No. 93 Investment Attraction Is it possible to receive tax deduction for foreign investment pursuant to Art.121 of the Tax Treatment Control Act, and at the same time tax deduction for small-medium enterprises as stipulated in Art. 6?
Tax deduction of only one kind can received; thus, a decision has to be made about which deduction to receive.
No. 92 Investment Attraction A domestic company with one billion won capital and a capital increase of one billion won has issued new stocks of one billion won with 100% extra stocks to a foreign investor. Thus, the amount of foreign investment became 2 billion won.
When issuing new stocks, the amount of foreign investment is the total amount of initial capital and capital increase. However, the rate of foreign investment is calculated based on the rate of capital.
– In this case, the rate of foreign investment would be as follows: KRW1 billion /
(KRW1 billion + KRW1 billion) = 50%
<capital increase> <initial capital> <capital increase> <rate of FDI>
Furthermore, when speaking of tax deductions of 100% or 50%, this figure refers to the rate of foreign investment and not the amount of foreign investment. That is, the tax deductions are given 100% or 50% to the rate of foreign investment.
– In this case, if the foreign investment were eligible for 100% tax deduction, the amount
of deduction would be 100% of the 50% rate of FDI, which is a deduction of 50%.
No. 91 Investment Attraction How is the deduction of taxes for foreign-invested companies calculated?
The deduction of taxes is calculated as follows:
• Corporate tax and tax for profits made from dividends
– (Calculated tax amount x tax base (subject to deduction) / total tax base) x rate of
foreign investment x (deduction rate of 100% or 50%)
• Local tax
– Calculated tax x rate of foreign investment x (tax deduction rate of 100% or 50%)
• Customs, special excise tax, value-added tax
– The tax depends on the import of capital goods (with conditions);
– For high-technology sector and foreign investment zones, 100% deduction for
import within three years of the date of FDI notification;
– For other foreign-invested companies, only deduction for customs.
No. 90 Investment Attraction Is it possible to get a refund of acquisition and registration tax, if the company has received approval for tax deduction after acquiring the factory for high technology?
It is not possible to get a refund from the acquisition and registration tax of assets paid before the approval for tax deduction was given
No. 89 Investment Attraction When would be the starting day of business for a manufacturing company, which added a high-technology section to its business through capital increase?
The starting day of the business would be the day the company starts the production of the high-technology products after capital increase.
No. 88 Investment Attraction The first year since the start of a business eligible for tax deduction brought only interest from deposited money. Profit was made in the second year. So when would be the day of reckoning for tax deduction?
The interest of the first business year is not subject to tax deduction. Only the profits made in the second year will be eligible for tax deduction.
No. 87 Investment Attraction The period for tax deduction of corporate tax in foreign investment zones and for high technology will be changed from 100% for 7 years, 50% for 3 years to 100% for 5 years and 50% for 2 years in 2005. When is the change applied?
The shortened period of tax deductions will be applied after 2005 to the applications for tax deduction or exemption.
No. 86 Investment Attraction Which business areas are excluded from the three-fold registration tax if real estate is acquired in a metropolitan overpopulation control area?
The following business sectors are excluded from the registration tax pursuant to Art.101 of the Enforcement Decree of the Local Tax Act:
– Social overhead capital facilities, banking, housing construction, electricity and
communication, high-technology according to the Industrial Development Act,
distribution, freight terminal, storage, government-invested corporation, hospital,
recycling, software, theaters (including movie theaters), cable broadcast stations,
city-friendly factories, installment finance, restructuring companies.
No. 85 Investment Attraction If a company acquires a theater in a metropolitan district subject to overpopulation control, will local taxes be levied?
In general, if a company acquires real estate or establishes it’s headquarters or branch in a metropolitan area under overpopulation control, local taxes are levied. However, certain business sectors including theaters are not subject to registration tax.
Three-fold acquisition tax is levied on:
– new or additional establishment of factories (excluding industrial complex, FDI zones,
industrial zones);
– acquisition of real estate used for commercial purposes or as office by the
headquarters of the company.
Three-fold registration tax is levied on:
– new or additional establishment of factories (excluding industrial complex, FDI zones,
industrial zones);
– establishment and setup of corporations and branches, corporate registration or real
estate registration due to moving-in (excluding industrial complex);
– Exception: acquisition of real estate after 5 years since business establishment or
moving into the metropolitan area. In such cases, no registration tax is levied.
However, if the real estate was notified as new or additional factory facility of the foreign- invested company by Dec. 31, 2003 then the three-fold acquisition tax and registration tax will not be applied.
No. 84 Investment Attraction Only a part of the production line of automobiles is high technology. In this case, can tax deduction be applied to the sales profit of the automobiles?
Tax deduction can be applied only to the part that is eligible for tax deduction. Thus, separate income calculations are necessary.
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