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Laws of the Republic of Korea |
1
ENFORCEMENT DECREE OF THE INCOME TAX ACT
Wholly Amended by Presidential Decree No. 14467, Dec. 31, 1994 Amended by Presidential Decree No. 14682, Jun. 30, 1995 Presidential Decree No. 14721, Jul. 6, 1995
Presidential Decree No. 14860, Dec. 30, 1995
Presidential Decree No. 14988, Apr. 27, 1996
Presidential Decree No. 14999, May 3, 1996
Presidential Decree No. 15138, Aug. 22, 1996
Presidential Decree No. 15191, Dec. 31, 1996
Presidential Decree No. 15486, Sep. 30, 1997
Presidential Decree No. 15500, Oct. 25, 1997
Presidential Decree No. 15565, Dec. 31, 1997
Presidential Decree No. 15604, Dec. 31, 1997
Presidential Decree No. 15747, Apr. 1, 1998
Presidential Decree No. 15967, Dec. 31, 1998
Presidential Decree No. 15969, Dec. 31, 1998
Presidential Decree No. 16112, Feb. 8, 1999
Presidential Decree No. 16556, Sep. 18, 1999
Presidential Decree No. 16664, Dec. 31, 1999
Presidential Decree No. 16762, Mar. 28, 2000
Presidential Decree No. 16809, May 16, 2000
Presidential Decree No. 16988, Oct. 23, 2000
Presidential Decree No. 17032, Dec. 29, 2000
Presidential Decree No. 17115, Jan. 29, 2001
Presidential Decree No. 17158, Mar. 27, 2001
Presidential Decree No. 17296, Jul. 7, 2001
Presidential Decree No. 17339, Aug. 14, 2001
Presidential Decree No. 17456, Dec. 31, 2001
Presidential Decree No. 17555, Mar. 30, 2002
Presidential Decree No. 17751, Oct. 1, 2002
Presidential Decree No. 17825, Dec. 30, 2002
Presidential Decree No. 18044, Jun. 30, 2003
Presidential Decree No. 18048, Jul. 10, 2003
Presidential Decree No. 18073, Jul. 30, 2003
Presidential Decree No. 18127, Nov. 20, 2003
Presidential Decree No. 18146, Nov. 29, 2003
Presidential Decree No. 18173, Dec. 30, 2003
Presidential Decree No. 18297, Feb. 28, 2004
Presidential Decree No. 18312, Mar. 17, 2004
Presidential Decree No. 18401, May 25, 2004
Presidential Decree No. 18529, Aug. 30, 2004
Presidential Decree No. 18705, Feb. 19, 2005
Presidential Decree No. 18850, May 31, 2005
Presidential Decree No. 18903, Jun. 30, 2005
Presidential Decree No. 18988, Aug. 5, 2005
Presidential Decree No. 19010, Aug. 19, 2005
Presidential Decree No. 19254, Dec. 31, 2005
ENFORCEMENT DECREE OF THE INCOME TAX ACT
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Presidential Decree No. 19327, Feb. 9, 2006
Presidential Decree No. 19463, Apr. 28, 2006
Presidential Decree No. 19507, Jun. 12, 2006
Presidential Decree No. 19513, Jun. 12, 2006
Presidential Decree No. 19687, Sep. 22, 2006
Presidential Decree No. 19890, Feb. 28, 2007
Presidential Decree No. 20212, Aug. 6, 2007
Presidential Decree No. 20222, Aug. 17, 2007
Presidential Decree No. 20323, Oct. 15, 2007
Presidential Decree No. 20330, Oct. 17, 2007
Presidential Decree No. 20516, Dec. 31, 2007
Presidential Decree No. 20618, Feb. 22, 2008
Presidential Decree No. 20720, Feb. 29, 2008
Presidential Decree No. 20763, Apr. 3, 2008
Presidential Decree No. 20931, Jul. 24, 2008
Presidential Decree No. 21025, Sep. 22, 2008
CHAPTER GENERAL PROVISIONS
Article 1 (Definition)
Article 2 (Determination on Address and Domicile) Article 3 (Special Cases in Determination of Residents) Article 4 (Calculation of Period of Domicile)
Article 4-2 (Calculation of Amount of Income from Trust) Article 5 (Determination of and Report on Place of Tax Payment) Article 6 (Designation and Notice of Places of Tax Payment) Article 7 (Report on Change of Places of Tax Payment) Article 8 (Application Mutatis Mutandis to Authority) CHAPTER TAX LIABILITY FOR RESIDENTS GROSS INCOME AND RETIREMENT INCOME
SECTION 1 Non-Taxation, Tax Reduction and Exemption Article 8-2 (Non-Taxable Income from House Rental) Article 9 (Scope of Side Business Income of Farm Households) Article 9-2 (Scope of Income from Making of Traditional Liquors) Article 9-3 (Scope of Income from Non-taxable Timbering of Forest Trees, etc.) Article 10 (Scope of Soldiers on Active Service)
Article 11 (Scope of School Expenses)
Article 12 (Scope of Allowances for Compensation of Actual Expenses)
Article 13 Deleted.
Article 16 (Scope of Non-Taxable Salaries for Workers Abroad)
ENFORCEMENT DECREE OF THE INCOME TAX ACT
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Article 17 (Scope of Allowance for Night Duty, etc. Received by Workers in Manufacturing)
Article 17-2 (Scope of Non-Taxable Meal
Expenses, etc.)
Article 18 (Scope of Non-Taxable Miscellaneous Income)
Article 19 (Scope of Nonresidents Income from Navigation
Overseas)
SECTION 2 Tax Base and Calculation of Tax Amount
Article 20 (Scope of Daily Employed Workers)
Article 21 Deleted.
Article 24 (Marginal Profits of Sales under Condition of Repurchase)
Article 25 (Marginal Profits of Insurance in Nature of Savings)
Article 26 (Excess Refund of At-Work Mutual-Aid Association)
Article 26-2 (Method of Calculating Profits of Specific Money in Trust)
Article 26-3 (Scope of Dividend Income)
Article 27 (Evaluation of Stocks, etc. Received due to Capital Reduction, etc.)
Article 27-2 (Extent of Reorganization of Juristic
Persons)
Article 27-3 (Juristic Persons, etc. Exempted, etc. from Corporate Tax)
Article 28 (Scope of Real Estate Rental Income)
Article 29 (Scope of Business)
Article 30 (Scope of Crop Cultivating Businesses)
Article 31 (Scope of Manufacturing Businesses)
Article 32 (Scope of Housing Construction and Sales Business)
Article 33 (Scope of Enterprise Service Businesses)
Article 34 (Scope
of Purchase and Sale Business of Real Estate)
Article 35 (Scope of Educational Service Business)
Article 36 (Scope of Health and
Social Welfare Business)
Article 37 (Service Industries related to Entertainment, Culture and Sports and Other
Public, Repair and
Personal Service Industries)
Article 38 (Scope of Earned Income)
Article 39 (Employee Stock Ownership Association)
Article 40 (Petty Stockholders)
Article 40-2 Deleted.
Article 41 (Scope of Miscellaneous Income, etc.)
Article 42 (Individual Retirement Accounts, etc.)
Article 42-2 (Scope of Retirement Income)
SECTION 3 Date Receipt of Total Income
Article 45 (Date of Receipt of Interest)
Article 46 (Date of Receipt of Dividend Income)
Article 47 (Date of Receipt of Real Estate Rental Income)
Article 48 (Date of Receipt of Business Income)
Article 49 (Date of Receipt of Earned Income)
Article 50 (Date of Receipt of Miscellaneous Income, etc.)
ENFORCEMENT DECREE OF THE INCOME TAX ACT
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SECTION 4 Calculation of Income
Article 51 (Calculation of Amount of Gross Income)
Article 52 Deleted.
Article 60 (Calculation of National Subsidies for Acquisition of Fixed Assets as Necessary
Expenses)
Article 61 (Expenses Related to Household Affairs, etc.)
Article 62 (Calculation of Depreciation Costs as Necessary Expenses)
Article
63 (Useful Life and Depreciation Rate)
Article 63-2 (Special Example regarding Change of Useful Life)
Article 63-3 (Useful Life of Used Assets)
Article 64 (Report on Depreciation Methods)
Article 65 (Changes in Depreciation Methods)
Article 66 (Definition of Declining Balance Method and Straight Line Method)
Article 67 (Legal Fiction of Immediate Depreciation)
Article 68 (Legal Fiction of Depreciation)
Article 69 Deleted.
Article 71 (Residual Value)
Article 72 Deleted.
Article 75 (Calculation of Interest of Construction Fund)
Article 76 (Interest on Loan from Unknown Creditors)
Article 77 Deleted.
Article 78-2 (Order to Exclude Paid Interest from Necessary Expenses)
Article 79 (Scope of Donations)
Article 79-2 (Scope of Social Welfare Facilities, etc. for which Income Deduction is Applied
to Whole Donations)
Article 80 (Scope of Designated Donations)
Article 81 (Calculation of Donations and Entertainment Expenses, etc.)
Article 82 Deleted.
Article 84 (Calculation, etc. of Amount of Revenue)
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Article 85 (Calculation of Maximum Limit of Entertainment Expenses for Businessman
Having Two or More Places of Business)
Article 86 Deleted.
Article 90 Deleted.
Article 92 (Definitions of Method of Inventory Valuation)
Article 93 (Methods of Valuation of Securities Purchased for Trade or
Short-Term
Investment)
Article 94 (Report on Method of Valuation of Inventory Assets, etc.)
Article 95 (Valuation Method when Report on Valuation Method
of Inventory Assets,
etc. not Made)
Article 96 Deleted.
Article 100 (Cumulative Taxation for Joint Business, etc.)
Article 101 (Aggregation of Deficit and Deduction of Deficit Carried
Over)
Article 102 (Scope of Bonds, etc.)
Article 102-2 Deleted.
Article 103 Deleted.
Article 105 (Retirement Income Deduction)
Article 106 (Personal Deduction for Dependents, etc.)
Article 107 (Scope of Disabled Persons)
Article 108 (Deduction, etc. for Women)
Article 108-2 (Deduction for Pension Insurance Premiums)
Article 108-3 (Deduction of Interest Expenses for Mortgage-Backed Retirement
Pension)
Article 109 (Deduction of Premium Payments)
Article 109-2 (Insurance Premium Deductions for Disabled Only Security Insurance)
Article 110 (Deduction of Medical Expenses)
Article 110-2 Deleted.
Article 112-2 (Income Deduction, etc. of Donations)
Article 113 (Special Deductions)
Article 113-2 (Scope of Sincere Businessmen)
Article 114 (Scope of Those who Withdraw Temporarily)
ENFORCEMENT DECREE OF THE INCOME TAX ACT
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SECTION 5 Tax Rate and Deduction of Amount of Tax
Article 115 (Calculation of Amount of Tax for Retirement Income)
Article 116
Deleted.
Article 116-3 (Tax Credit for Bookkeeping)
Article 117 (Tax Credit for Payments in Foreign Country)
Article 118 (Tax Credit for Loss by Disasters)
Article 119 Deleted.
Article 126 Deleted.
Article 128 (Calculation of Gains Accruing from Sale of Land, etc.)
