□ Tax Payers

The income tax is calculated according to the following table. In the case where there is a tax treaty between Korea and another country, the tax treaty comes prior to local income tax stipulations.

Where property is transferred with compensation such as sale, exchange and payment in kind to a corporation, the Capital Gains Tax applies. Corporations will be taxed on this as corporate income tax.

□ Real Property and Property of its kind

If land, real estate or other properties are transferred, the capital gains tax shall be prorated accord-ing to the period of possession. For example, 50 percent for less than one year, 40 percent for one year to less than two years, and 9 percent to 36 percent for more than 2 years. In case the property is transferred before owner's registration, the tax rate will be 70 percent. For specific share transfers, the holdings of a corporation that possesses excessive real property, such rights to use specific facilities (golf club membership, etc.), and business rights, a tax rate of 9 percent to 36 percent shall be applied regardless of the period of possession.

In case of unlisted shares, if a major stockholder of a large corporation transfers them after retaining less than a year, a tax rate of 30 percent shall be applied. If such stocks are retained for more than a year, a tax rate of 20 percent is applied. Minority stockholders of large corporations transferring unlist-ed stocks shall be liable to a 20 percent rate, regardless of the period retained. If a small and medium corporation transfers its unlisted stocks, they will be liable to 20 percent tax, regardless of its period retained.

Listed stockholders, in principle, are normally not subject to tax. If, however, a majority shareholder of a large business transfers the shares after holding on to them for less than a year, he or she will be liable to a 30 percent rater of tax. If he or she retains the stocks for more than a year, the tax will be 20 percent.

④ Value Added Tax

On the value added in the course of supplying goods or services, a 10 percent value added tax shall be levied.

□ Business Registration

Business Registration for paying value added tax shall be filed within 20 days of the commencement of the business. Required filing documents for a foreign-invested corporation are a notification form of Foreign-Investment Report, Certificate of Foreign Currency Purchase, Certificate of Foreigner Registration Certificate, and Report of Designated Tax Payment Manager etc.

□ Tax Refund System

The following goods and services are zero-rated and the related input taxes incurred are refundable. They are goods for export; services rendered outside Korea; and other goods or services supplied for foreign exchange earnings.

⑤ Local Taxes

Local taxes consist of provincial, city and county taxes.

Provincial taxes include acquisition tax, registration tax, race tax, horse race tax, license tax, community facility tax, regional development tax and local education tax.

City or county taxes include inhabitant tax, property tax, mileage tax, automobile tax, agricultural income tax, butchery tax, aggregate land tax, urban planning tax, and business place tax.

At the same time, local education tax is added to taxes such as registration tax, property tax and aggregate land tax.

Persons acquiring the following are liable to pay taxes within 30 days of acquisition:
- Real estate (land, buildings),
- Motor vehicles, heavy equipment (heavy equipment for construction/cargo handling gears and
- mining equipment under the Construction Machinery Management Act)
- Standing trees
- Aircrafts and vessels
- Mining rights and fishery rights
- Golf club, condominium, and sports complex memberships

Generally, the tax base is 2 percent of the acquisition price. However, a heavy tax is levied for acquisition of following types of properties:

A Registration tax is levied when registering particulars concerning acquisition, transfer, alteration, or lapse of property rights or other titles in the official registry book. It should be paid before business registration and the tax rate is as follows.

Property tax is levied based on the property's current standard value as in the following table. In the case where a non-urban type factory is newly built or extended in the Metropolitan Overpopulation Control Zone, five-fold heavy tax shall be levied for five years from the first taxation base date.
(0.3 % x 5 times = 1.5 %)

Tax base for all types of land are classified into General Combined Tax Base, Special Combined Tax Base and Separate Tax Base. The taxation method for each tax type is as follows.

Resident Tax is levied based both in proportion to income and on a per capita rate. In case of pro rata income, tax amount is 10 percent of corporate tax, income tax and farmland tax. In case of per capita rate, individuals should pay less than ￦10,000 (provided by the ordinances). Corporations should pay from ￦50,000 to ￦500,000 according to the capital size.

□ Business Place Tax

Business Place Tax is levied in a pro rata fashion according the size of the business place, and levied in a pro rata fashion according the size of the payroll.

In regard to property, tax is levied at the rate of ￦250 per square meter. For the sizes of less than 300 square meters, the tax is exempted. For a pollutant discharging business place, a higher tax rate of ￦500 per square meter is levied.

In regard to employees, 0.5 percent of payroll is levied monthly. For a business place with less than 50 employees, the tax is exempted. However, the business place tax rate is a standard tax rate. Therefore the actual tax rate can vary according to the regulations of different cities and counties.

⑥ Customs Duties

□ Tariff Assessment

All goods being imported from foreign countries cannot be brought into Korea unless their customs duties are prepaid. Customs duties are calculated by multiplying tax base of the tariff tax base by the tariff rate. The tariff tax base is either the value or the quantity of the imported goods. The tariff rate is provided on the tariff rate table by group of items. As the tax rate applies to each HS Number corre-sponding to an item or a group of items, the tariff is affected by the decision on which value should be regarded as the taxable value or how the taxable value is decided.

If the value is the tax base of the tariff, it is called an "ad valorem duty" and if the quantity is tax based, "specific duty." The value that is the tax base of the ad valorem duty is called the "taxable value." Korean customs valuations on taxable values reflect the relevant provisions of the WTO Valuation Agreement and have the same principals of the international tariff valuation.

□ Taxable Value

Taxable values on imported goods are assessed by various methods. The first stage is its trans-action value. The valuation method, which decides taxable value by transaction value, is called the first method. However, for cases other than sales, the transaction value cannot be used as the base for taxable value. In these cases, the taxable value is determined by reviewing the following methods successively.

A customs duties refund means that the Korean government returns certain customs duties to the payer(s) under certain conditions. It is part of the export support system that aims to enhance the international price competitiveness of Korean export goods. Under the system the Korean govern-ment returns to the exporters or the manufacturers of export goods the customs duties they paid when they imported raw material for export goods.

To be eligible for a customs duty refund, The exporter or the export good manufacturer should have the Certificate of Import Declaration,
The customs duties for the goods have been paid or the goods have been granted for lump-sum payment of customs duties,
The goods must be produced and supplied for exporting within two years after the import declaration and application for customs duties refund must be filed within two years after the goods were submitted for export.

⑦ Other Taxes

□ Education Tax

Education tax is a tax levied upon the income of persons engaged in the banking and insurance businesses and various taxes as surtax. The tax base and the tax rate are as follows.

The Securities Transaction Tax (STT) is levied when the securities are transferred. The basic tax rate of STT is 0.5 percent and elasticity tax rates of STT are 0.15 percent to 0.3 percent. In case of listed stocks, the taxpayers are securities settlement corporations and securities companies. In case of unlisted stocks, the taxpayer is the transferor. However, in the case that a non-resident foreign corpo-ration whose business place is not within the country transfers securities outside the market, the transferee becomes the taxpayer and the location of the issuer's main office becomes the place for tax payment.

Details can be found in the Foreign Investment Promotion Act.

② Tax Support for Foreign Investors' Dividends

For dividends taken by foreign investors from a foreign-invested corporation that is engaged in businesses eligible for tax reduction or tax exemption, tax will be reduced or exempted reflecting the percentage of dividends such businesses withdrew out of the total dividend income accrued during the tax reduction or exemption period.

The initial date in reckoning for tax reduction or tax exemption of dividends generated from new investments and capital increase through paying actual money, actual shares and dividends is same as that of the corporate tax. During the period when the corporate tax gets full exemption, the dividend income tax will also be exempted 100 percent. During the period that the corporate tax gets 50 per-cent reduction, the dividend income tax will also be reduced by 50 percent.

In the case where a foreign investor takes over the shares of a foreign-invested company from a local individual or a local corporation, it is regarded as acquisition of existing shares. Therefore, it is not eligible for the tax reduction or tax exemption. However, in the case where a foreigner or a foreign corporation takes over the shares from another foreigner or foreign corporation, the original period and rate of tax reduction and tax exemption remain effective.

③ Tax Exemption on Advanced Foreign Technology

In case highly advanced technology, which is judged critical for enhancing Korea's global competi-tiveness, is introduced pursuant to an agreement, the provider's (individual, corporation, international organization) corporate tax and income tax will be exempted for five years from the date which the initial compensation for introducing the technology is to be made.

④ Tax Support for Foreign Technicians

Earned income tax will be fully exempt for the income that a certain foreign technician earned in return for his/her service provided to Korean individual or corporation in Korea for five years from the initial date―provided that the initial date is before December 31, 2006― to the month of fifth-year-date from the initial service date.

A foreign technician will be exempted from earned income tax if he/she renders his/her service to Koreans in Korea pursuant to the technology introduction agreement stipulated in the FIPA. However, the privilege shall remain effective only for five years to the month of fifth-year-date from the issuing date of certificate of report for the technology introduction agreement under the condition that the agreement is observed.

⑤ Expansion of Scope for Tax Exemption on Foreign Workers' Overseas Allowance

The recipient of this benefit can choose either tax exemption on 17 percent of his/her gross salary or application of equal terms with those for Koreans after a tax exemption on 30 percent of his/her gross salary.