Promoting Economic Freedom

Korea Times October 23, 2009 by Sean C. Hayes (Host of this blog) Two roads diverged in Korean yellow woods. Will Korea remain on the road less traveled and maintain its cumbersome regulatory framework governed by an inefficient, illogically burdensome and self-interested bureaucracy or will Korea free itself from its autocratic regulatory regime and bureaucracy and choose the other road? In a country with a notorious Sybil-type personality, only the most arrogant of pontificators will take a stab at predicting the future of Korea. What is definitely known about it, however, is that most economists and business professionals nearly unanimously opine that we must free ourselves from autocratic, authoritarian and government-focused regulatory regimes in order for the people of nations to prosper. In short, we must respect and foster economic freedom. The leading indicator of economic freedom is the Index of Economic Freedom. The index was developed by the Wall

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Transfer Pricing Reform In Korea

A U.S. NASDAQ listed company requested information concerning a specific transfer price scheme, amongst other issues, in Korea. The company has recently decided to enter the Korean market after having successfully entered the Japanese and other Asian markets. For obvious reasons, I can’t answer the question here, but a brief description of recent amendments to the law may be of interest to those that have considered global transfer price issues. The transfer pricing rules underwent a major change a couple of the years back. In 2006, the Law for the Coordination of International Tax Affairs (LCITA) and a Presidential Enforcement Decree were amended. The Law and Decree were amended in order to codify the “substance over form” rule, encourage investment overseas by Korean companies, improve the application of the “arm’s length principle,” to discourage treaty shopping, and to clarify the numerous ambiguities that have developed, since the enactment of the

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Exemption From National Health Insurance Plan

Exemption From National Health Insurance Plan Appeared in the Korea Times on January 10, 2007 Dear Professor Hayes: I am an American working for a company in Korea. My company and I pay for a private insurance policy, but I also pay for the Korean National Insurance Plan. I found that last month premiums drastically increased and I think it is unfair for me to have to pay for two insurance plans when one of the plans I will never use. Can I and the many other foreign workers in this situation avoid paying for the two insurance plans by canceling the government plan? How can I do this? Paying Twice in Seoul. Dear Paying Twice: A revision to the enforcement decree of the National Health Insurance Law came into effect a few months ago. The revision allows for foreigners and Korean nationals that reside abroad to avoid paying into

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Restrictions on Foreigners Purchasing Property in Korea

Foreigner Purchasing Property in Korea is not longer restricted for most acquisitions.  An article on Korean Real Estate can be found at: Korean Real Estate Acquisition Taxes. Dear Sean Hayes: I was informed that there are limitations on foreigners purchasing property in Korea. I would like to purchase an apartment and was wondering what restrictions are on foreigners in purchasing property in Korea. What does a foreigner need to do to purchase property in Korea and is it true that foreigners need advance permission from the government to purchase property? Renter in Itaewon. Dear Renter: In 1998 Korea liberalized many of its laws concerning foreigners, including the Foreigners’ Land Acquisition Act. Many further liberalizations also occurred under the present administration. The changes in the treatment of foreigners were a direct reaction to the financial crisis that hit Korea and most of the rest of Asia. Many of the changes were

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76 Percent of Apartment Owners to Pay More Tax

Chosun Ilbo A Lesson in Survival From the Finance Minister The real estate tax burden this year will rise for 7.38 million households or 76 percent of the 9.7 million apartments, condominiums and villa complexes across the country. The 9.7 million will pay W85,000 (US$1=W945) in combined property tax per household on average this year, up about 12 percent (W9,000) from last year, the Ministry of Government Administration and Home Affairs said Thursday. The increase is small, the government explained, because property taxes for households worth less than W600 million in government-set value, which are not subject to combined real estate tax, are limited to a rise of no more than 10 percent. But as the government plans to raise real estate tax from the current 50 percent of publicly assessed value to 100 percent by 2017, the burden is also expected to rise for householders not subject to combined

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Rules to Change for Entertainment Spending

Chosun Ilbo Feb. 21, 2007The existing government regulation that requires a receipt for corporate entertainment spending exceeding 50,000 won will be tightened. Entertainment spending which will require a receipt will be lowered to 30,000 won in 2008 and 10,000 won in 2009. In response, businesses are expressing their anger against the government’s measure, saying it will increase the tax burden and add more work for them. They also argued that the government’s excessive intervention may lead to contraction of business activities. The government which held a Cabinet meeting on Tuesday at the Central Government Complex passed the revised corporate tax laws to tighten existing regulations on entertainment spending. At the moment, companies only have to submit receipts for entertainment expenses exceeding 50,000 won to the tax authorities to make them recognized as business expenses. Tax authorities treat entertainment expenses of 50,000 won or less as business expenses without requiring a

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