Article 129 (Determination, Revision and Notification of Gains
from Sale of Land, etc.
and Amount of Tax)
SECTION 8 Final Return on Tax Base and Voluntary Payment
Article 130 (Final Return on Tax Base of Gross Income)
Article 131 (Adjusted
Account Statement)
Article 132 (Account Statement of Amount of Income by Simple Bookkeeping)
Article 133 Deleted.
SECTION 9 Report and Verification on Current Status of Places of
Business
Article 141 (Report on Present Condition of Places of Business and Investigation and
Verification Thereon)
SECTION 10 Determination, Revision, Collection and Refund
Article 142 (Determination and Revision of Tax Base and Amount of Tax)
ENFORCEMENT DECREE OF THE INCOME TAX ACT
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Article 143 (Determination and Revision Based on Estimation)
Article 144 (Calculation of Amount of Income at Time of Estimation,
Determination
and Revision)
Article 145 (Standard and Simple Expense Rates)
Articles 146 and 146-2 Deleted.
Article 147-4 (Additional Tax against Insincere Registration of Joint Business Place)
Article 147-5 (Special Application Example
of Additional Tax in Case of Revision, etc.)
Article 148 (Occasional Assessment)
Article 149 (Notification of Amount of Tax and Tax Base)
Article 149-2 (Refund through Retroactive Deduction of Loss)
SECTION 11
Special Cases for Places of Joint Business
Article 150 (Special Cases for Joint Place of Business )
CHAPTER -2 LIABILITY TO PAY
TAX ON GROSS INCOME BY
CONSCIENTIOUS SMALL AND MEDIUM BUSINESSES
SECTION 1 Tax Base and Calculation of Amount of Tax
Article 150-2 (Application of Conscientious Tax Payment Method)
Article 150-3
(Request, etc. for Application of Conscientious Tax Payment Method)
Article 150-4 (Revocation of Approval of Application of Conscientious
Tax Payment
Method)
Article 150-5 (Conscientious Tax Payment Advisory Committee)
Article 150-6 (Special Cases concerning Calculation of Necessary Expenses
of Depreciation
Cost)
Article 150-7 (Special Cases concerning Inclusion of Reserve for Retirement Benefits
into Necessary Expense)
SECTION 2 Calculation of Amount of Tax
Article 150-8 (Deduction of Standard Amount of Tax)
Article 150-9 (Deduction of Amount of Tax for Increase in Amount of Income)
SECTION 3 Reports, Payments, etc.
Article 150-10 (Reports, Payments, etc.)
CHAPTER RESIDENT S LIABILITY TO PAY TAX FOR TRANSFER
INCOME
SECTION 1 Definition of Transfer
Article 151 (Cases Not Deemed Transfer)
Article 152 (Definition of Land Substitution)
ENFORCEMENT DECREE OF THE INCOME TAX ACT
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SECTION 2 Non-Taxation and Tax Reduction or Exemption for Transfer
Income
Article 153 (Non-taxation for Farmland)
Article 154 (Scope of One House for One Household)
Article 155 (Special Cases Concerning One House for One Household)
Article 155-2
(Special Cases concerning One House for One Household on House of
Long-Term Security)
Article 156 (Scope of Expensive House)
Article 156-2 (Special Case of One House for One Household in cases of Possessing
House and Association Member s Relocation Right)
SECTION 3 Calculation of Amount of Transfer Income
Article 157 (Scope of Major Stockholders)
Article 158 (Scope of Other Assets)
Article 159 (Calculation of Gains on Transfer of Onerous Donation)
Article 159-2 (Special Deduction for Long-term Possession)
Article
160 (Calculation of Gains, etc. on Transfer of Expensive House)
Article 161 Deleted.
Article 162-2 (Transfer Price)
Articles 162-3 through 162-5 Deleted.
Article 165 (Computation of Standard Market Price of Assets Other Than Lands and
Buildings)
Article 166 (Computation, etc. of Gains from Transfer)
Article 167 (Unfair Conduct and Calculation of Transfer Income)
Article
167-2 (Aggregating, etc. of Marginal Transfer Loss)
Article 167-3 (Scope of Housing Falling under Three or More Houses for One Household)
Article 167-4 (Scope of Houses Excluded from Three or More Houses or Relocation Rights
for One Household)
Article 167-5 (Scope of Houses Falling under Two Houses for One Household Whereon
Transfer Income Tax is Overtaxed)
Article 167-6 (Scope of Houses Excluded from Two Houses and Association Member s
Relocation Rights for One Household)
Article 167-7 (Scope of Stocks of Corporation Excessively Possessing Land for
Non-business Purposes)
Article 167-8 (Scope of Small or Medium Enterprise)
Article 168 (Scope, etc. of Assets Excluding Unregistered Transfer)
Article
168-2 (Scope of Houses Falling under Two or More Houses for One Household
Whose Tax Rate may be Adjusted)
Article 168-3 (Criteria, etc. for Designation of Designated Area)
ENFORCEMENT DECREE OF THE INCOME TAX ACT
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Article 168-4 (Organization and Operation of Committee for Deliberation of Real Estate
Price Stability)
Article 168-5 (Designation Procedures, etc. for Designated Areas)
Article 168-6 (Criteria for Period of Non-business Land)
Article
168-7 (Determination of Land Category)
Article 168-8 (Scope, etc. of Farmland)
Article 168-9 (Scope, etc. of Forest Land)
Article 168-10 (Scope, etc. of Pasturage Lands)
Article 168-11 (Scope of Other Lands Used for Business)
Article 168-12 (Scope of Land Annexed to House)
Article 168-13 (Scope of Villas and Criteria for Application)
Article 168-14 (Criteria for Determination of Land not Deemed as Non-business
Land
Having Inevitable Reasons)
SECTION 4 Preliminary Return on Tax Base of Transfer Income and Its
Voluntary Payment
Article 169 (Preliminary Return on Tax Base of Transfer Income)
Article 170 (Voluntary Payment by Preliminary Return)
Article 171
(Deduction of Amount of Tax for Preliminary Tax Return and Payment)
Article 172 Deleted.
Article 173 (Final Return on Tax Base of Transfer Income)
Article 174 (Procedure for Voluntary Payment of Final Tax Return)
Article
175 (Payment of Transfer Income Tax in Installments)
Article 175-2 (Payment of Transfer Income Tax in Kind)
SECTION 6 Decision
on and Revision of Transfer Income, and Collection
and Refund Thereof
Article 176 (Decision and Revision on Tax Base for Transfer Income and Amount of
Tax)
Article 176-2 (Estimated Decision and Revision)
Article 177 (Notification of Tax Base and Amount of Tax for Transfer Income)
Article 177-2 (Inquiry on Particulars, etc. of Stock
Transactions)
Article 178 Deleted.
SECTION 1 Common Provisions concerning Calculation of Amount of
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Tax for Nonresident
Article 179 (Scope of Domestic Source Income of Nonresident)
Article 180 (Scope of Agent, etc. of Nonresident)
SECTION 2 Aggregate
Taxation on Nonresidents
Article 181 (Calculation of Tax Base and Amount of Tax in Aggregate Taxation)
Article 181-2 (Expense Distribution by Main Office,
etc.)
Article 182 (Report and Payment by Nonresident)
Article 183 (Calculation of Tax Base and Amount of Tax in Case of Separate Taxation
on Nonresident)
Article 183-2 (Concept, etc. of Normal Price)
Article 183-3 (Filing of Data concerning OTC Trading of Securities by Nonresidents)
Article 183-4 (Special Examples to Return and
Payment by Nonresidents on Income
from Transfer of Securities)
CHAPTER WITHHOLDING TAX
SECTION 1 Withholding Tax
Article 184 (Scope of Business Income Subject to Withholding Tax)
Article 184-2 (Income from Service Fees)
Article 185 (Payment of Amount of Tax Withheld)
Article 186 (Special Cases in Payment of Taxes Withheld)
Article 187 (Scope of Long-term Bonds)
Article 188 (Real Name for Interest or Dividend Income)
Article 189 (Simplified Tax Table)
Article 190 (Deemed Payment Date of Interest Income)
Article 191 (Deemed Payment Date of Dividend Income)
Article 192 (Deemed Payment
Date of Dividend Income, Bonus and Miscellaneous Income
Obtained by Disposal of Income)
Article 193 (Delivery of Receipt for Tax Withholding)
Article 194 (Application of Simplified Earned Income Tax Table)
Article 195
(Tax Withholding on Bonuses, etc.)
Article 196 (Year-End Settlement of Amount of Tax for Earned Income)
Article 197 (Year-End Settlement of Amount of Tax for Earned
Income of Reemployed
Person)
Article 198 (Report on Income Deduction by Earned Income Earner)
Article 199 (Report on Place of Work with Two or More Places of
Work and Year-End
Settlement)
Article 200 (Delivery of Receipt for Tax Withholding for Employment Income, etc.)
Article 201 (Refund of Earned Income at Year-End
Settlement)
Article 201-2 (Year-End Settlement of Business Income Tax)
Article 201-3 (Calculation of Amount of Income of Business
Income Subject to Year-End
Settlement)
Article 201-4 (Report, etc. on Income Deduction for Business Income Subject to Year-End
Settlement)
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Article 201-5 (Application of Simplified Annuity Income Tax Table)
Article 201-6 (Year-end Settlement for Amount of Annuity Income
Tax)
Article 201-7 (Report on Income Deduction by Annuity Income Earner)
Article 201-8 (Issuance of Receipts for Tax Withholding
for Annuity Income)
Article 201-9 (Tax Withholding at Time of Delayed Payment)
Article 201-10 (Supply of Data on Income Deduction
for Calculation of Annuity Amount
of Income, etc.)
Article 202 (Miscellaneous Amount of Income Subject to Tax Withholding)
Article 203 (Settlement of Amount of Tax on Retirement Income)
SECTION 2 Special Cases of Tax Withholding by Tax Association
Article 204 (Organization and Operation of Tax Association)
Article
205 (Payment of Amount of Tax Collected by Tax Associations)
Article 206 (Tax Management of Tax Association)
SECTION 3 Special Cases of Tax Withholding
Article 207 (Payment of Withheld Taxes on Nonresident)
Article 207-2 (Application for Non-Taxation, etc. When Subjected to Non-Taxation,
etc.
from among Nonresident s Domestic Source Income)
Article 207-3 (Special Cases in Tax Withholding concerning Interest, etc. Accrued on
Bonds, etc. of Nonresidents)
Article 207-4 (Procedure of Prior Approval for Applying Non-Taxation, Exemption and
Limited Tax Rate under Tax Treaty)
Article 207-5 (Procedure of Correctional Claim for Applying Non-Taxation, Exemption
and Limited Tax Rate under Tax Treaty)
Article 207-6 (Additional Tax on Unconscientious Payment of Withholding)
Article 207-7 (Payment of Amount of Tax Withheld Related
to Supply of Service by
Nonresident Entertainers, etc. and Procedures of Refund thereof)
CHAPTER SUPPLEMENTARY PROVISIONS
Article 208 (Preparation and Recording of Books)
Article 208-2 (Reception and Preservation of Evidence of Expenditures, etc.)
