Company Car Expense Deductions in Korea: Korean Tax Law Updates

Companies, in Korea, sometimes provide senior employees of the company a company car.  A tax issue arises concerning the deduction of car expenses and the refunding of VAT.  In practice “company cars” are, often, used for the company as well as private use.  Thus, Korea has excluded deduction of expenses and exclusion of VAT for some automobiles. Corporate Tax Law formalities require Korean companies and Foreign Capital-Invested Companies, in Korea, to have detailed operation records or sufficient evidence to claim deductions and exclusions.  The rules have tightened over the past few years and a proactive and detail-oriented accountant is necessary. For example, if the legal defined size of the company car is less than nine passengers: No VAT refunds are legally allowable (we have fund that some accountants in Korea are not even aware of this reality); Maintenance expenses are not deductible expenses; and Other expenses, including fuel are not

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Tax Liability of Controlling Shareholders in a Korean Company: Tax Law Updates

Under Article 39 of Korea’s Framework Act on National Taxes, unpaid taxes owed to the Korean government are enforceable against certain “ologopolistic” shareholders of respective debtor company’s shareholder.  This secondary liability of shareholders is codified within the Framework Act on National Taxation.  Article 39 of the Framework Act on National Taxes, specifically, notes that: “Where the property of a corporation is not enough to pay national taxes, additional dues and disposition fees for arrears imposed upon or to be paid by the corporation, any person who falls under any of the following as of the date on which the national tax liability is established shall have the secondary tax liability for the amount of such money shortage: Provided, That in case of an oligopolistic stockholder under subparagraph 2, his/her secondary tax liability shall be limited to the amount calculated by multiplying the amount obtained by dividing the amount of such

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Privity of Contract in Franchise Agreements in Korea: Korean Franchise Law Updates

Normally, in Korea, a contract/agreement cannot confer rights nor impose obligations upon a person who is no a party to the contract/agreement.  One interesting case, in franchise law, applied this principle to the benefit of the franchisor and the detriment to a supplier.  A Supplier delivered food through a Distributor to a Franchisee based on a franchisee requirement iterated in a franchise agreement with a franchisor.  The case brings to light, also, the potential liability of franchisors for acts of Korean franchisees.  The dispute occurred, of course, since the Supplier was not paid for an outstanding order, since the Franchisee was insolvent.  The Franchisor (deep pocket) was not insolvent and, thus, the only available option for collection was via the Franchisor.  One caveat is that the Franchisor was paid a commission by the Supplier/Distributor for sales to the Franchisee and as noted above, the Franchisee was mandated to use this specific Supplier.  Thus, the

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Expiration Versus Termination of a Distribution Agreement in Korea: Korean Distributor Basics

While Korean Law does not specifically detail the differences in treatment in law between the non-renewal (expiration) of a distribution agreement versus the termination, in reality, Korean courts are less likely to rule in favor of distributors in cases where a distribution agreement is not renewed.  Thus, typically, it is advisable to have a distribution agreement based on a specified term of years.  However, even with the expiration of the Korean Distribution Agreement, termination risks exist. In some cases, Korean courts have noted that termination and even non-renewal is a violation of Korean Law since the non-renewal or termination of the Korean distributor was not based on “good faith.”  In many cases, Korean courts have required a showing of “good cause” to terminate or even to not renew a relationship.  Contractual formalities and structural realities often assist in allowing a non-performing distributor from prevailing in court.  Thus, a nuanced and

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Future of Bitcoin in Korea according to FTC: Korean Cryptocurrency Updates

The head of the Korean Fair Trade Commission has noted to local vernaculars that he does not agree with Justice Minister Park Sang-ki’s comment that “cryptocurrency investment is gambling.”  He further noted that: “cryptocurrency recently emerged as an issue in Korea and other laws do not have the exact legal clauses that relate to closing exchanges.”  Thus, indicating, in part, that the Korean government doesn’t have the specific power to close the Korean cryptocurrency exchanges.  Of course, the FTC Chairman’s opinion does not have any legal binding effect, however, his opinions are widely respected by academics and legal practitioners. Many legal practitioners I have spoke to, in Korea, believe that the government shall not have the power, because of the number of traders in Alt Currencies to ban trading in Alt currencies.  This reality may lead to a settling of this issue via the imposing of capital gains tax on

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“Fair Use” Korean Copyright law

