Korea: Foreign Direct Investment and CorporationTax

FDI

South Korea attracts foreign business and investment in a number ofways. There are Free Economic Zones. The government provides variousincentives. Even some local governments provide incentives. These can includesubsidies for labour and tax breaks.

Foreign investment into Korea is underpinned by the ForeignInvestment Promotion Act (the “Act”) which was enacted to attract more inwardforeign investment into Korea.

In order to qualify under the Act, a foreign investor must make aninvestment equivalent to KRW100 million. At the time of writing, this isapproximately USD81,000. Certain “in kind” contributions may qualify as well.

The main benefits under the Act are that all remittances to the homecountry are guaranteed and that the company will receive equal treatment withKorean companies. The issuance of work visas is also less problematic with thisroute.

Taxation

The Korean government has for a long time recognised the importanceof foreign investment.

Corporation Tax

The basic rates of Corporation Tax are as follows:-

11%                           onthe first KRW200 million of the tax base

22%                           upto KRW200 billion

24.2%                       overKRW200 billion

Withholding Tax and VAT

Withholding tax for a non-resident is payable at the rate of 22%unless the rate is reduced by a Tax Treaty with the third party country.

The rate of VAT is currently 10%.