Article 208-3 (Obligation to Prepare and Keep Detailed
Statement of Issuing Receipt
of Donations)
Article 208-4 (Obligation to Prepare and Keep Details of Issuing Certificates of Financial
Institutes)
Article 208-5 (Opening of Banking Account for Business Purpose, etc.)
Article 209 (Calculation, etc. of Common Profit and Loss)
Article 210 (Installment and Use of Cash Register)
Article 210-2 (Admission to Membership of Credit Card Merchant, etc.)
Article
210-3 (Admission to Membership of Cash Receipt Merchant, etc.)
Article 211 (Preparation and Delivery of Account Statement)
Article
212 (Submission of Aggregate Table of Account Statements by Seller or Purchaser)
Article 212-2 (Account Statement for Import)
Article 212-3 (Submission of Table of Sum of Tax Invoices by Seller)
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Article 213 (Submission of Detailed Statement of Payment)
Article 213-2 (Submission through Cash Receipt Issuing Device, etc.)
Article 214 (Exemption, etc. from Submission of Detailed Statement of Payment)
Article 215 (Special Cases in Submission of Detailed
Statement of Payment)
Article 216 (Extension of Deadline for Submission of Detailed Statement of Payment)
Article 216-2 (Special
Cases of Duty to Submit Detailed Statement of Payment of
Nonresidents Domestic Source Income, etc.)
Article 216-3 (Submission and Administrative Guidance of Documentary Evidence of
Income Deduction)
Article 217 (Preparation and Keeping of Books for Tax Withholding for Interest and
Dividend)
Article 218 (Utilization and Furnishing of Computerized Information Data on Resident
Registration)
Article 219 (Submission of Certified Copy of Foreigner s Registration Card)
Article 220 (Assignment of Inherent Code Number)
Article 221 (Payment of Subsidies)
Article 222 (Question and Inspection)
Article 223 (Inspection of Annuity Income Documents, etc.)
Article 224 (Scope of Service Providers and Places of Business Providers,
etc.)
Article 225 (Submission of Materials concerning Payment of Non-life Insurance Money)
Article 226 (Sample Survey)
CHAPTER GENERAL PROVISIONS
Article 1 (Definition)
The definitions of terms used in this Decree shall be those determined
by the Income Tax Act (hereinafter referred to as the "Act").
Article 2 (Determination on Address and Domicile)
(1) The address under Article 1 of the Act shall be determined by the objective
facts of living relationship, such as the existence of a family living together
in Korea and of the property located in Korea.
(2) The term "domicile" in Article 1 of the Act means the place where
a person has lived for a long time besides his/her address,
and in which
there is no general living relationship as close as an address.
(3) Where a person who lives in Korea falls under
any of the following
subparagraphs, he/she shall be deemed to have his/her address in Korea:
1. When a person has an occupation which requires him/her to continually
reside in Korea for one year or longer; and
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2. When a person has family members living with him/her in Korea,
and is deemed to continually reside in Korea for one year or longer
in view of his/her occupation or property status.
(4) Where a person living or working overseas falls under any of the following
subparagraphs, he/she shall be deemed to have no address in Korea:
1. When a person has an occupation which usually requires him/her to
continually reside abroad for one year or longer; and
2. When a person with a foreign nationality or denizenship under foreign
laws, who has no family living together with him/her in
Korea, and
is not deemed to return home again to reside mainly in Korea in view
of his/her occupation or property status.
(5) In cases of a crew member of a vessel or aircraft serving an overseas
route, if the domicile of his/her family living together
with the relevant crew
member, or his/her usual domicile in the period other than duty hours,
is located in Korea, the address
of relevant crew member shall be deemed
to be in Korea; and when such place is located overseas, the address of
the relevant crew
member shall be deemed located overseas.
Article 3 (Special Cases in Determination of Residents)
Public officials or residents
working overseas, or executives or employees
dispatched to places of business abroad, etc. of a domestic corporation
shall be deemed
as residents, notwithstanding the provisions of Article
2 (4) 1.
Article 4 (Calculation of Period of Domicile)
(1) Period of domicile in Korea shall be from the date after the date of
a person's arrival in Korea to the date of his/her departure.
(2) In cases where a person having residence in Korea returns home again
after his/her departure from Korea, and where the purpose
of his/her
departure is deemed apparently temporary in view of the domicile of
family living together with him/her and the location
of his/her property,
the relevant period of his/her absence shall be deemed as the period of
domicile in Korea.
(3) In cases where the period of domicile in Korea is one year or more over
two taxable periods, it shall be deemed as having a
domicile in Korea for
one year or more.
Article 4-2 (Calculation of Amount of Income from Trust)
ENFORCEMENT DECREE OF THE INCOME TAX ACT
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(1) When calculating the amount of income each year, persons who operate
trust business shall account for income belonging to trust
assets separately
from miscellaneous income.
(2) Whether a beneficiary is specified or exists under Article 2 (6) of the
Act shall be governed by the conditions at the time
when income or
expenditure related to trust assets have been incurred.
[This Article Newly Inserted by Presidential Decree No.
20618, Feb. 22, 2008]
Article 5 (Determination of and Report on Place of Tax Payment)
(1) The determination of the place of tax
payment pursuant to Article
6 (3) of the Act shall, if the place of tax payment is indistinct, be governed
by any of the following
subparagraphs: 1. When a person has two or more addresses, the place registered under
the Citizen Registration Act shall be the place of tax payment,
and
when a person has two or more domiciles, the place in which his/her
living relationship is the closest shall be the place of
tax payment;
2. In cases where a nonresident has two or more places of business and
where it is difficult to determine his/her principal place
of business,
the place reported by the relevant nonresident as a place of tax payment
pursuant to paragraph (5) shall be the place
of his/her tax payment;
3. In cases where a nonresident having no domestic place of business earns
income from domestic sources under subparagraph 3 or 9
of Article
119 of the Act from two or more domestic places, the place reported
by such nonresident as a place of tax payment pursuant
to paragraph
(5) from among the places from which such income from domestic sources
is generated shall be the place of his/her
tax payment; and
4. In cases where a nonresident fails to file any report under subparagraph
2 or 3, the place designated by the Commissioner of the
National Tax
Service or the commissioner of the competent regional tax office in
consideration of the status of income and the
propriety of tax
management, shall be the place of tax payment.
(2) The Commissioner of the National Tax Service or the superintendent
of the competent tax office shall, where he/she has designated
the place
of tax payment under paragraph (1) 4, notify a taxpayer in writing before
the final return on the tax base of relevant
taxable period or before the
commencement date of the period for tax payment (in cases where any
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TAX ACT
15
of the causes for an interim prepayment or an occasional imposition occur,
within 15 days before the commencement date of such period
for tax
payment).
(3) The term "cases prescribed by Presidential Decree" in the proviso to
Article 7 (1) 4 of the Act means cases falling under any
of the following
subparagraphs:
1. Where the location of the head office or principal office has been approved
by the Commissioner of the National Tax Service as
the place to pay
income tax withheld that has been hitherto paid at the branch offices,
business offices and other places of work
of the corporation concerned.
In such cases, the Commissioner of the National Tax Service may approve
the place to pay the amount
of income tax withheld by income; or
2. Where approval is granted by the superintendent of the competent
tax office as a business to file as a single taxable unit pursuant
to
Article 4 (3) of the Value-Added Tax Act.
(4) The term "places prescribed by Presidential Decree" in Article 7 (1) 5
of the Act means the following places: 1. Locations of business of a domestic corporation or foreign corporation
which has issued securities provided for in each subparagraph
concerned,
in cases where income falling under any of subparagraphs of Article
179 (10) exists; and
2. Places designated by the Commissioner of the National Tax Service,
in cases other than those indicated in subparagraph 1.
(5)
A person who intends to report the place of tax payment under Article
8 (1) and (2) of the Act shall submit a written report on
the place of tax
payment determined by Ordinance of the Ministry of Strategy and Finance
(including submitting it by means of the
national tax information and
communications networks) to the superintendent of the competent tax
office.
16
under Article 3, shall be the principal place of his/her family's living or
the location of any agency to which he/she belongs.
Article 6 (Designation and Notice of Places of Tax Payment)
(1) Any person who intends to apply for the designation of the place
of
tax payment under Article 9 (1) 1 of the Act shall submit a written application
for the designation of the place of tax payment
determined by Ordinance
of the Ministry of Strategy and Finance (including submitting it by means
of national tax information and
communications networks) to the
superintendent of the competent tax office of the place of business from
October 1 to December
31 of the year concerned.
(2) The commissioner of the competent regional tax office (the Commissioner
of the National Tax Service, in cases where the commissioner
of the
competent regional tax office to be newly designated is different from
the commissioner of the competent regional tax office
of the former place
of tax payment) shall, upon receipt of an application for designation of
the place of tax payment stipulated
under paragraph (1), designate the
place of business as the place of tax payment, except in cases as determined
by Ordinance of
the Ministry of Strategy and Finance, and shall notify in
writing as to whether the designation is granted to the applicant, by
not
later than the end of February of the following year.
(4) When the said notification has not been made within the period
designated under paragraph (2), the place of tax payment for
which
designation applied for shall be the place of tax payment.
Article 7 (Report on Change of Places of Tax Payment)
ENFORCEMENT DECREE OF THE INCOME TAX ACT
17
(1) A person who intends to change the place of tax payment under Article
10 of the Act shall submit a written report on change
of the place of tax
payment, as prescribed by Ordinance of the Ministry of Strategy and Finance
(including submitting it by means
of the national tax information and
communications networks) to the superintendent of the competent tax
office of such changed
place of tax payment.
(2) When a person revises the business registration under Article 11 of
the Enforcement Decree of the Value-Added Tax Act as the
taxpayer's
address has been changed, he/she shall be deemed to have made the
report on the change of the place of tax payment under
paragraph (1).
CHAPTER TAX LIABILITY FOR RESIDENTS'
GROSS INCOME AND
RETIREMENT INCOME
SECTION 1 Non-Taxation, Tax Reduction and Exemption
Article 8-2 (Non-Taxable Income from House Rental)
(1) The term "rental income
from a house prescribed by Presidential
Decree" in subparagraph 2 of Article 12 of the Act means income from
the rental of a house
(excluding income from the renting of an expensive
house) of a person who owns only one house: Provided, That income
from the rental
of a house located outside Korea shall be taxable regardless
of the number of houses.
(2) In the application of the provisions of paragraph (1), the number of
houses shall be counted based on the following subparagraphs:
by Presidential Decree No. 17032, Dec. 29, 2000>
1. A tenement house shall be deemed one house, and in cases of subdivided
registration, each one shall be counted as one house;
2. A jointly-owned house shall be counted as owned by the holder of the
largest share, and if there are two or more holders of the
largest share,
it shall be counted as owned by each such owner respectively: Provided,
That where there are two or more holders
of the largest share, and if
they agree that one of them is to be the person to whom the income
from rent of the relevant house
reverts, it shall be counted as owned
by such person;
3. In cases of a subletting or a subletting on deposit basis of the houses
that are rented or rented on deposit basis, the relevant
house rented
or rented on deposit basis shall be deemed the house of a tenant or
a tenant on deposit basis; and
4. Where a principal and spouse each own houses, the total number
of houses owned by them.