Dear Professor Hayes : I am in the process of completing a book on the modern history of the Republic of Korea. A good deal of my work cites news reports, published journals, and first hand reports mentioned in other books, Web sites and personal blogs. My book chronicles the modern developments from the eyes of foreigners who reside or resided in Korea. My publisher wants to confirm that Korea has a “fair use” doctrine, therefore, allowing me to cite the works of others.  Author in Rhode Island Dear Author: In general, the copyright holders, in Korea, may solely economically exploit a copyrighted work for the life of the author of the work plus 50 years. Korean Copyright Law provides that copyright infringers may be held liable in civil court and even punished in criminal court. In recent years, the Korean prosecution has been vigorous in prosecuting copyright infringers and

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Legality of an Employer Lockout in Korea: Korean Labor & Employment Law Basics

Korea, in the eyes of many domestic and foreign companies, has been lax in the enforcement of the rights of employers to run a business.  One noted cases that lead to a decision by the Supreme Court of Korea comes to mind.  Because of a labor strike at a major automobile parts manufacturer and the physical blocking of the use of replacement workers and employer machinery by the employees, the employer implemented a partial unpaid lockout of certain employees (employees were employed by a unit of the employer), thus disallowing certain workers to enter the workplace in order to prevent further disruption of the manufacturing process.  The employees physically blocked production and thus did not allow certain orders to be fulfilled by the employer, thus affecting the employer’s business. The case is a great case to demonstrate Korea’s Lockout Law. Following the lockout, the locked-out employees, on several occasions, expressed

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IPG’s Korean Employment & Labour Law Chapter in Global Legal Insights 2018

IPG is proud to announce the contribution of the Korean chapter to GLI’s 2018 Edition of Employment & Labour Law.  The publication contains chapters from 29 different countries.  The publication may be found at: Employment & Labor Law, Sixth Edition. Key Issues addressed are, among others,: -General Labour Market Conditions in Korea -Employment Policies under the Moon Administration -Litigation Trends in Korea -Definition of “Ordinary Wage” in Korea -Korean Supreme Court’s Regular Interval Bonus Case -Director as an Employee for Korean Employment Security Purposes -Korean Employee Lockouts -Layoffs and Dismissals Based on Fault of the Employees in Korea -Korean Restrictive Covenants Law -Trade Secrets Protection in Korea -Severance Payments in Korea -Childcare Leave in Korea -Maternity Leave in Korea -Paternity Leave in Korea -Annual Leave in Korea Please see the other articles below and via the Employment Law Tag. [ABTM id=1137] (c) Sean Hayes – SJ IPG. All Rights reserved.

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Part-time Worker Annual Paid Leave Obligations under the Korean Labor Standards Act

Employers, in Korea, are in most cases required to grant annual paid leave to full-time and even part-time workers working in Korea-based companies.  Exceptions to this Korean annual paid leave law exist for Korean workers that work, on average, less than 15 hours per week for these Korean-based companies. Article 18 of the Korean Labor Standards Act notes that: “(1) The terms and conditions of employment of part-time workers shall be determined on the basis of relative ration computed in comparison to those work hours of full-time workers engaged in the same kind of work at the pertinent workplace.” However, annual paid vacation leave and other articles/obligations under the Korean Labor Standards Act do not apply to “workers whose contractual work hours per week on an average of four weeks (in cases where their working periods are less then four weeks, then, based on such period of work) are less

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Korean National Tax Service Tax Law News Release to Foreign Corporate Taxpayers: Korean Tax Law Updates

The following Korean Tax Law News is a publicly released Korean tax notification that is intended for foreigner companies in Korea.  The notification was not translated or drafted by this law firm.  For any questions on this notification please Contact Us. Korean Tax Law News 【January 2018】 ☞ The following Korean tax information is translated from Korean for foreign-invested companies, and is not legally binding. ※ Year-end tax settlement by foreign workers in Korea □ With the increase in foreigners residing in Korea, the number of foreign workers in Korea has increased every year as well. ○ For the convenience of foreign workers‘ year-end tax settlement in Korea, here are a few tips on year-end tax settlement for foreign workers this year. □ If a foreigner has wage and salary income generated in Korea, he/she should perform year-end tax settlement just like domestic workers, regardless of his/her sojourn period and

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Korean Tax Law Amendment Press Release by Korean Government

