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Henry An |
Jin-Young Lee |
Revised tax treaty with Canada
Korea and Canada signed a revised tax treaty on September 5 2006, which is effective from December 18 2006. The former Korea-Canada tax treaty had been in effect since December 19 1980.
The main features of the new Korea-Canada tax treaty are:
A reduction in withholding taxes rates imposed on passive income.
A reduction on dividend income from 15% to 5% when share ownership is 25% or more. The 15% rate will continue to apply in other cases.
A royalty rate cut from 15% to 10%.
An income tax cut from 15% to 10%.
Gains on the sale of shares may be taxed in the country of source if 50% or more of the value of the shares is derived from immovable property located in the other country.
Treaty benefits will be denied if preferential tax treatment is provided to non-residents on income derived from a paper company.
New tax treaty with Albania
Korea and Albania signed a tax treaty on May 17 2006, which will come into force on January 13 2007. The applicable withholding tax rates on passive income are as follows: dividends – 5% to 10%, interest – 10%, and royalties – 10%.
On the horizon
Korea has tax treaties with 68 countries. Korea's Ministry of Finance and Economy (MOFE) has announced intentions to negotiate tax treaties with jurisdictions that Korea actively trades with but do not have tax treaties with Korea. These jurisdictions include: Qatar, Cayman Islands, Saudi Arabia, Cambodia, Azerbaijan, and Hong Kong. MOFE also plans to amend existing tax treaties several countries, including Belgium, India, the Netherlands and Ireland.
Henry An (henry.an@kr.pwc.com) and Jin-Young "David" Lee (david.jin-young.lee@kr.pwc.com), Seoul