(3) The term "expensive house" in paragraph (1) means a house, the
standard market price of which, under Article 99 of the Act,
exceeds 600
million won as of the end of taxable period or the transfer date of relevant
house.
[This Article Newly Inserted by Presidential Decree No. 16664, Dec. 31, 1999]
Article 9 (Scope of Side Business Income of Farm Households)
(1) The term "income from any side business of a farm household prescribed
by Presidential Decree" in subparagraph 3 of Article
12 of the Act means
income falling under any of the following subparagraphs from among income
from stock breeding, fish farming,
straw goods manufacturing, private house
lodging, sale of foods, speciality manufacturing, traditional tea
manufacturing, or other
similar activities: 1. Income from stock breeding as a side business size of a farm household
in the attached Table 1; and
ENFORCEMENT DECREE OF THE INCOME TAX ACT
19
2. Income other than that in subparagraph 1, the total amount of which
is less than 12 million won a year.
(2) The term "private house lodging" in the main body of paragraph
(1) means private lodging business in agricultural and fishing
villages under
the Rearrangement of Agricultural and Fishing Villages Act.
(5) In applying the provisions of paragraph (1), matters necessary for
the calculation of income from side business of a farm household
shall
be prescribed by Ordinance of the Ministry of Strategy and Finance.
Article 9-2 (Scope of Income from Making of Traditional Liquors)
The term "income from making traditional liquors prescribed by
Presidential
Decree" in subparagraph 3-2 of Article 12 of the Act means income from
making liquors falling under any of the following
subparagraphs in
Eup/Myeon areas other than the Seoul Metropolitan area under the Seoul
Metropolitan Area Readjustment Planning
Act, and where the total amount
of income is not more than 12 million won per year: 1. Liquors falling under Article 9 (2) 2 (b) through (d) of the Enforcement
Decree of the Liquor Tax Act;
2. Liquors undergone procedures referred to by Ordinance of the Ministry
of Strategy and Finance on recommendation by the Minister
of Land,
Transport and Maritime Affairs for promotion of tourism (limited to
ENFORCEMENT DECREE OF THE INCOME TAX ACT
20
those recommended before June 30, 1991); and
3. Liquors for which a license is granted by the Governor of Jeju-do in
consultation with the Commissioner of the National Tax Service
pursuant to the previous Special Act on Jeju-do Development (limited
to those licensed before February 5, 1999).
[This Article Newly Inserted by Presidential Decree No. 18173, Dec. 30, 2003]
Article 9-3 (Scope of Income from Non-taxable Timbering
of Forest Trees,
etc.)
(1) The afforestation period for the purpose of applying subparagraph 3-3
of Article 12 of the Act shall be calculated in any of
the following manners:
1. As regards forest trees planted voluntarily by a person, the period
from the day on which planting is completed to the day on
which they
are cut down or transferred to a third party;
2. As regards forest trees planted by contract, the period from the day
on which possession of such trees is delivered to the day
on which they
are cut down or transferred;
3. As regards forest trees planted by any other person and purchased
subsequently, the period from the day on which such trees are
purchased
to the day on which they are cut down or transferred;
4. As regards forest trees conveyed as a gift, the period from the day
on which such trees are conveyed as a gift to the day on which
they
are cut down or transferred;
5. As regards forest trees inherited, the period from the commencement
date of their afforestation period by the predecessor under
subparagraphs 1 through 4 to the day on which an heir cuts down
or transfers them; and
6. In cases where a right under a forestation contract for profit sharing
(referring to a contract to which the owner of a parcel
of mountainous
land, a person responsible for costs and expenses, and a person responsible
for afforestation become parties to
the contract to agree that they shall
plant trees and income from forest trees planted and cut down or transferred
subsequently
shall be distributed to them at an agreed ratio; hereafter
the same shall apply in this Article and Article 51 (9)) is acquired,
the period from the day on which such right is acquired to the day
on which such right is transferred.
(2) The term "business income from the cutting down or transfer of trees
growing on forest land, not exceeding six million won in
each year" in
ENFORCEMENT DECREE OF THE INCOME TAX ACT
21
subparagraph 3-3 of Article 12 of the Act means the amount of income
calculated in accordance with Articles 51 (8) and (9) and 55,
which shall
not exceed six million won in each year.
(3) In determining the day on which planting is completed or the possession
of trees is delivered in cases of paragraph (1) 1 or
2, the unit of stands
(referring to the group of trees, which serves as a unit for forest management
enabling to discern a specific
forest with an identical forest floor from its
surroundings) of a forest as planted shall apply.
[This Article Newly Inserted by
Presidential Decree No. 19890, Feb. 28, 2007]
Article 10 (Scope of Soldiers on Active Service)
The term "soldiers on active service, prescribed by Presidential Decree"
in subparagraph 4 (a) of Article 12 of the Act means soldiers
on active
service with a rank below sergeant (including short-term deputy officers),
riot policemen, guards or warders of correctional
institutions, or others
equivalent thereto, who have been drafted or called up, or have volunteered,
to fulfill their military
service obligation.
Article 11 (Scope of School Expenses)
The term "school expenses determined by Presidential Decree" in
subparagraph 4 (g) of Article 12 of the Act means school expenses
satisfying
the following requisites (limited to the amount to be paid in the relevant
school year), from among entrance fees, tuition
and lecture fees and other
public imposts for schools under the Elementary and Secondary Education
Act and the Higher Education
Act (including similar educational institutions
in foreign countries) and for vocational training institutions under the
Act on
the Development of Occupational Abilities of Workers: 1. Expenses paid to relevant workers for education or training related
to the business of enterprises in which they are engaged;
2. Expenses paid to relevant workers pursuant to payment criteria stipulated
by the regulations, etc. of enterprises in which they
are engaged; and
3. Expenses paid to relevant workers on condition that they return the
amount paid to them, unless they work for the period exceeding
the
relevant period of education after completing such education or training,
if such education or training period is six months
or longer.
ENFORCEMENT DECREE OF THE INCOME TAX ACT
22
Article 12 (Scope of Allowances for Compensation of Actual Expenses)
The term "allowances for the compensation of actual expenses,
which are
determined by Presidential Decree" in subparagraph 4 (h) of Article 12
of the Act means those falling under the following
subparagraphs:
1. Allowances paid to unpaid members of committees under Acts and
subordinate statutes, or Municipal Ordinances (including members
of the Academy of Sciences and the Academy of Arts);
2. Food expenses received under the Seafarers Act;
3. Amount of such level as to compensate actual expenses, such as pay
for day duty, night watch, or business travel (including amounts
not exceeding 200 thousand won per month from among the incurred
expenses received by an employee pursuant to payment criteria
stipulated by the regulations, etc. of relevant enterprises, in lieu of
receiving reimbursement of the actual travel expenses incurred
during
a business trip within the city using his/her own car to perform his/her
duties);
4. Clothing, caps or shoes provided as uniforms to employees who shall
wear uniforms under Acts and subordinate statutes, or Municipal
Ordinances;
5. through 7. Deleted; 8. Work clothes or clothing worn only in the relevant place of work, which
are received by employees who work in a hospital, laboratory,
financial
institution, factory or mine, or who engage in special jobs or services;
9. Risk premiums paid to soldiers serving in such special fields as parachute
jumping, underwater destruction, diving, high voltage,
explosives
handling, flight, service in the DMZ, service at the front line sentry
post, service on warships or in landing tracked
vehicles, police special
tactical service allowances paid to police officers serving in special fields,
and security service allowances
paid to security service public officials;
10. Embarkation allowance of 200 thousand won or less per month provided
to seamen under the Seafarers Act, who are stipulated by
Ordinance
ENFORCEMENT DECREE OF THE INCOME TAX ACT
23
of the Ministry of Strategy and Finance (excluding persons to whom
the provisions of Articles 16 and 17 apply), and the allowance
for service
on warships and flight allowance provided to police officials, and
allowance for service on warships, flight allowance
and fire fighting
allowance provided to officials of fire departments;
11. Allowances for entering a mining tunnel and for blasting, received by
workers in a mine;
12. Amount not exceeding 200 thousand won out of subsidies for research
or research activity expenses provided to a person who falls
under
any of the following items:
(a) Teaching staff of a school under the Early Childhood Education
Act, the Elementary and Secondary Education Act, or the Higher
Education Act or a school equivalent thereto (including an
educational institution under a special Act);
(b) A person directly engaging in, or providing direct support for research
activities (limited to a person holding qualifications
equivalent to
that of teaching staff of universities and colleges) in a research institute
governed by the Support of Specific
Research Institutes Act, a
government-funded research institute established pursuant to a
special Act, or a local-government-funded
research institute
established pursuant to the Act on the Establishment and Operation
of Local Government-Invested Research Institutes,
and is specified
by Ordinance of the Ministry of Strategy and Finance; and
(c) A person who directly engages in researching activities
in a research
institute attached to a small or medium enterprise or a venture
enterprise defined in Article 15 (1) 1 or 3 of the
Enforcement Decree
of the Technology Development Promotion Act;
13. Deleted; 14. Amount of 200 thousand won or less per month from among allowances
for news gathering that are received in connection with news
gathering
activities by a reporter who engages in a press enterprise that runs
a broadcasting company under the Broadcasting Act
or a news agency
or newspaper firm under the Act on the Freedom of Newspapers, etc.
and Guarantee of Their Functions (referring
to ordinary daily
newspapers, special daily newspapers and daily newspapers in foreign
languages, including periodicals directly
published by a company running
ENFORCEMENT DECREE OF THE INCOME TAX ACT
24
the relevant newspaper), and who is engaged in the business of using
broadcasting channels under the Broadcasting Act (including
editorial
writers and cartoonists who perform news gathering activities under
full-time employment in the relevant press enterprise
and in the business
of using broadcasting channels under the Broadcasting Act). In such cases,
if he/she receives allowance for
news gathering along with his/her wages,
the amount of money equivalent to 200 thousand won per month shall
be deemed as allowance
for news gathering;
15. Allowances of 200 thousand won or less each month received by a
worker working in an isolated area prescribed by Ordinance of
the
Ministry of Strategy and Finance; and
16. Wages received by a worker in relation to natural disasters or other
calamities.
Article 13 Deleted.
(2) The term "pay received by persons prescribed by Presidential Decree"
in subparagraph 4 (i) of Article 12 of the Act means pay
received as a
reward for his/her services by a person who is not Korean, from among
those working for a foreign government or an
international organization.
Article 15 (Categories, etc. of Salary for Military Personnel and Military
Service Officials Stationed
in Foreign Countries)
(1) Salaries received by military personnel and military service officials under
subparagraph 4 (k) of Article
12 of the Act shall include prepaid salary:
Provided, That if military personnel or a military service official stationed
in a
foreign country is deemed unfit for the performance of duties in the
relevant foreign country on account of reasons such as reprimand,
etc.,
and is called home, the prepaid salary corresponding to the remaining
period shall not be included.
(2) When military personnel or a military service official stationed in a
foreign country has received his/her wages in advance,
and where wages
corresponding to the period after the period of performing duties are included
therein, the provisions of paragraph
(1) shall also be applicable to such
cases.