The following is a Press Release by the Korean Government on recent Korean Tax Law enforcement decrees.  We shall update the reader when more is known.  The following press release was not proofread or translated by this firm.  The Press Release was published by the Ministry of Strategy & Finance in the English language and copied, in its entirety, below. Decree Focuses on Boosting Investment and Broadening Tax Base The government announced a revision to a total of 17 tax enforcement decrees, including ones to help create jobs, improve income and broaden the tax base.  Major revisions to the 2017 tax enforcement decrees are as follows. – Expand the angel investment tax incentives (30 to 100 percent income tax deduction):  Include crowdfunding investment in companies run for less than 7 years, or investment in companies run for less than 3 years if they are qualified by credit rating agencies –

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Korean Tax Risk of Foreign Corporation Deemed “Actual Business Management Locale” within Korea: Korea Tax Law Basics

Foreign corporations, doing business in Korea, may be deemed local corporations subject to taxation on worldwide income if the foreign-incorporated company is deemed a Korean “domestic corporation” for Korean tax purposes.  This liaison-office Korean Tax Risk can, thus, lead to taxes on worldwide income, a tax audit and even criminal sanctions against those operating in Korea.  We have dealt with matters were employees, even, received exit bans. Thus, in most cases the establishment of a local Korean corporation is essential in assisting in shielding your foreign corporation from tax and other liabilities unless substantial reasons exist to not establish a local Korean corporate entity. One of the most significant risks of foreign companies doing business in Korea without a local entity is being deemed a local corporation subject to tax on worldwide income.  A domestic corporation under the Corporate Tax Act of Korea is a company with its “actual business

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Abuse of Market Dominance in Korea: Competition Law in Korea

The Seoul Central District Court ruled earlier this year that Namyang Dairy Products Co. (“Namyang”) was in violation of the Monopoly Regulation and Fair Trade Act of Korea by abusing its market dominance and “unfairly taking advantage” of retailers. For more Antitrust/Competition Law articles please click on the labels noted Antitrust Law on the right. Namyang, a major Korean dairy company, was accused by retailers of, among other things, forcing retailers to purchase expired or soon to expire products and purchase unpopular products.  The Seoul Central District Court in 2014GaHab592238 ruled the company was in violation of Article 23 of the Monopoly Regulation and Fair Trade Act of Korea and awarded damages to the plaintiffs. Monopoly Regulation and Fair Trade Act of Korea Article 23(1), no. 4 prohibits a company or individual from: “Trading with a certain transacting partner by unfairly taking advantage of his/her position in trade.” The Court

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Guidelines on Rules of Employment & Guidelines on Fair Personnel Management Withdrawn by Korean Ministry of Employment

Inline with the labor union and employee-focused promises of the President Moon Administration, the Ministry of Employment & Labor has withdrawn the impeached President Park’s Guidelines on Rules of Employment & Guidelines on Fair Personnel Management to the regret of most of industry.  The withdraw of the Guidelines does not change the present state of Korean Labor & Employment Law. Ex-President Park’s Guidelines on Rules of Employment, inter alia, noted procedures to amend the rules of employment of a company even without the mandated consent of the employees and the Guidelines on Personnel Management noted a procedure and reasons to terminate poor performing employees.  The Guidelines, together, were a means, in part, to express an opinion and clarify issues, seemingly, with the purpose to to add more labor flexibility to a system that is perceived to be overly protective of employees.  Korea, in international surveys, is rated as have one

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Publicity Rights/Portrait Rights in Korea: Entertainment Law Basics in Korea

The Seoul Central District Court delivered, in mid 2016, a decision ruling that an individual’s publicity rights (portrait rights) were violated by a person sharing an image on a public social media site.  The violators were sharing the images for commercial purposes and shared the images without the publisher’s consent (Seoul Central District Court 2015GaDan5324874). FACTS Mr. A posted photos of himself on his Instagram Page.  Mr. B utilzed those photos on Naver’s Band without Mr. A’s consent. Band is a Korean social media site. C company, also, posted the photos on Facebook without Mr. A’s consent.  Thus, Mr. A’s photos were re-posted from Mr. A’s Instagram Page and posted on Naver’s Band by an individual and posted on Facebook by a company.  Seemingly, the purpose of the re-posting was to promote the pages and products of Mr. B and Company C.  The attorneys for Mr. B and Company C

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Starting a Company in Korea: Establishing a Foreign Capital-Invested Korean Company, Branch or Liaison Office

