Tax Treaties
2. Status of Tax Treaty
Tax treaties have the same effect as domestic law, while in case of conflict between tax treaties and domestic tax laws, tax treaties take precedence over domestic tax laws. Taxes, however, cannot be levied on the basis of a tax treaty without provisions of the domestic tax law, nor can the tax burden on residents of another country be higher than the tax burden as prescribed by domestic tax law.
INFORMATION
Tax Treaty Countries (93 nations)
Gabonese Republic, Greece, Republic of South Africa, Netherlands, Nepal, Norway, New Zealand, Denmark, Germany, Laos, Latvia, Russia, Romania, Luxembourg, Lithuania, Malaysia, Mexico, Morocco, Malta, Mongolia, United States of America, Myanmar, Kingdom of Bahrain, Bangladesh, Venezuela, Vietnam, Belgium, Belarus, Bulgaria, Brazil, Brunei Darussalam, Kingdom of Saudi Arabia, Republic of Serbia, Sri Lanka, Sweden, Switzerland, Spain, Slovakia, Slovenia, Singapore, United Arab Emirates, Iceland, Ireland, Azerbaijan, Albania, Algeria, Estonia, Republic of Ecuador, Federal Democratic Republic of Ethiopia, United Kingdom, Oman , Austria, Jordan, Uruguay, Uzbekistan, Ukraine, Iran, Israel, Egypt, Italy, India, Indonesia, Japan, Georgia, China, Czech Republic, Chile, Kazakhstan, Qatar, Canada, Republic of Kenya, Republic of Colombia, Kuwait, Croatia, Kyrgyzstan, Republic of Tajikistan, Thailand, Turkey, Turkmenistan, Tunisia, Panama, Pakistan, Papua New Guinea, Republic of Peru, Portugal, Poland, France, Fiji, Finland, Philippines, Hungary, Australia, Hong Kong
Tax Treaties by Country Website of National Tax Service
(www.nts.go.kr/) → Resource → Tax Law/Treaty → Tax Treaty Website of National Tax Law Information System
(https://txsi.hometax.go.kr/docs/main.jsp) → Law → Tax Treaty (Korean website)
※ Note : Tax treaty revisons are noted in the last part of the provision and thus should be checked to determine whether revisions have been made.
Limited Tax Rate [Taxation and withholding tax rate by each contracting state]
Contracting State Limited tax rate
Interest Dividend Royalty
Gabonese Republic 10% Corporation holding over 25% of stocks: 5% /
Other: 15% 10%
Greece 8% Corporation holding over 25% of stocks: 5%
/ Other: 15% 10%
Republic of South
Afri-ca 10% Corporation holding over 25% of stocks: 5%
/ Other: 15% 10%
Netherlands Over 7 years : 10%
Others：15% Corporation holding over 25% of stocks: 10%
/ Others: 15% Copyright: 15%
Others: 10%
Nepal 10% Corporation holding over 25% of stocks: 5%
/ Corporation holding over 10% of stocks: 10%
/ Other: 15%
15%
Norway 15% 15% Copyright: 15% Other: 10%
New Zealand 10% 15% 10%
Denmark 15% 15% Industrial investment: 10%
Other: 15%
Germany 10% Corporate holding over 25% of stocks: 5%
/ Others: 15% Equipment : 2%
Others: 10%
Laos 10% Corporation holding over 10% of stocks: 10%
/ Others: 15% 5%
Latvia 10% Corporation holding over 10% of stocks: 5%
/ Other: 10% Industrial investment: 5%
Other: 10%
Russia N/A Corporation holding over 30% of stocks: 5%
/ Other: 10% 5%
Romania 10% Corporation holding over 25% of stocks: 7%
/ Other: 10% Patent, etc: 7% / Other: 10%
/ Commission: 10%
Luxembourg Bank: 5%
Other:10% Corporation holding over 10% of stocks: 10%
/ Other: 15% Commercial information: 5%
/ Other: 10%
Lithuania 10% Corporation holding over 25% of stocks: 5%
/ Other: 10% Commercial information: 5%
/ Other: 10%
Malaysia 15% Corporation holding over 25% of stocks: 10%
/ Other: 15% Copyright: 10%, 15%
Others 10%
Mexico Bank: 5%
Other：15% Corporation holding over 10% of stocks: 0%
/ Other: 15% Royalty: 10%
Other: 15%
Morocco 10% Corporation holding over 25% of stocks: 5% /
Other: 10% Copyright, etc.: 5%
Other: 10%
Malta 10% Corporation holding over 25% of stocks: 5%
/ ther: 15% 0%
Mongolia 5% 5% 10%
United States of
America 12% Corporation holding over 10% of stocks: 10%
/ Other: 15% Copyright: 10%
Other: 15%
Myanmar 10% 10% Cost of information usage: 10%
/ Other: 15%