ENFORCEMENT DECREE OF THE INCOME TAX ACT
25
Article 16 (Scope of Non-Taxable Salaries for Workers Abroad)
(1) The term "wages prescribed by Presidential Decree" in subparagraph
4 (m) of Article 12 of the Act means the wages falling under any of the
following subparagraphs:
1. Amount of less than one million won per month (1.5 million won
per month when receiving remuneration in exchange for labor on
a pelagic fishery vessel or in a vessel serving overseas route, etc.)
from among remuneration received by a person by providing
labor abroad
(including furnishing labor on a pelagic fishery vessel or in a vessel
or aircraft serving overseas routes, etc.)
or in North Korea under the
Inter-Korean Exchange and Cooperation Act (hereafter in this Article
referred to as "overseas, etc.");
and
2. Amount received in excess of that to be received if the relevant worker
serves in Korea, from among allowances received for service
overseas,
etc. by public officials or the personnel supervised as to the performance
of duty or other services by the chief of
an embassy or consulate abroad
under Article 24 of the Regulations on Services by Public Officials Abroad
(including the employees
of government-funded agencies established
under the particular Acts, who are sent to work in an embassy or
consulate abroad pursuant
to Article 2 (2) of the Organization Regulations
on the Ministry of Foreign Affairs and Trade and its Agencies).
(2) Salaries under
paragraph (1) shall include cases where the price for
relevant labor is paid in Korea.
(3) Salaries received by a person who provides labor in a pelagic fishery
vessel or on a vessel or aircraft serving overseas routes,
etc. under paragraph
(1) 1, shall be limited to the salary received by the crew of a pelagic
fishery vessel for engaging in pelagic
fisheries, and to salaries received
by the crew of a vessel or an aircraft serving overseas route, etc. for their
labor provided
during the service period over the said routes, etc.
(4) The scope of a pelagic fishery vessel under paragraph (1) 1 and of
crew under paragraph (3) shall be governed by Ordinance of
the Ministry
of Strategy and Finance.
ENFORCEMENT DECREE OF THE INCOME TAX ACT
26
Article 17 (Scope of Allowance for Night Duty, etc. Received by Workers in
Manufacturing)
(1) The term "workers prescribed by Presidential Decree" in subparagraph
4 (o) of Article 12 of the Act means persons who receive
a regular monthly
pay not exceeding one million won (including workers on a daily basis) and
who fall under any of the following
subparagraphs. In such cases, the
regular monthly pay means the salary calculated by adding allowances
for extended work, night
work or holiday work under the Labor Standards
Act, and salary calculated by deducting the production allowances received
under
the Seafarers Act (the payment on the ratio exceeding the regular
monthly pay, in cases of the payment on a ratio basis), from the
regular
monthly pay under paragraph (4): 1. Persons providing labor in a factory or mine, who are prescribed by
Ordinance of the Ministry of Strategy and Finance from among
employees
engaging in production or related areas as indicated in the Korea
Standard Occupational Classification publicly notified
by the
Commissioner of the National Statistical Office;
2. Persons providing labor under employment by a fishing business, and
who are prescribed by Ordinance of the Ministry of Strategy
and Finance;
and
3. Persons stipulated by Ordinance of the Ministry of Strategy and Finance
from among drivers or employees in related fields, or
those engaged
in delivery or transport of baggage in accordance with the Korea Standard
Occupational Classification published by
the Commissioner of the
National Statistical Office.
(2) The term "wages received for such overtime work, night work or holiday
work prescribed by Presidential Decree" in subparagraph
4 (o) of Article
12 of the Act means the amount of money falling under any of the following
subparagraphs:
1. Amount of not more than 2.4 million won per annum from among wages
received in addition to ordinary wages due to overtime work,
night work
or holiday work under the Labor Standards Act (in cases of mine workers
or daily employed workers, the total amount
of the relevant wages);
ENFORCEMENT DECREE OF THE INCOME TAX ACT
27
and
2. Amount of not more than 2.4 million won per annum from among the
allowances for production received by workers under paragraph
(1) 2
pursuant to the Seafarers Act (pay based on a ratio exceeding regular
monthly pay, in cases where pay is based on such ratio).
(3) The scope of fisheries under paragraph (1) 2 shall be governed by
the Korea Standard Industrial Classification publicly notified
by the
Commissioner of the National Statistical Office (hereinafter referred to
as the "Korea Standard Industrial Classification").
(4) The term "regular monthly pay" in paragraph (1) means the total
amount of salaries, pay, remuneration, wages, allowances and
other similar
grants (excluding the irregular pays, such as the bonus, etc. received in
the relevant year, and the pay of such
nature as compensation of actual
expenses under Article 12), which are received by class of post each month.
1. Meals and other food and drinks provided to workers by in-house meal
services or similar means; and
2. Meal costs of not more than 100 thousand won per month received
by workers for whom meals and other food and drinks stipulated
by
subparagraph 1 are not provided.
[This Article Newly Inserted by Presidential Decree No. 15138, Aug. 22, 1996]
Article 18 (Scope of Non-Taxable Miscellaneous Income)
(1) The term "other prizes and supplementary prizes prescribed by
Presidential Decree" in subparagraph 5 (c) of Article 12 of the
Act means
prizes specified in any of the following subparagraphs: 1. Prize money and consolation prizes received by winners of the Academy
of Sciences prizes under the National Academy of Sciences
Act, or the
Academy of Arts prizes under the National Academy of Arts of the
Republic of Korea Act;
2. Prize money and consolation prizes received by the winners of the
Nobel Prize or of prizes from foreign governments, international
agencies,
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28
international organizations, and other foreign organizations or funds;
3. Prize money and consolation prizes received by the winners of the
Korean Culture and Arts prizes under the Culture and Arts Foundation,
and of various prizes granted by the Korean Culture and Arts Promotion
Center from the Culture and Arts Promotion Fund under the
same
Act;
4. Prize money and consolation prizes received by the winners of prizes
awarded at the Korean Art Exhibitions;
5. Prize money and consolation prizes received by the winners of athletic
prizes under the National Sports Promotion Act;
6. Prize money and extra prizes received by the winners of prizes awarded
at a science exhibition held by the Ministry of Science
and Technology;
7. Prize money and consolation prizes received by the winners of prizes
awarded with an approval of the related central administrative
agency
by a corporation founded under special Acts;
8. Prize money and consolation prizes received by persons selected as
quality masters (including subgroups) under the Quality Control
and
Safety Management of Industrial Products Act;
9. Amounts not exceeding 150 thousand won per person from among prize
money received from an employer in connection with the relevant
commendation or prize-winning in cases of employees who have received
a commendation from the official ranking equal to or higher
than a
chief of the central administrative agency in view of their achievements
in promoting government policies, such as at-work
Saemaul campaign,
the industrial accidents prevention campaign, etc., or of employees
who have a won vocational technique competition
in Korea or abroad
approved by the chief of the relevant central administrative agency;
and
10. Prize money and consolation prizes granted by the State or local
governments, other than those in subparagraphs 1 through 9.
(2) The term "matters prescribed by Presidential Decree" in subparagraph
5 (d) of Article 12 of the Act means an excellent invention
connected with
the duties of employees pursuant to the Invention Promotion Act.
Article 19 (Scope of Nonresidents' Income from Navigation Overseas)
The term "income from any overseas navigation business of such
vessels
ENFORCEMENT DECREE OF THE INCOME TAX ACT
29
or aircraft prescribed by Presidential Decree" in Article 13 (1) 3 of the
Act means income falling under any of the following subparagraphs:
1. Income from regular business for the purposes of navigating overseas
only; and
2. Income from navigation overseas by vessels or aircraft owned by a
business under time charter contract or regular lease contract
of aircraft
(excluding a bareboat charter or bareaircraft contract).
SECTION 2 Tax Base and Calculation of Tax Amount
Article 20 (Scope of Daily Employed Workers)
The term "daily employed workers" in Article 14 (3) 2 of the Act means
any persons who receive remuneration for labor based upon
the days or
hours for which they provide labor, or where their pay is calculated based
upon the outcome of labor in the days or
hours for which they provide
labor, and who are stipulated under the following subparagraphs:
1. Persons engaged in construction work, excluding a person who falls
under any of the following items:
(a) Persons employed continuously for one year or more by the same
employer; and
(b) Persons employed by the same employer continuously in order to
engage in the following jobs in general:
( ) Directly instructing or supervising persons who prepare for
work or engage in manual labor;
( ) Technical work, clerical work, typing, cooking, guard, etc.
required at a work site; and
( ) Operating or maintaining construction machines;
2. Persons engaged in loading and unloading (including stevedores), but
excluding those who fall under any of the following items:
(a) Persons not receiving remuneration for labor on days on which
they provide labor, but regularly receive remuneration for labor;
and
(b) Persons employed by the same employer continuously in order to
engage in the following jobs in general:
( ) Directly instructing or supervising persons who prepare for
works or engage in manual labor; and
( ) Operating or maintaining major machines; and
ENFORCEMENT DECREE OF THE INCOME TAX ACT
30
3. Persons engaged in jobs other than subparagraph 1 or 2, and who do
not remain under continuous employment by the same employer
for
three months or more under employment contract.
Article 21 Deleted.
(2) Where bonds falling under the following subparagraphs are issued
in unity (referring to issuance by unifying the terms and conditions
of
issuance, such as coupon rate, maturity, etc. of bonds to be issued
additionally for a given period) on the open market, the
difference between
the sale price and par value of the relevant bonds shall be deemed not
to be included in the interest and amount
of discount under Article 16
(1) 1 or 2 of the Act: 1. State bonds;
2. Industrial finance bonds under Article 25 of the Korea Development
Bank Act;
3. Deposit protection fund bonds and compensation fund bonds for deposit
protection fund bonds under Articles 26-2 and 26-3 of the
Depositor
Protection Act; and
4. Monetary stabilization bonds of the Bank of Korea under Article 69
of the Bank of Korea Act.
(3) In cases of bonds issued by the State, the principal of which varies
according to commodity prices, it shall be deemed that
increase in the
principal of such bonds does not include the interest and discount amount
under Article 16 (1) 1 of the Act.
[This Article Wholly Amended by Presidential Decree No. 19327, Feb. 9, 2006]
Article 23 (Scope, etc. of Investment Trusts)
(1) The term "investment trust prescribed by Presidential Decree" in Article
17 (1) 5 of the Act means any investment trust that
meets all requirements
set forth in the following subparagraphs:
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31
1. It shall be an investment trust under the Indirect Investment Asset
Management Business Act (excluding the special account of
an insurance
company under Article 135 of the same Act, but including money
trust under the Trust Business Act, which indemnifies
the principal;
hereinafter referred to as an "investment trust");
2. Deleted; 3. Account settlement shall be made once or more each year from the
date of establishment of the relevant investment trust; and
4. Entrustment shall be accepted in money and repaid in money (including
what are accepted and repaid in assets other than money,
and the
relevant entrustment value and repaid value are all expressed in
monetary amounts).
