9/02/2011

Korean Corporate Tax Changes Affecting Businesses in Korea

I hate taxes, as I assume you also do, but my M & A and other corporate clients in Korea may be hating Korean taxes just a little bit less after the recent changes in Korean Corporate Tax Law.

First, the Enforcement Decree of the Corporation Tax Act of Korea was amended this year to allow expanded preferential tax treatment in an acquisition of a Korean company.

Before the present amendment, a majority/controlling shareholder could avail of “preferential tax treatment” in Korea only if the shareholder in the Korean company retained the shares for at least three fiscal years.

The amendment provides an exception for instances when the shareholder is required to dispose of shares because of Korean legal prohibitions in owning the shares.

Additionally, the amended Enforcement Decree will allow foreign corporations operating in Korea to deduct the untaxed reserve income from taxable income.

The updated Korean Enforcement Decree of the Corporation Tax Act also allows the more convenient utilization of deductions for donations to charities in Korea.

Other articles that may be of interest on Korean Tax Law: