A Quick Glance at the Requirements for Claiming Tax Benefits in Korea

A Quick Glance at the Requirements for Claiming Tax Benefits in Korea

Foreign companies that are beneficial owners of Korean-sourced income must now submit an application to
their withholding agents before they receive any income, in order to claim any tax treaty benefits. The new
application requirements, prescribed under the revised Corporate Income Tax Law (CITL), are applicable with
regard to tax withheld on or after July 1, 2012.

Korea - Claiming Tax Treaty Benefits - Key Highlights:

The beneficial owners of Korean-source income and those who want to claim a reduced tax treaty rate are
now required to submit an application form (to be defined in the presidential decree of the CITL) to the
withholding agent prior to the income is paid. In cases where the beneficial owners receive income (Korean-
Source income) via an offshore investment vehicle, the offshore entity must obtain the application form from
beneficial owners.

The offshore investment vehicle must also submit a report on the offshore investment vehicle with a
comprehensive schedule of beneficial owners. In situations where the withholding agent does not receive an
application form or the complete report from the offshore investment vehicle, or is unable to verify the
beneficial owner based on the information provided, it applies the Korean domestic withholding tax rate.

If the beneficial owner does not claim a reduced tax treaty rate at the time of withholding, it has three years
from the end of the month in which the tax was deducted, to claim a refund.

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Know More - internal audit compliance, doing business overseas

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