(2) In applying the provisions of paragraph (1), a trust established overseas
shall be deemed an investment trust in accordance
with paragraph (1),
even in cases of failing to meet the requirements under each subparagraph
of paragraph (1).
1. Securities listed on the securities market or the KOSDAQ market under
the Securities and Exchange Act (excluding those in the
following items;
hereafter in this paragraph, the same shall apply):
(a) Bonds, etc. under Article 46 (1) of the Act; and
(b)
Stocks or beneficiary certificates of a foreign indirect investment
vehicle established under foreign Acts and subordinate statutes;
2. Stocks or investment shares of a venture business under the Act on
Special Measures for the Promotion of Venture Businesses;
3. Deleted; and 4. Futures under the Futures Trading Act intended as securities under
subparagraph 1.
(5) Securities acquired by an investment trust by investing only in indirect
investment securities pursuant to subparagraph 13 of
Article 2 of the Indirect
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32
Investment Asset Management Act shall be deemed as "securities acquired
directly by investment trust" pursuant to paragraph (4).
(6) Profits from an investment trust shall be the amount obtained by
deducting various remunerations or fees, etc. under the Indirect
Investment
Asset Management Business Act or the Trust Business Act.
1. Where only one resident is the investor (including a nonresident and
a foreign corporation having no place of business in Korea;
hereafter
the same shall apply in this Article) or where one resident and his/her
relative under Article 20 of the Enforcement
Decree of the Framework
Act on National Taxes and other specially related persons (in cases
of a nonresident or a foreign corporation,
referring to a person in relations
falling under any of the following items) are the investors:
(a) A nonresident, and his/her
spouse, linear blood relatives and siblings;
(b) A party directly or indirectly owns not less than 50% of the shares
with voting
rights of the other party; and
(c) Where a third party directly or indirectly owns not less than 50%
of the shares with voting rights of the other party, the relationship
between a party and the other party; and
2. Where an investor makes a decision whether to operate properties.
(9) With regard to the calculation of the indirect ownership
ratio of the
stocks under paragraph (8) 1 (b) and (c), the provisions of Article 2 (2)
of the Enforcement Decree of the Adjustment
of International Taxes Act
shall apply mutatis mutandis.
Feb. 9, 2006; Presidential Decree No. 20618, Feb. 22, 2008>
(10) The method, etc. of calculating the tax base of profits from an
investment
trust shall be as determined and announced by the Minister of Strategy
and Finance.
[This Article Wholly Amended by Presidential Decree No. 18173, Dec. 30, 2003]
Article 24 (Marginal Profits of Sales under Condition
of Repurchase)
The term "marginal profits of sales under repurchase condition of bonds
or securities prescribed by Presidential
Decree" in Article 16 (1) 9 of the
Act means the marginal profits of the sale and purchase of bond or securities
which are sold
or purchased by financial institutions (referring to the
financial institutions falling under any item of subparagraph 1 of Article
2 of the Act on Real Name Financial Transactions and Guarantee of Secrecy
and the corporations falling under any subparagraph of
Article 111 (2)
of the Enforcement Decree of the Corporate Tax Act; hereinafter the same
shall apply) under a condition of resale
or repurchase thereof, by applying
an interest rate agreed in advance according to the repurchase period.
Article 25 (Marginal Profits of Insurance in Nature of Savings)
(1) The term "marginal profits of any insurance in the nature of
savings
prescribed by Presidential Decree" in Article 16 (1) 10 of the Act means
the amount arrived by deducting a paid-in insurance
premium or paid-in
deduction (hereafter in this Article referred to as "insurance premium")
from the insurance money and the deducted
money to be received at
maturity under an insurance contract, or from the refunded money
(hereafter in this Article referred to
as "insurance money") to be received
as the relevant insurance contract is cancelled early, and such insurance
money corresponds
to the following subparagraphs:
1. Period from the day of the first insurance premium payment under an
insurance contract to the date of maturity or early cancellation
shall
be less than 10 years (including cases where receiving a partial payment
of insurance premium paid before elapsing 10 years
from the first payment
ENFORCEMENT DECREE OF THE INCOME TAX ACT
34
date during the verified period, while the period from the first payment
date to the date of maturity or early cancellation is over
10 years);
and
2. Insurance money shall not be that paid due to the death, disease, injury
and other bodily harm of the insured, or due to the loss
or destruction
of, or damage to his/her assets.
(2) The term "insurance contracts" in paragraph (1) means any of the
following subparagraphs:
1. Life insurance contracts (excluding insurance contract under Article
16 (2) of the Guarantee of Workers' Retirement Benefits Act
and
retirement insurance contract under Article 2 (1) of Addenda of the
same Act) or accident insurance contracts under the Insurance
Business
Act;
2. Life mutual-aid contracts or accident mutual-aid contracts administered
pursuant to relevant Acts by an institution falling under
any of the
following items:
(a) The National Agricultural Cooperatives Federation and cooperatives
under the Agricultural Cooperatives Act;
(b) The National Federation of Fisheries Cooperatives and cooperatives
under the Fisheries Cooperatives Act;
(c) Deleted;
(e) The Community Credit Cooperatives Federation under the
Community Credit Cooperatives Act; and
3. Postal insurance contracts under the Postal Savings and Insurance
Act.
(3) Deleted.
35
cases of offsetting a insurance premium with dividends, etc., the insurance
premium shall be deemed paid with dividends, etc. from
an insurance
contract.
Article 26 (Excess Refund of At-Work Mutual-Aid Association)
(1) The term "at-work mutual-aid association prescribed by Presidential
Decree" in Article 16 (1) 11 of the Act means a mutual-aid society or
mutual-aid association (including similar organizations)
established under
Article 32 of the Civil Act and other Acts, which are organized for stable
living, enhancement of welfare or
mutual-aid for workers engaging in the
same place of work or occupation.
Article 26-2 (Method of Calculating Profits of Specific Money in Trust)
The profit of trust to which the provisions of Article 4
(2) of the Act are
applicable as specific money in trust under Article 3 (2) 1 of the Enforcement
Decree of the Trust Business
Act shall be calculated by applying Article
23 (6) mutatis mutandis.
[This Article Newly Inserted by Presidential Decree No. 19327, Feb. 9, 2006]
Article 26-3 (Scope of Dividend Income)
Distributed amount of profits from securities or certificates under Article
2-3 (1) 7 and 8 of the Enforcement Decree of the Securities
and Exchange
Act shall be included in dividend income under Article 17 (1) 7 of the
Act.
[This Article Newly Inserted by Presidential Decree No. 19327, Feb. 9, 2006]
Article 27 (Evaluation of Stocks, etc. Received due
to Capital Reduction, etc.)
(1) In cases of deemed dividends under each subparagraph of Article 17
(2) of the Act, the value of
property other than cash shall be based upon
the amount calculated according to the following classifications:
ENFORCEMENT DECREE OF THE INCOME TAX ACT
36
1. Amount under any of the following items, if acquired assets are stocks
or contributed shares (hereafter in this Article, referred
to as "stocks,
etc."):
(a) Face value or amount invested, in cases of stocks, etc. under
subparagraphs 2 and 5 of Article 17 (2) of the Act;
(b) Face
value or amount invested, in cases of stocks, etc. under
subparagraphs 4 and 6 of Article 17 (2) of the Act (limited to cases
where
such stocks, etc. satisfy the requirements under Article 44 (1)
1 and 2 of the Corporate Tax Act and Article 46 (1) 1 and 2 of
the same Act, respectively, and where their market price under
subparagraph 2 is higher than face value or amount invested); and
(c) Issue prices, in cases of stock dividends under Article 462-2 of
the Commercial Act; and
2. For all other cases, market value at the time of acquiring the property.
(2) In cases of acquiring stocks, etc. under the proviso
to Article 17 (2)
2 of the Act, the book value per new/old stock or per unit shall be as
follows:
Book value per stock or per unit of investment = Book value per old
etc. per old stock or per unit of investment
(3) In the calculation of gross income from deemed dividends through
capital reduction or stock retirement under Article 17 (2)
1 of the Act
(including any decrease in investment or retirement of contribution quotas;
hereafter in this paragraph, referred
to as "stock retirement, etc."), if
there exists any portion not deemed as a fictitious dividend under the proviso
to Article 17
(2) 2 of the Act among stocks acquired due to the capitalization
of capital reserve funds within two years retrospectively counted
from
the day of such deemed dividends (excluding the stocks issued due to the
capitalization of capital reserve fund pursuant to
Article 459 (1) 1 of the
Commercial Act; hereafter in this paragraph referred to as "short-term
retired stocks"), it shall be deemed
that short-term retired stocks have
first been reduced or retired, and the acquisition value of such short-term
retired stock shall
be deemed to be non existent, notwithstanding the
provisions of paragraph (2). In such cases, if part of stocks, etc. are
transferred
in the period from the acquisition of short-term retired stocks
ENFORCEMENT DECREE OF THE INCOME TAX ACT
37
to the date of deemed dividends, short-term retired stocks, etc. and other
stocks, etc. shall be calculated by deeming they are
transferred in proportion
to the number of each stock, etc., and the book value per stock or per
unit of investment after the stock
retirement has been made, shall be
in accordance with the following formula:
Book value per stock or per unit of investment = Aggregate of acquisition
value after stock retirement has been made / Total number
of stocks
after stock retirement has been made.
(4) The term "marginal gain from the valuation of corporations undergoing
merger or that from the valuation of dividing companies
under the
conditions prescribed by Presidential Decree" in Article 17 (2) 2 (a) of
the Act, means the amount calculated under Article
12 (1) and (2) of the
Enforcement Decree of the Corporate Tax Act.
(5) In applying the provisions of Article 17 (2) 2 (b) of the Act, in cases
where a part of the revaluation reserve is transferred
to the capital or
the contribution amount, the amount corresponding to the revaluation
spread of the land under Article 13 (1)
1 of the Assets Revaluation Act
shall be calculated by the following formula:
(6) The value of stocks without face value in cases under paragraph (1) 1
(a) and (b) shall be the amount computed by dividing the
equity capital
of the corporation issuing such stocks by the total number of its issued and
outstanding shares on the date falling
under subparagraphs 4 and 5 of
Article 46.
38
Provided, That this shall not apply where paragraph (3) is applicable and
where the relevant stockholder establishes an amount other
than the face
value.
1. Juristic persons to which the provisions of Article 51-2 of the Corporate
Tax Act or Articles 54 and 104-11 of the Restriction
of Special Taxation
Act are applied; and
2. Juristic persons to which the provisions of Article 63-2, 121-2, 121-4,
121-8, or 121-9 of the Restriction of Special Taxation
Act are applied.
(2) The term "rate prescribed by Presidential Decree" in Article 17 (3)
4 of the Act means a rate falling under
any of the following subparagraphs:
1. In cases of a juristic person falling under paragraph (1) 1, 100/100; and
2. In cases of a juristic person falling under paragraph (1) 2, a rate calculated
by the following formula (in cases where a business
year to which the
provisions of paragraph (1) 2 are applied is only one business year,
it shall be calculated on the basis of income
in the relevant business
year, and in cases where the relevant rate exceeds 100/100, it shall be
100/100):
Aggregate of income subject to reduction or
exemption in two immediately preceding
business years
Rate of reduction
or exemption
Aggregate of gross income in two immediately preceding business
years
[This Article Wholly Amended by Presidential Decree No. 16664, Dec. 31, 1999]
Article 28 (Scope of Real Estate Rental Income)
(1) Rights related to real state under Article 18 (1) 1 of the Act shall
ENFORCEMENT DECREE OF THE INCOME TAX ACT
39
not include surface rights and servitude (including rights established
underground or in the air).