Kingdom of Bahrain 5% Corporation holding over 25% of stocks: 5%
/ Other: 10% 10%
Bangladesh 10% Corporation holding over 10% of stocks: 10%
/ Other: 15% 10%
Venezuela Bank : 5%
Others：10% Corporation holding over 10% of stocks: 5%
/ Other: 10% Equipment: 5%
Other: 10%
Vietnam 10% 10% Patent, etc.: 5%
Other: 15%
Belarus 10% Corporation holding over 25% of stocks: 5%
/ Other: 15% 5%
Belgium 10% 15% 10%
Bulgaria 10% Corporation holding over 15% of stocks: 5%
/ Other: 10% 5%
Brazil Loan for 7 years:
10% / Other: 15% 10% Trademark: 25%
Other: 10%
Brunei Darussalam 10% Corporation holding over 25% of stocks: 5%
/ Other: 10% 10%
Georgia 10% Corporation holding over 10% of stocks: 5%
/ Other: 10% 10%
Czech Republic 10% Corporation holding over 25% of stocks: 5%
/ Other: 10% 10%
Kazakhstan 10% Corporation holding over 10% of stocks: 5%
/ Other: 15% Industrial equipment: 2%
Other: 10%
Canada 10% Corporation holding over 25% of stocks: 5%
/ Other: 15% 10%
Kuwait 5% 5% 15%
Republic of Kenya 12% Corporation holding over 25% of stocks: 8%
/ Other: 10% 10%
Republic of Tajikistan 8% Corporation holding over 25% of stocks: 5%
/ Other: 10% 10%
Turkey Over 2 years: 10%
Other: 15% Corporation holding over 25% of stocks: 15%
/ Other: 20% 10%
Tunisia 12% 15% 15%
Pakistan 12.5% Corporation holding over 20% of stocks: 10%
/ Other: 12.5% 10%
Republic of Peru 15% Corporation holding over 25% of stocks: 10%
/ Other: 15% 10%
Poland 10% Corporation holding over 10% of stocks: 5%
/ Other: 10% 5%
Fiji 10% Corporation holding over 25% of stocks: 10%
/ Other: 15% 10%
Philippines Public issues: 10%
Other: 15% Corporation holding over 25% of stocks: 10%
/ Other: 25% 10%, 15%
Australia 15% 15% 15%
Republic of
Serbia 10% Corporation holding over 25% of stocks: 5%
/ Other: 10% Copyright: 5%
Other: 10%
Sri Lanka 10% Corporation holding over 25% of stocks: 10%
/ Other: 15% 10%
Switzerland Bank: 5%
Others: 10% Corporation holding over 25% of stocks: 5%
/ Others: 15% 5%
Sweden Loan for 7 years:
10%Other: 15%
Corporation holding over 25% of stocks: 10%
/ Other: 15% Copyright: 15%
Other: 10%
Spain 10% Corporation holding over 25% of stocks: 10%
/ Other: 15% 10%
Slovakia 10% Corporation holding over 25% of stocks: 5%
/ Other: 10% Copyright: 0%
Other: 10%
Slovenia 5% Corporation holding over 25% of stocks: 5%
/ Other: 15% 5%
Singapore 10% Corporate holding over 25% of stocks: 10%
Others: 15% 15%
United Arab
Emirates 10% Corporation holding over 10% of stocks: 5%
/ Others: 10% 0%
Iceland 10% Corporation holding over 25% of stocks: 5%/
Other: 15% 10%
Ireland 0% Corporation holding over 10% of stocks: 10%/
Other: 15% 0%
Azerbaijan 10% 7% Industrial investment: 5%
/ Other: 10%
Albania 10% Corporation holding over 25% of stocks: 5%
/ Other: 10% 10%
Algeria 10% Corporation holding over 25% of stocks: 5%
/ Other: 15% Equipment: 2%
Other: 10%
Estonia 10% Corporation holding over 25% of stocks: 5%
Other 10% Equipment: 5%
Other: 10%
Federal Democratic Republic of Ethiopia
7.50% Corporation holding over 25% of stocks: 5%
/ Other: 8% 5%
Republic of
Ecuador 12% Corporation holding over 10% of stocks: 5%
/ Other: 10% Equipment: 5%
Other: 12%
United
Kingdom 10% Corporation holding over 25% of stocks: 5%
/ Other: 15% Equipment: 2%
Other: 10%
Oman 5% Corporation holding over 10% of stocks: 5%
/ Other: 10% 8%
Austria 10% Corporatoion holding over 25% of stocks: 5%
/ Other: 15% Equipment: 2%
Other: 10%
Jordan 10% 10% 10%
Uruguay 10% Corporation holding over 25% of stocks: 5%
/ Other: 15% 10%
Uzbekistan 5% Corporation holding over 25% of stocks: 5%
/ Other: 15% Equipment: 2%
Other: 5%
Israel Bank: 7.5%
Other: 10% Corporation holding over 10% of stocks: 5%,
10% / Other: 15% Equipment: 2%
Other: 5%
Egypt Over 3 years: 10%
Other: 15% Corporation holding over 25% of stocks: 10%
/ Other: 15% 15%
Italy 10% Corporation holding over 25% of stocks: 10%
/ Other: 15% 10%
India 10% 15% 10%
Indonesia 10% Corporation holding over 25% of stocks: 10%
