taxpayer
for taxation purposes; and
 In case where profits are distributed, the foreign entity is deemed as a flow-through entity and every
beneficiary of profits is taxed on the relevant portion of the profit. The new amendments to the Bill
make the following clarifications:
Situation Tax implication

2. Situation Tax implication
In case details of partners and
distribution ratio of the profit is
submitted. In addition, for a PE - if
business is also registered.
Partners would be taxed
In cases where information is not
submitted. In addition for entities with
PE status, if there is no business
registration.
The entity would be taxed as a non-
resident
Individual Taxation
The special flat income tax rate for foreign workers is hiked to 18.7% from 16.5% (including 10% local income tax)
in order to decrease the difference in taxation of domestic and foreign employees. However, the special flat tax is
extended till December 31, 2014.
For special deduction items an all-inclusive deduction limit of KRW 25 million has been introduced. These include:
 certain designated donations,
 education expenses,
 home financing-related costs,
 private insurance and medical expenses,
 credit card spending, etc.
However, previous specified deduction limits remain on other items which include:
 basic personal deduction,
 earned income deduction,
 social insurance expenses,
 qualified pension savings deduction,
 statutory donations and
 disabled-person related expenses.
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