(2) Income from renting mining rights by the owner of mining rights, a
person holding mining concession rights, or the subcontractor
of mining
(hereinafter referred to as a "mining right holder, etc.") under Article 18
(1) 3 of the Act, shall be deemed as income
of a mining right holder,
etc. from renting a mine along with mining equipment; and fees which a
mining right holder, etc. receives
from a sub-contractor or share subcontractor
by renting mining rights, mining concession rights, rights related to mining
on conditions
that a mining right holder, etc. provide the whole or part
of capital expenditures or profitable expenditure, shall not be included.
Article 29 (Scope of Business)
The scope of business pursuant to each subparagraph of Article 19 of the
Act except for those especially stipulated in this Decree
shall be based
on the Korea Standard Industrial Classification: Provided, That if Ordinance
of the Ministry of Strategy and Finance
prescribes otherwise, the same
shall not be applicable.
Article 30 (Scope of Crop Cultivating Businesses)
The term "crop cultivating business" in Article 19 (1) 1 of the Act means
the
crop cultivating business indicated in the Korean Standard Industrial
Classification.
Article 31 (Scope of Manufacturing Businesses)
In applying the provisions concerning business income pursuant to Article
19 of the Act, the following cases shall be deemed as
manufacturing
businesses pursuant to Article 19 (1) 4 of the Act:
1. Deleted; and 2. Where entrusting other manufacturers to do manufacturing, instead
of direct manufacturing, and where the following requisites
are satisfied:
(a) A person shall plan products to manufacture (including devising
or designing of products, and making samples)
on his/her own;
(b) A person manufactures products under his/her own name; and
(c) A person accepts products, and directly sells
them under his/her
own responsibility.
Article 32 (Scope of Housing Construction and Sales Business)
ENFORCEMENT DECREE OF THE INCOME TAX ACT
40
(1) The term "such sales business of new construction housing prescribed
by Presidential Decree" in Article 19 (1) 6 of the Act
means business
falling under any of the following subparagraphs:
1. Constructing and selling housing; and
2. Deleted. 1. The total area of a building (excluding area on the basement level,
area for parking on the ground level, and area for common
facilities
for residents under subparagraph 3 of Article 2 of the Regulations on
Standards, etc. of Housing Construction); or
2. Land area calculated by multiplying five times the area on which the
building is built (10 times in cases of land located outside
of an urban
district under Article 6 of the National Land Planning and Utilization
Act).
(3) Where there exist, together with the relevant building, buildings for
other purposes, such as stores, etc. built in part of
a house, or buildings
for other purposes built on the same lot number (including other lot numbers
in a complex with similar residential
conditions) (hereafter in this paragraph,
referred to as "buildings for other purposes"), buildings for other purposes
and land
attached thereto shall be excluded from the house under paragraph
(1), and in cases falling under any of the following subparagraphs,
the whole
building shall be deemed as housing under paragraph (1). In such cases,
the provisions of Article 154 (4) shall be applied
mutatis mutandis to
the calculation of area of land attached to a building:
1. Where a house and building for other purposes are sold or purchased
separately as each transaction unit, and where the area of
the building
for other purposes is not more than 10/100 of the area of the house;
and
2. Where a house and building for other purposes attached to the house
are sold or purchased separately as each transaction unit,
and where
the area of the building for other purposes is smaller than the area
of the house.
(4) Where a house and building for other purposes under paragraph (1)
are newly built and sold, they shall be entered separately
on the book,
ENFORCEMENT DECREE OF THE INCOME TAX ACT
41
and where there exist any common expenses necessary for them, such expenses
shall be calculated in proportion under the conditions
prescribed by
Ordinance of the Ministry of Strategy and Finance.
Article 34 (Scope of Purchase and Sale Business of Real Estate)
The term "real estate sale business prescribed by Presidential Decree"
in
Article 19 (1) 12 of the Act means building construction business (limited
to selling buildings constructed on a person's own
account) and real estate
supply business indicated in the Korea Standard Industrial Classification:
Provided, That the business
of selling new construction housing under
Article 32 shall be excluded.
Article 35 (Scope of Educational Service Business)
Educational service business under Article 19 (1) 13 of the Act shall not
include
kindergartens under the Early Childhood Education Act, and schools
determined by the Elementary and Secondary Education Act and
the Higher
Education Act and the similar institutions determined by Ordinance of the
Ministry of Strategy and Finance.
42
according to the details of business.
(2) Earnest money for an exclusive contract received by an entertainer,
professional athlete, etc. in connection with business activities
shall be
business income.
(1) The scope of earned income under Article 20 of the Act shall include
income set forth in the following subparagraphs:
1. Expenses paid in terms of confidential expenses (including expediency
fund; hereinafter the same shall apply), social expenses
and others under
similar pretexts, which are pay indistinct as to whether they are used
for business;
2. Money for merit, bonus, money for celebrating a business opening,
school expenses, scholarships (including school expenses and
scholarships which an employee's children at school received from
an employer), and other similar salaries which are paid to an
employee;
3. Labor allowance, family allowance, war bonus, price allowance,
cashier's allowance, duty allowance, and other salaries similar
thereto;
4. Allowances for collecting money, returns for inviting purchase of
insurance, for soliciting the purchase and sale of securities
or for
stimulating savings, and other payments of a similar nature which
are received by office workers of the financial institutions
such as an
insurance company and a securities company;
5. Meal allowance, housing allowance, clothing allowance, and other
salaries similar thereto;
6. Benefits gained from housing provided by an employer: Provided, That
such cases are excluded for an executive who is not a stockholder
nor
a contributor (including an officer who is a petty stockholder under
Article 40 from among stockholders of a listed-stock corporation
or
ENFORCEMENT DECREE OF THE INCOME TAX ACT
43
KOSDAQ-listed corporation), an employee who is not an executive
(including an employee of a nonprofit corporation or private person)
and a person who receives earned income from the State or a local
government receives such housing provided by his/her employer
as
determined by Ordinance of the Ministry of Strategy and Finance;
7. Benefits which an employee gains by borrowing money necessary for
purchasing or renting housing (including the land attached to
the
house) at low interest or without compensation;
8. Technology allowance, health allowance, research allowance, and other
wages of a similar nature;
9. Overtime allowance, commuting allowance, perfect attendance
allowance, special bonus, and other wages of a similar nature;
10. Monthly or yearly wages paid in terms of travel expenses;
11. Allowance for service in an isolated area, allowance for service abroad,
and other wages of a similar nature;;
12. Insurance premiums, trust installments or mutual aid installments
(hereafter in this subparagraph, referred to as "insurance
premiums,
etc.") imposed on an employer in connection with the insurance, trust
or mutual aid whose contractor is an employee or
whose beneficiary is
an employee, his/her spouse, or any other family member: Provided,
That insurance premiums, etc. specified
in the following items shall
be excluded:
(a) Deleted;
(c) Insurance premiums, etc. of the retirement insurance or of the
retirement lump-sum trust under Article 2 of Addenda of the
Guarantee of Workers' Retirement Benefits Act, Act No. 7379, and
the retirement insurance or retirement lump-sum trust of the
ENFORCEMENT
DECREE OF THE INCOME TAX ACT
44
corporation's officers as determined by Ordinance of the Ministry
of Strategy and Finance (hereafter in this Section, referred to
as
"retirement insurance or retirement lump-sum trust");
(d) Mutual aid installments paid to the Association of Mutual Aid for
Retirement of Construction Workers by the owner of a mutual
benefit contract business pursuant to the Act on the Employment
Improvement,
etc. of Construction Workers;
(e) Insurance premiums of insurance the insured of which is an executive
or employee, and whose grounds for payment are compensation
for
damages incurred by an act in the course of performing duties,
except for those incurred intentionally (including gross negligence)
by the executive or employee;
(f) Share in expenditure paid by an employer to the Korea Scientists
and Engineers Mutual-Aid Association for employees admitted
to
a retirement annuity that meets all the following requirements,
which is for a project for the benefit of retirement annuity
pursuant
to the Korea Scientists and Engineers Mutual-Aid Association Act:
( ) That an employer shall regularly pay, once or more
each year,
the share in expenditure that is 1/12 or more of the total of
annual wages of the employees;
( ) That an annuity shall be paid in cases where persons admitted
to a retirement annuity shall be 55 years or more of age and
have been admitted for 10 years or more; and
( ) That an annuity shall be paid for 10 years or more;
13. Retirement allowance, retirement bonus and other similar wages which
are paid upon retirement, but not belonging to retirement
income;
14. Vacation bonus and other similar wages;
15. Refund money reverted to employees where retirement insurance,
retirement lump-sum amount in trust, insurance or trust under
Article
16 (2) of the Guarantee of Workers' Retirement Benefits Act is
terminated: Provided, That this shall not apply to cases
where employees
are paid retirement allowance by adjusting it in advance pursuant
to Article 8 (2) of the Guarantee of Workers'
Retirement Benefits Act
when they receive the relevant refund money;
16. Refund of the group refund-cum-guaranty insurance to be reverted
to employees before the maturity of contract period or at maturity;
17. Profits gained by executives or employees of a corporation by exercising,
ENFORCEMENT DECREE OF THE INCOME TAX ACT
45
while serving in the relevant corporation, etc., stock options granted from
the relevant corporation or that having a special relation
referred to in
Article 87 of the Enforcement Decree of the Corporate Tax Act with
the said corporation (hereafter in this subparagraph,
referred to as
the "relevant corporation, etc."; referring to the difference between the
market price at the time of exercising
stock options and the actual purchase
price, and stocks with preemptive rights to new stocks); and
18. Deleted.
(3) Deleted.
Article 40 (Petty Stockholders)
(1) The term "amount determined by Presidential Decree" in Article 20 (3)
of the Act means the smaller amount of either 1/100 of
the total amount
of issued securities or of the total investment amount (hereafter in this
Article referred to as the "total amount
of issued securities, etc.") of the
relevant corporation, or 300 million won (referring to the aggregate of
face values): Provided,
That in cases of a financial institution under the
Banking Act, it shall refer to the amount corresponding to 1/100 of its
total
amount of issued stocks, etc.
46
year following that to which belongs the date of capital increase: Provided,
That the same shall not be applicable in cases where
the total face value
of his/her securities becomes 1/100 or more of the total amount of issued
stocks, etc. after the capital increase
of the relevant corporation.
(3) The term "controlling stockholders of a corresponding corporation
prescribed in Presidential Decree" in Article 20 (3) of the
Act means
such stockholders in cases where the total stocks owned by stockholders
possessing 1/100 or more of the total amount
of issued stocks of the
corresponding corporation (excluding stockholders who are the State or
local governments), and by stockholders
in special relations with them
under Article 98 (1), reaches to the largest amount from among shareholders
of the relevant corporation.
