Samil Commentary February 2007
Korean Tax Law Changes 2007
Ⅰ. Lower Withholding Tax Rate on Bond Interest
The Korean withholding tax rate on interest earned by nonresidents or foreign corporations from investment in bonds or debentures will be lowered from 27.5% to 15.4% (including resident surtax). This change will benefit tax residents residing in foreign countries lacking income tax treaties with Korea, such as Hong Kong and Taiwan.
The lower tax rate will be applicable to income earned on or after January 1, 2007.
Nonresidents from a foreign country with which Korea has entered into an income tax treaty continue to be subject to a 0~16.5% withholding tax on such income according to the treaties.
Ⅱ. Request for Downward Adjustment of Income Tax Base or Tax Due by Nonresidents
Nonresidents and foreign corporations will be allowed to file a request for downward adjustment of withholding taxes on certain types of income if a duly-filed withholding tax receipt showed overstatement of tax base. The request must be made within three years from the due date for the payment of withholding tax.
This measure will become effective from the taxable year in which January 1, 2007 falls.
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