Setting up Running & Taxes (June 2012) (June,

Christie Sun-young LEE

US CPA, Executive Consultant Hana Tax Management Corporation

foreign@hanatax.net sun-y-lee@hanmail.net 010-9044-6459

Contents

1. 2. 3. 4. 4

Forms of business entity and setting up a company in Korea Value Added Tax Income Taxes (Corporation, Sole-Proprietor ship and employee) Q&A

1. Forms of business entity in Korea

1. Type of Business entity in Korea (1)
Type by Tax Law Type of Company Individual Individual Sole proprietorship Minimum Capital for registration Minimum Investment for FDI 100M KRW 100M KRW No limitation Corporation Corporation () Limited Co. () 10M KRW for Limited Co.

1. Forms of business entity in Korea

1. Type of Business entity in Korea (2)
Type by Tax Law Court registration Income tax rate Value Added Tax Individual N/A 6% ~ 38% Applicable Corporation Required 10% 20% 22% Applicable

1. Setting up a company in Korea

1. Process of establishing a business entity

Research and Business plan

Consider related regulation

Funding & Registration g

Operation Set up and p Launching

2. Value Added Tax

1. Definition A Value Added Tax is a form of consumption tax. From the perspective of the buyer, it is a t on the purchase F th ti f th b i tax th h price. From the perspective of the seller, it is a tax only on the value added to a product, material or service. In principle, VAT applies to all provisions of goods and services. However, there are some exceptions.

2. Value Added Tax

2. Zero Tax Rate ( ) Zero Tax rate shall apply t the supply of goods and services as Z T t h ll l to th l f d d i follows : Exporting g p g goods, Service supply to overseas , pp y - International navigation services by ships and aircrafts; and others

2. Value Added Tax

3. Tax Exemption ( ) Unprocessed f d stuffs (including agriculture, li U d food t ff (i l di i lt livestock, fi h t k fishery and forest products) Passenger transport services, Books, Medical and health g p , , services, Financing services. Manpower services which authors, composers, or other specialized persons as prescribed by Presidential Decree Decree.

2. Value Added Tax

4. Value Added Tax filing due dates
First quarter : (Jan1 to Mar31): April 25th is the due date to report Second quarter : (Apr1 to Jun30): July 25th is the due date to report q (Jul1 to Sep30): October 25th is the due date to report p ) p Third quarter : ( Forth quarter : (Oct1 toDec31): Next year January 25th is the due date to report 5. Sample of Korean Tax Invoice will be followed

Two column bullet points

Bullets go in here

And also in here

Contents

1. 2. 3. 4. 4 5.

How to establish a business entity in Korea Value Added Tax Income Taxes Other Tax Obligation Q&A

3. Income Tax
<Corporation income tax rate for year 2012>
Tax Base KRW 200 M or less KRW 200 M ~ 20 B or less Over KRW 20 B Tax rates (Progressive Tax Rate) 10% 20% of the amount over KRW 200 M 22% of the amount over KRW 20 B

I di id l income tax rate f year 2012 > <Individual i for

Tax Base KRW 12 M or less KRW 12 M ~ 46 M or l less KRW 46 M~ 88 M or less KRW 88 M ~ 300 M or less Over KRW 300 M Tax rates (Progressive Tax Rate) 6% 15% of th amount over KRW 12 M f the t 24% of the amount over KRW 46 M 35% of the amount over KRW 88 M 38% of the amount over KRW 300 M

3. Income Tax
<Corporation income tax rate for year 2012> Tax Base KRW 200 M or less KRW 200 M ~ 20 B or less Over KRW 20 B Tax rates (Progressive Tax Rate) 10% 20% of the amount over KRW 200 M 22% of the amount over KRW 20 B

(Example) When the tax base is KRW 70,000,000 payable tax is KRW 7,000,000 70,000,000 * 10% SUM (Total Payable Tax) y (Example) When the tax base is KRW 300,000,000 p y , , payable tax is KRW 40,000,000 , , 200,000,000 * 10% (300,000,000-200,000,000) * 20% SUM (Total Payable Tax) =20,000,000 =20,000,000 =40,000,000 =7,000,000 =7,000,000 , ,

3. Income Tax
<Individual income tax rate for year 2012 > Tax Base KRW 12 M or less KRW 12 M ~ 46 M or less KRW 46 M~ 88 M or less KRW 88 M ~ 300 M or less Over KRW 300 M Tax rates (Progressive Tax Rate) 6% 15% of the amount over KRW 12 M 24% of the amount over KRW 46 M 35% of the amount over KRW 88 M 38% of the amount over KRW 300 M

(Example) When the tax base is KRW 70,000,000 payable tax is KRW 11,580,000 12,000,000 * 6% (46,000,000-12,000,000) * 15% (70,000,000-46,000,000) (70 000 000 46 000 000) * 24% SUM (Total Payable Tax) =720,000 =5,100,000 =5,760,000 5 760 000 =11,580,000

3. Income Tax
2012 Simplified salary income tax table (http://www.nts.go.kr/cal/cal_06.asp)
Monthly salary (excluding non taxable income) 1,000,000 2,000,000 2 000 000 3,000,000 4,000,000 5,000,000 Monthly salary income tax (When there is no dependent) 2,410 22,540 22 540 107,450 235,650 374,400

If your salary is KRW 1,000,000 per month, Monthly salary income tax is KRW 2,410 and residence tax is KRW 240

3. Income Tax

* Special tax incentives for foreign workers on their wages and salaries receivable by December 31 2012 31,2012 Separate taxation on total income from employment by multiplying such income by a 15% flat rate

Tips

Check card credit card card, Korean Tax Invoice Tax card obtained from the tax office

 Q&A

 Thank you !