Tax is always an issue that foreign investors pay a lot of attention when they want to invest in any country, including Korea. Tax system of Korea is classified into national taxes and local taxes.
Nation taxes
Nation taxes are categorized into 02 types: internal taxes and tariffs. Internal taxes inclues corporate tax, value-added tax, earned income tax, transfer income tax and security transaction tax. Tariffs are imposed on imported goods to Korea.
– Corporate tax: Corporate tax is levied on income arising from business activities of a corporation such as income from each business year, liquidation income, and capital gains from the transfer of land, etc. The rate of the corporate tax depends on the amount of taxable income.
– Value-added tax (VAT): VAT is a kind of tax that is paid for added value acquired in the process of manufacturing products, providing services and importing goods. The rate is 10% for domestic sales and 0% for exported goods or sevices supplying cross-border,…
– Wage and salary income tax (for workers): Income tax is levied on income arsing from working any job, regardless of its name or form. The income tax rate depends on the amount of money people earn in a month.
– Capital gains tax (for stocks, etc.): Capital gains tax is levied on an asset which is transferred to other individuals/corporations for payment through purchase, exchange, or contribution on a corporation. The rate can be 30%, 20%, 10%,… of the tax base, depending on each specific case.
– Security transaction tax: Security transaction tax is imposed on the transfer of stocks of a corporation. The tax is calculated on total value of securities at the time of alienation with the rate 0,45%.
Local taxes
Local taxes, imposed by local governments, include acquisition tax, registration and license tax, property tax and others.
– Acquisition tax: People need to pay acquisition tax when they purchase or inherit properties like real estate, motor vehicles, heavy equipment, trees, boats, aircraft, golf memberships, condominium memberships, health club memberships, mining rights, fishery rights. Acquisition tax is calculated on the base of the declared price and acquisition period. Moreover, the rate depends on the types and the value of properties. For example, the rate of a house 600 million or less is 1%.
– Property tax: Property tax is imposed on land, buildings, housing, aircraft and ships. They calculate property tax by the current standard value multiply a specialize rate (differenr from each property).
In addtion, the Korean government introduces many policies to reduce and exempt from the taxes if foreign investors meet special conditions.
