Witholdings Taxes on Transactions between Korean & Hong Kong Companies

The Republic of Korea and Hong Kong signed a double taxation treaty on July of 2014.  The treaty will come into force, if ratified, by the respective assemblies. 

Under Korea Tax Law, the, normal, withholding tax is 22%.  The main purpose of the treaty is to reduce this rate and, also, allow the governments to share information on potential tax evaders. 

This double taxation treaty, among other things, includes provisions for:

  1. A 15% Withholding Tax on dividends and a 10% Withholding Tax if the company receiving the funds owns a minimum 25% interest in the company remitting the dividends;
  2.  A 10% Withholding Tax on most interest and royalties;
  3.  A cooperation mechanism to share tax information in order to apprehend Korean tax evaders; and
  4.  Taxation on capital gains, only, in the country where the income was earned. 

Sean Hayes may be contacted at: SeanHayes@ipglegal.com.

Sean Hayes is co-chair of the Korea Practice Team at IPG Legal. He is the first non-Korean attorney to have worked for the Korean court system (Constitutional Court of Korea) and one of the first non-Koreans to be a regular member of a Korean law faculty. Sean is ranked, for Korea, as one of only two non-Korean lawyers as a Top Attorney by AsiaLaw.

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