/ Other: 15% 15%
Japan 10% Corporation holding over 25% of stocks: 5%
/ Other: 15% 10%
China 10% Corporation holding over 25% of stocks: 5%
/ Other: 10% 10%
Chile Bank : 4% / Stock
market bond: 5%
/ Others : 15%
Corporation holding over 25% of stocks: 5%
/ Others: 10% Equipment: 2%
Other: 10%
Qatar 10% 10% 5%
Colombia 10% Corporation holding over 20% of stocks: 5%
/ Other: 15% 10%
Croatia 5% Corporation holding over 25% of stocks: 5%
/ Others: 10% 0%
Kyrgyzstan 10% Corporation holding over 25% of stocks: 5%
/ Other: 10% 5%, 10%
Thailand Bank: 10%
Other15% 10% Software: 5% / Patent: 10% /
Industrial equipment: 15%
Turkmenistan 10% 10% 10%
Panama 5% Corporation holding over 25% of stocks: 5%
/ Other: 15% Equipment: 3%
Other: 10%
Papua New
Guinea 10% 15% 10%
Portugal 15% Corporation holding over 25% of stocks: 10%
/ Other: 15% 10%
France 10% Corporation holding over 10% of stocks: 10%
/ Other: 15% 10%
Finland 10% Corporation holding over 25% of stocks: 10%
/ Other: 15% 10%
Hungary 0% Corporation holding over 25% of stocks: 5%
/ Other: 10% 0%
Hong Kong 10% Corporation holding over 25% of stocks: 10% /
Other: 15% 10%
* Original statements must be checked before actual application of taxation.
(National Tax Service (www.nts.go.kr) - Resources - Tax treaty) * No tax treaty exists with Taiwan or Macao.
* Residence tax is additionally imposed in the United States, the Philippines, and the Republic of South Africa
Q1. What is the ceiling and scope of entertainment expenses which can be included as deductible expenses?
Entertainment expense refers to the expenses spent for entertainment, society, compensation, or other expenses of a similar nature, and means the amount spent by a domestic corporation to facilitate work with those who are directly or indirectly involved with their business. The ceiling of entertainment expenses is as follows.
Ceiling = KRW 12 million (KRW 24 million for small and medium size enterprises) x the number of months in the business year / 12 + amount of income x rate
Amount of income Rate
KRW 10 billion or less Total amount of income x 0.2%
More than KRW 10 billion not
exceeding KRW 50 billion KRW 20 million + (Amount over KRW 10 billion x 0.1%)
Amount exceeding KRW 50
billion KRW 60 million + (Amount over KRW 50 billion x 0.03%)
Evidentiary documents of entertainment expenses: Proof of eligibility is included in the tax invoice, cash receipt, and corporate credit card (including a comapny card in an employee’s name). Expenses incurred in excess of KRW 10,000 using cash or personal cards are not recognized as deductibles, although in the case of expenses for congratulations and condolences, a wedding invitation, etc., is eligible for a limit of KRW 200,000 per expenditure.
Q2. How is a non-resident’s capital gains on domestic-source securities taxed?
In principle, 10% of the amount shall be filed and paid. However, when the acquisition value and transfer expenses of the securities can be confirmed, the payable tax amount shall be the lesser of the following;
① Paid amount x 10%
② (Gross income - acquisition value and transfer expenses) x 20%
Q3. Is the scope of payment guarantee for overseas controlling shareholders applicable to thin capitalization only when a payment guarantee is issued to a third party?
The scope of payment guarantee for foreign shareholders applicable to thin capitalization includes all forms of payment gaurantee which requires the overseas controlling shareholder to fulfil their payment obligations if a domestic company, etc. defaults on an obligation, regardless of whether there is a certificate of payment guarantee, the type of payment guarantee or the method of payment guarantee (Gook-il 46017-483).
Q4. If a domestic place of business borrows interest-free loan from the controlling shareholder, is it subject to thin cap?
A loan without interest or discount fees is excluded from thin cap (Gook-il 46017-483).