Article 40-2 Deleted.
(1) The term "retirement insurance determined by Presidential Decree"
in Article 20-3 (1) 3 of the Act means retirement insurance
under Article
2 (1) of the Addenda of the Guarantee of Workers' Retirement Benefits
Act (Act No. 7379).
(2) Annuities under Article 20-3 (1) 4-2 of the Act shall include the amount
received additionally according to the results of management
of retirement
annuity, and an annuity received as the benefit of retirement annuity
pursuant to Article 16 (1) 1 of the Korea Scientists
and Engineers Mutual-Aid
Association Act shall be deemed as an annuity pursuant to Article 20-3
(1) 4-2 of the Act.
(3) Annuity income subject to income tax under Article 20-3 of the Act
shall be the amount computed by a formula in any of the following
subparagraphs:
ENFORCEMENT DECREE OF THE INCOME TAX ACT
47
1. Annuities falling under Article 20-3 (1) 1 of the Act:
Taxable annuity income = Gross amount received (Cumulative total
of converted
income during the installment payment period after
January 1, 2002 Cumulative total of converted income during the
entire installment
payment period) {1 - [Cumulative total of pension
insurance premium paid by the beneficiary in installments in excess
of the portion
for which income deduction is actually allowed (limited
to the amount verified with the evidence submitted by the beneficiary)
Cumulative total of pension insurance premiums paid in installments
during the installment payment period after January 1, 2002]}
2. Annuities falling under Article 20-3 (1) 2 of the Act: Provided, That
annuities under subparagraph 3 shall be excluded:
Annuity
income subject to income tax =
Gross amount
received
Number of months in which contributions are made
after January 1, 2002
Number of months in which contributions are made
3. Annuities in cases where retired public officials, soldiers, teachers
and staff of private schools or staff of special post offices
are employed
and appointed as public officials, soldiers, teachers and staffs of private
schools, or staffs of special post offices,
after January 1, 2002 and
return their retirement benefits and the term in office is aggregated
under the provisions of Article
23 (2) of the Public Officials Pension
Act, Article 16 (6) of the Veterans' Pension Act, Article 32 (1) of
the Pension for Private
School Teachers and Staff Act, or Article 34
(2) of the Special Post Offices Act: and
Annuity income subject to income tax =
Gross amount
received
Number of months in which contributions are paid
after the date of re-appointment
Number of months in which contributions are paid
4. Annuities falling under Article 20-3 (1) 4-2 of the Act:
Annuity income subject to income tax =
Gross
amount
received
(1-
Cumulative total of the amount the employee paid
in excess of actually deducted amount of income
)
Total amount of principal and interest as of the date when
annuity starts to be paid
ENFORCEMENT DECREE OF THE INCOME TAX ACT
48
(4) The term "converted income" in paragraph (3) 1 means the amount
that standard monthly income per annum during a participation
period
under Article 47 (1) 2 of the National Pension Act is converted into the
current value of the year preceding the commencement
of annuity payments
by applying a revaluation rate by year as publicly notified by the Minister
of Health and Welfare.
(1) The term "money and other valuables received by a person other than
an author, stage performer, phonograph record maker or broadcasting
business operator, in compensation for the transfer or use of copyrights
or neighboring rights" in Article 21 (1) 5 of the Act,
means the prices
received by a person, to whom copyrights or neighboring rights under the
Copyright Act has been inherited, donated
or transferred, by transferring
or lending such copyright or neighboring rights to another person.
(2) The term "trademark rights" in Article 21 (1) 7 of the Act means
rights to trademarks under the Trademark Act, service marks,
collective
marks, geographical indications, homonymous geographical indication,
collective marks with geographical indication,
registered trademarks, and
business marks.
(4) The term "rights to lease a store prescribed by Presidential Decree"
in Article 21 (1) 7 of the Act means economic interest
(including other
goodwill transferred along with the right to lease the store) acquired by
a resident as a consequence of transferring
his/her status as a lessee of
a store from which he/she has earned business income (excluding business
income further specified
by Ordinance of the Ministry of Strategy and
Finance).
(5) Rights incidental to permission for collecting earth, sand, and rocks
ENFORCEMENT DECREE OF THE INCOME TAX ACT
49
under Article 21 (1) 7 of the Act shall include rights incidental to permission
for collecting earth, sand, and rocks, which are
transferred along with a
parcel of land under Article 94 (1) 1 of the Act.
(6) Rights to develop and use ground water under Article 21 (1) 7 of
the Act shall include rights to develop and use ground water,
which are
transferred along with a parcel of land, etc. under Article 94 (1) 1 of
the Act.
(8) The term "specially related person prescribed by Presidential Decree"
in Article 21 (1) 13 of the Act means a person who is
in any of the following
special relations: 1. A person who is in special relations under Article 98 (1) with the
pertinent resident;
2. A person who is in special relations under Article 2 (1) of the Enforcement
Decree of the Adjustment of International Taxes Act
with the pertinent
nonresident; and
3. A person who is in special relations under Article 87 of the Enforcement
Decree of the Corporate Tax Act with the pertinent corporation.
(9) The term "economic gain" in Article 21 (1) 13 of the Act means gain
which an individual person receives by using the property
at low
consideration or free of charge, which is a resource of generating income
as it is provided as a corporation's property
or for private business
(hereinafter referred to as a "property for business"), except for dividends
and bonuses which are disposed
of when a corporation makes a report
on its income under the Corporate Tax Act or the superintendent of the
competent tax office
determines or rectifies the corporation's income, and
means the rental and other prices for such uses to be normally paid for
ENFORCEMENT
DECREE OF THE INCOME TAX ACT
50
the use of such property (where there any amount lower than the normally
paid amount has been paid, the amount shall be one from
which such
difference is deducted).
[This Article Wholly Amended by Presidential Decree No. 20618, Feb. 22, 2008]
Article 42-2 (Scope of Retirement Income)
(1) Retirement income provided for in Article 22 (1) of the Act shall include
the amount of money under the following subparagraphs:
1. and 2. Deleted; 3. Amounts of money deemed as retirement allowance paid in advance
under Article 17 of the Act on the Employment Improvement, etc.
of
Construction Workers;
4. Retirement allowances, retirement consolation benefits and other payments
of a similar nature paid pursuant to the regulation
for payment of
retirement allowances, the terms of employment or the agreement
between labor and management which are applied to
many unspecified
persons;
5. Amounts of money paid in compensation for losses incurred by changes
in the retirement allowance payment system, while paying
the adjusted
retirement payment under Article 8 (2) of the Guarantee of Workers'
Retirement Benefits Act as the provisions on payment
of retirement
benefits or the terms of employment are amended; and
6. A lump-sum amount paid under the Guarantee of Workers' Retirement
Benefits Act, which falls under any of the following items,
and a lump-sum
amount paid as the benefit of retirement annuity pursuant to Article 16
(1) 1 of the Korea Scientists and Engineers
Mutual-Aid Association
Act (hereinafter "lump-sum retirement annuity"):
ENFORCEMENT DECREE OF THE INCOME TAX ACT
51
(a) Lump-sum amount paid from the retirement annuity scheme under
the Guarantee of Workers' Retirement Benefits Act;
(b) Lump-sum
amount paid from the individual retirement account
under the Guarantee of Workers' Retirement Benefits Act
(hereinafter referred
to as the "individual retirement account");
(c) Amounts of money withdrawn early from the defined contribution
retirement annuity
scheme (hereinafter referred to as "defined
contribution retirement annuity") and the individual retirement
account under the Guarantee
of Workers' Retirement Benefits Act;
and
(d) Lump-sum amount paid to the person who was receiving pension
benefits due to such reasons as early withdrawal from the pension
contract.
(2) The term "retirement insurance money prescribed by Presidential Decree"
in Article 22 (1) 1 (c) of the Act means the amounts
of money under the
following subparagraphs: 1. Insurance money of an insurance whose payment of insurance money
is subject to the retirement of an employee and its insured and
beneficiary
is the employee (hereinafter referred to as "group retirement
insurance"); and
2. Insurance money or refund money from retirement insurance or a
retirement lump-sum trust.
(3) Lump-sum payment subject to tax under Article 22 (2) of the Act
shall be the amounts of money calculated by any of the following
formulas:
1. Lump-sum payments under Article 22 (1) 1 (d) of the Act:
(a) Where it is a lump-sum refund received pursuant to Article 56 (2)
of the National Pension Act, which exceeds the limit pursuant to
Article 80 (2) of the same Act; and
lump-sum payment subject to taxation = total received amount
(total number of months in which premiums have been paid after
January
1, 2002 / total number of months in which premiums have
been paid) - cumulative amount of premiums paid in excess of the
amount
deducted from amount of income during the period of payment
after January 1, 2002 (limited to the amount that can be confirmed
ENFORCEMENT DECREE OF THE INCOME TAX ACT
52
by evidenciary documents submitted by the relevant beneficiary).
(b) Other cases:
Lump-sum payment subject to taxation = cumulative amount of
pension insurance premiums paid after January 1, 2002, interest
thereon
and extra interest - cumulative amount of pension premiums
paid in excess of the amount deducted from amount of income during
the
period of payment after January 1, 2002 (limited to the amount
that can be confirmed by evidenciary documents submitted by the
relevant beneficiary).
2. Lump-sum payments under Article 22 (1) 1 (e) of the Act: Provided,
That lump-sum payments under the provisions of subparagraph
3 shall
be excluded: and
Lump-sum payment subject to tax =
Gross
amount
received
Number of months in which contribution is paid since
January 1, 2002
Gross number of months in which contribution is paid
3. Lump-sum payments in cases where retired public officials, soldiers,
teachers and staff of private schools or staff of special
post offices are
employed and appointed as public officials, soldiers, teachers and staff
of private schools, or staff of special
post offices, after January 1, 2002
and return their retirement benefits and the term in office is aggregated
under the provisions
of Article 23 (2) of the Public Officials Pension
Act, Article 16 (6) of the Veterans' Pension Act, Article 32 (1) of
the Pension
for Private School Teachers and Staff Act, or Article 34
(2) of the Special Post Offices Act:
Lump-sum payment subject to income tax =
Gross amount
received
Number of months in which contributions are paid
after the date of re-appointment
Number of months in which contributions are paid
(4) Lump-sum payment subject to income tax under paragraph (1) 6 shall
be the amount calculated by the following formula:
Lump-sum payment subject to income tax =
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53
Gross
amount
received
(1-
Cumulative total of the amount the employee paid
in excess of actually deducted amount of income
)
Total amount of principal and interest as of the
date when annuity starts to be paid
(5) Where a resident transfers or pays an amount in excess of the amount
equivalent to 80/100 of retirement benefits (including
the honorary
retirement allowances and the group retirement insurance money;
hereinafter the same shall apply) received due to
retirement to a defined
contribution annuity or individual retirement account (hereinafter referred
to as the "taxation deferred
account") within 60 days from the date of
retirement, the relevant retirement benefits shall not be deemed as the
retirement income
before he/she actually receives such amount.
[This Article Newly Inserted by Presidential Decree No. 15565, Dec. 31, 1997]
Articles 43 and 44 Deleted.