Korea, for many business, is an excellent market to enter.  We assist numerous franchisers, tech companies, chemical companies, oil & gas companies, automotive suppliers, defense companies and basic manufacturing companies on compliance and contentious issues related to their business in Korea.  We, also, assist entrepreneurial individuals in establishing and doing business in Korea. To establish a company in Korea, there are, in short, three legal manners for a foreign company or individual to do business in the Korean Market.  A business may enter as a Foreign Capital-Invested Company (Foreign Direct Investment Company)a Branch or Liaison Office.  In most situations, the most suitable manner to enter the Korean market is via the FDI Company route in order to avail of certain favorable tax treatments, not expose the foreign entity to liability, easier remittance of profits and easier processing of visas. However, many exceptions to this general rule do exist.  The basics

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Increased Scrutiny of Employers by Korean’s Ministry of Employment & Labor under President Moon’s Administration: HR Audit Needed by Korean Employment Lawyers

Many Korean Employment Lawyers are taking note of the recent initiative by Korea’s Ministry of Employment & Labor.  At the end of June of 2017, the Ministry announced an “Unfair Labor Practice Eradication Initiative.” This Initiative intends to investigate and punish perceived “unfair labor practices” of employers in Korea by having the Ministry of Employment & Labor conduct more audits of companies and provide punishment for those perceived to be in violation of Korea’ Labor Law.  It is time to do an internal audit of the labor practices of your company.  The audits completed by Labor Lawyers (not actually lawyers usually- usually NoMusa – licensed labor professionals) is, often, not adequate.  These individuals are unable to take cases to the court and, typically, do not have the nuanced necessary to adequately advise on more complex labor matters concerning strategy.  The “Unfair Labor Practice Eradication Initiative” shall: Increase the Frequency &

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English-speaking Korean lawyers and International Lawyers at International Law Firm in Korea discussing issues of Korean Law

IPG Legal is a leading client-focused international law firm with offices in Korea that is, often, selected over the ubiquitous Korean Law Firms when success is essential and success depends on nuanced street-smart advice, proactive  and unconflicted representation. Our attorneys are, intentionally. different from the crowd.  From our retired judge partners to our junior associates, we are all trained with an intense focus on client success, lawyer proactivity, and to understand the nexus between your commercial and legal needs. Our attorneys shall never push to you useless memos, non-nuanced legal advice or get you into litigation without an honest assessment of the merits and shortcomings of the matter. We are  – intentionally different from the crowd.  Globally Experienced – Locally Connected.  We are IPG.  Korean Legal Practices Korean Antitrust, Competition & FTC Arbitration, Int’l & Domestic Korean Civil Litigation Korean Criminal Defense Korean Corporate Law & Compliance Korean Employment, Labor &

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Korean Distributor Sales Territory or Customer Restrictions in Korea: Korean Distributor law Agreements in Korea

Korea’s Distribution Law is governed, primarily, by the Commercial Code of Korea, Monopoly Regulation and Fair Trade Law of Korea (FTL) and the, newly enacted, Fairness in Distributor Transactions Act of Korea.  These laws comprise a substantial body of law that is consistently evolving. The main regulatory body enforcing the FTL of Korea is the Fair Trade Commission of Korea (“FTC”).  The Fair Trade Laws of Korea, in most cases, creates the most significant risk for suppliers and manufacturers doing business with distributors in Korea.  A nuanced understand coupled with a proactive approach to your distributors is necessary in succeeding in the Korean market. Distribution Agreements in Korea General Rule In general, Korea prohibits the “unfair restriction” of trade based on the territory or type of customer. However, numerous exceptions exist to this general restriction.  I shall be detailing some of these exceptions over the next couple of months.  Please check

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English-Speaking Business Lawyers in Seoul, Korea: Corporate Law & Compliance Team at IPG Legal

Sean Hayes and English-Speaking Korean attorneys working for an international law firm in Korea author the Korean Law Blog.  Sean Hayes is the author of this blog.   Additionally, English-Speaking corporate attorneys and Korean-savvy business professionals contribute articles to the blog.  The blog is rated by the ABA one of the Top 100 Law Blogs. Leading rating services rate IPG Legal  as a leading law firms operating in Asia.  IPG serves mainly expat companies and individuals and, thus, has many English-speaking Korean lawyers with significant overseas corporate law experience. The Corporate Law and Compliance Team at IPG Legal Entry of a Fortune 500 e-commerce site into the Korean and Chinese markets.  Advisory Services related to FTC and Supplier Risks for a major e-commerce company in Korea. Consulted on licensing, joint venture and regulatory compliance issues for an American real estate developer’s shopping mall joint venture operating in Korea. Due Diligence, drafting of shareholder

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