In general, taxes are paid in both countries. However, it is possible to receive a tax deduction for a considerable amount of the taxes paid in Korea. If the status of the foreign employee has changed to ‘non-resident’ in the home country and ‘resident’ of Korea, taxes only need to be paid only in Korea (however, this may differ depending on the home country).
According to the income tax law in Korea, there is no distinction between a Korean and foreign citizen when referring to ‘resident’ and ‘non-resident’. That is, no matter what nationality, a ‘resident’ is considered someone who has a permanent address registered in Korea or has resided in Korea for a term of longer than one year. 

As a rule, in tax law interest is accepted as cost, however, dividends are not accepted as cost. Accordingly, multinational companies establishing branch offices in foreign countries, have the tendency to use small amount of capital and large amount of debt in order to minimize the tax burden.
‘Small capital tax system’ means, if the loan from the dominating stockholder and loan from a third party with a payment guarantee is more than three-times (six-times for financial institutions) the amount of invested capital, then the interest or discount of the exceeding amount is usually not viewed as interest but as dividends. It is therefore not cost so that the foreign-invested company has to pay corporate tax.

There are no tax benefits for foreign investment made by means of acquiring existing stocks, but tax deduction is applied for foreign investment through capital increase.
If selling existing stocks, the seller has to pay the acquisition tax (corporate tax) and transaction tax for the transfer of shares. The acquirer does not have to pay any special taxes. One exception is for a corporation not listed on the stock exchange, where acquisition tax is levied for the possession of more than 51% of total stocks.

The normal price refers to the price applied to companies that have no special relationship to the trading company. There are several methods to calculate the normal price. The price is determined by selecting the most rational method:

Rational method means the method coming closest to reality such as considering economic conditions and other factors.  

In order to prevent international tax evasion of for example multinational companies, Korea has a system to protect its country’s tax rights. If a company has a special relationship with a company A and sells goods at a cheaper price or buys goods at a higher price (actual price) compared to other trading partners (arms-length price), the tax rate levied will correspond to the arms-length price and not the actual price. 

If the foreign investor transfers his shares to a Korean national or a Korean corporation, then surcharge is levied depending to the transfer rate.
If the foreign investor transfers his shares to another foreigner or foreign corporation, then no surcharge is levied, because the total amount of foreign investment does not change.
If the shares are transferred to another foreign-invested company in Korea, surcharge will be levied, since a foreign-invested company is considered a domestic corporation.

If the transaction is conducted through a security company, that company does the tax withholding. However, if the transaction is conducted without the involvement of a security company, the tax withholding is done by the person paying for the transfer of shares(transferee). This is also the case, even if the transferee is a non-resident or foreigner.

Profits from dividends from businesses eligible for tax deduction are subject to tax deduction. However, in case of capital decrease it is not subject to tax deduction since it goes against the purpose of attracting foreign capital.

– For reference, a certain price for the capital decrease has to be paid for capital
decrease. And if the price for the shares exceeds the acquisition price, the excess
amount is the fictitious dividend from capital decrease.

The withholding tax is selected from whichever is lower among the two tax rates.
What is the restrictive tax rate?

– The restrictive tax rate is a tax rate agreed upon through a tax agreement, which does
not permit the taxation above a certain maximum rate for investment profits such as
interest, dividend or fees.

According to relevant laws, if a company is operating both, two business sectors eligible as well as not eligible for tax deduction, then the accounting has to be done separately.