Providing Excellence In Client Services
July 2013
Newsletter
Bi-monthly Newsletter of Horwath Choongjung LLC
Contents
This newsletter is prepared and issued by Horwath Choongjung LLC
(Choongjung Accounting Corp.) on a bi-monthly basis and intended to
provide foreign investors with an update on tax law changes in Korea
Amendment of Tax Treaty
and other related subjects of special interests to foreign investors.
The information provided herein should not form a basis of any
Amendment of the KoreaSingapore Tax Treaty
decision as to a particular course of action, nor should it be relied upon
New Tax Ruling
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Special rules in issuing
output VAT invoice (Buga600, 2013.06.28)
Please contact any of the following individuals with any inquiries or
comments.
Tax Filing Information
Contacts: H.S. Kim, S.Y. Kim or G.S. Sim at Tax&BPO Services of
Horwath Choongjung [Tel: (82)(2) 316-6600, Fax: (82)(2) 775-5885,
E-mail: post@crowehorwath.co.kr]
(You may find this newsletter and other items of interest at
http://www.crowehorwath.co.kr)
Deemed gift tax return
filing by July 31, 2013
as a substitute for a detailed advice in individual cases.
Interim corporate income
tax return filing by
September 2, 2013
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July 2013
Amendment
of Tax Treaty
Amendment of the Korea-Singapore Tax Treaty
The amended Korea-Singapore Tax Treaty came into force on June 28, 2013. The
amended tax treaty may enable the National Tax Service of Korea to receive
financial information of the taxpayers suspected of tax evasion from the tax
authorities of Singapore. However, in this regard, the government requesting
information should prove that the taxpayer evaded taxes.
The main revisions are as follows.
Old provision
Amended provision
□ Article 25 of the Agreement
Exchange
such
information
□ Article 1 of the Protocol
as
is
1. Exchange such information as is
necessary for the carrying out of this
foreseeably relevant for carrying out the
Convention and of the domestic laws of
provisions of this Convention or to the
the Contracting States concerning taxes
administration or enforcement of the
covered by this Convention.
domestic laws concerning taxes of every
kind and description imposed on behalf
of the Contracting States, or of their
political subdivisions or local authorities.
5.
In no case shall the provisions of
paragraph 3 be construed to permit a
Contracting State to decline to supply
information
solely
because
the
information is held by a bank, other
financial institution, nominee or person
acting in an agency or a fiduciary
capacity
or
because
it
relates
to
ownership interests in a person.
New Tax
rulings
Special rules in issuing output VAT invoice (Buga-600, 2013.06.28)
In the case where a Korean branch office of a foreign company imports and
supplies VAT taxable goods to a domestic purchaser (“A”) from the head office in
the foreign country, if the imported goods are shipped to A directly from the head
office and A undertakes necessary importing procedures and receives the
importing VAT invoice from the relevant customs office, the Korean branch office
does not need to issue an output VAT invoice to A regarding the supply of imported
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July 2013
goods.
Tax Filing
Information
Deemed gift tax return filing by July 31, 2013
Under Article 45-3 of the Inheritance and Gift Tax Law, if the amount of sales made
by a company (“beneficiary company”) to a specially related company (“SRC”) of
the beneficiary company’s controlling shareholder exceeds 30% of the beneficiary
company’s total sales amount on a fiscal year basis, the controlling shareholder
and his/her relative (“Taxpayer”) having more than 3% of share ownership in the
beneficiary company directly and indirectly are deemed to be gifted some portion
of an after-tax operating income of the beneficiary company from SRC, and the
deemed income is subject to gift tax.
Taxpayer is required to file a gift tax return and make tax payment within 3 months
from the end of the month in which the corporate income tax return filing due date
of beneficiary company falls (i.e., by July 31, 2013 if the beneficiary company’s
fiscal year-end is December 31, 2012).
In the case where the taxpayer files a gift tax return by the due date, he/she is
entitled to a tax credit of 10% of the gift tax liability; if the taxpayer fails to file a gift
tax return and pay the taxes by the due date, a non-filing penalty of 20% of gift tax
liability and nonpayment (underpayment) penalty equivalent to 0.03% per day of
the unpaid (underpaid) taxes for the delinquent period will be imposed.
If the gift tax payable exceeds Won 10 million, it can be paid in 2 installments.
Interim corporate income tax return filing by September 2, 2013
A resident corporation (and a nonresident corporation having a permanent
establishment in Korea) is required to pay interim corporate taxes within 2 months
from the end of the first six months of each fiscal year. Interim corporate tax return
must also be filed along with the tax payment.
An interim corporate income tax return can be filed using either (i) the 1/2 method
(that is, paying 1/2 of the corporate tax paid in the prior year or (ii) the book-closing
method (by closing the books of accounts of the corporation for the first six month
period and calculate interim corporate tax amount based on such six-month financial
results). When a corporation had not paid the corporate income taxes in the prior
year due to tax loss or having no taxable income, only option (ii) above should be
applied. The calculation formula of interim corporate taxes by using the book closing
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July 2013
method is as follows:
Taxes payable = [taxable income for interim period Ⅹ12/6]Ⅹtax ratesⅩ6/12
- (tax exemption/withholding taxes paid/occasional assessment
taxes paid for interim period)
If interim corporate income taxes payable exceeds Won 10 million, such taxes can
be paid in 2 installments, the second installment payment due within 1 month (2
months in case of small and medium corporation) from the end of the payment
period.
Taxable income
Taxes in installment
Over Won 10 million and up to Won 20 million
Taxes payable in excess of Won 10 million
Over Won 20 million
*50% or less of taxes payable
Unlike annual corporate income tax return, there is no additional local income tax
assessed on interim corporate income tax liability.
*
*
*
*
*
Horwath Choongjung LLC
Member Crowe Horwath International
PMAA Jaram Building, 16th Floor, 566 Dohwa-dong,
Mapo-gu, Seoul 121-815, Korea
TEL: (82)(2) 316-6600 FAX: (82)(2) 775-5885 E-mail: post@crowehorwath.co.kr
Website: http://www.crowehorwath.co.kr
Horwath Choongjung LLC is a member of Crowe Horwath International, a Swiss association. Each member firm of Crowe Horwath International is a
separate and independent legal entity. Horwath Choongjung LLC and its affiliates are not responsible or liable for any acts or omissions of Crowe Horwath
International or any other member of Crowe Horwath International and specifically disclaim any and all responsibility or liability for acts or omissions of
Crowe Horwath International or any other Crowe Horwath International member.
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