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Laws of the Republic of Korea |
1
INCOME TAX ACT
Wholly Amended by Act No. 4803, Dec. 22, 1994
Amended by Act No. 5031, Dec. 29, 1995
Act No. 5108, Dec. 29, 1995
Act No. 5155, Aug. 14, 1996
Act No. 5191, Dec. 30, 1996
Act No. 5193, Dec. 30, 1996
Act No. 5259, Jan. 13, 1997
Act No. 5291, Jan. 13, 1997
Act No. 5374, Aug. 28, 1997
Act No. 5424, Dec. 13, 1997
Act No. 5493, Dec. 31, 1997
Act No. 5503, Jan. 13, 1998
Act No. 5532, Apr. 10, 1998
Act No. 5552, Sep. 16, 1998
Act No. 5559, Sep. 16, 1998
Act No. 5580, Dec. 28, 1998
Act No. 5994, Aug. 31, 1999
Act No. 6051, Dec. 28, 1999
Act No. 6124, Jan. 12, 2000
Act No. 6276, Oct. 23, 2000
Act No. 6292, Dec. 29, 2000
Act No. 6429, Mar. 28, 2001
Act No. 6557, Dec. 31, 2001
Act No. 6781, Dec. 18, 2002
Act No. 6852, Dec. 30, 2002
Act No. 6916, May 29, 2003
Act No. 6958, Jul. 30, 2003
Act No. 7006, Dec. 30, 2003
Act No. 7120, Jan. 29, 2004
Act No. 7289, Dec. 31, 2004
Act No. 7319, Dec. 31, 2004
Act No. 7335, Jan. 14, 2005
Act No. 7528, May 31, 2005
Act No. 7579, Jul. 13, 2005
Act No. 7837, Dec. 31, 2005
Act No. 7873, Mar. 3, 2006
Act No. 7896, Mar. 24, 2006
Act No. 7908, Mar. 24, 2006
Act No. 8144, Dec. 30, 2006
Act No. 8435, May 17, 2007
Act No. 8524, Jul. 19, 2007
Act No. 8531. Jul. 19, 2007
Act No. 8541, Jul. 23, 2007
Act No. 8825, Dec. 31, 2007
Act No. 8852, Feb. 29, 2008
Act No. 8911, Mar. 21, 2008
INCOME TAX ACT
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CHAPTER GENERAL PROVISIONS
Article 1 (Liability for Tax Payment)
Article 2 (Scope of Tax Liability)
Article 3 (Scope of Taxable Income)
Article 4 (Classification of Income)
Article 5 (Taxable Period)
Article 6 (Place of Tax Payment)
Article 7 (Tax Payment Place in Case of Withholding Tax, etc.) Article 8 (Tax Payment Place in Case of Inheritance, etc.) Article 9 (Designation of Tax Payment Place)
Article 10 (Report on Change of Tax Payment Place) Article 11 (Jurisdiction over Taxation)
CHAPTER TAX LIABILITY ON RESIDENT S GLOBAL INCOME AND RETIREMENT INCOME
SECTION 1 Non-Taxation, Reduction and Exemption
Article 12 (Non-Taxable Income)
Article 13 (Reduction and Exemption of Tax Amount) SECTION 2 Calculation of Tax Base and Tax Amount
Sub-Section 1 Common Provisions concerning Calculation of Tax Amount Article 14 (Calculation of Tax Base)
Article 15 (Order in Calculation of Tax Amount)
Sub-Section 2 Categories and Amount of Incomes
Article 16 (Interest Income)
Article 17 (Dividend Income)
Article 18 (Real Estate Rental Income)
Article 19 (Business Income)
Article 20 (Earned Income)
Article 20-2 Deleted.
Article 21 (Miscellaneous Incomes)
Article 22 (Retirement Income)
Article 23 Deleted.
Sub-Section 1 Total Gross Income Amount
Article 24 (Calculation of Total Gross Income Amount)
Article 25 (Special Case for Calculation of Total Gross Income Amount)
Article
26 (Non-Inclusion in Total Gross Income Amount)
Sub-Section 2 Necessary Expenses and Year of Reversion
INCOME TAX ACT
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Article 27 (Calculation of Necessary Expenses)
Article 28 (Calculation of Allowance for Bad Debts as Necessary Expenses)
Article 29 (Calculation of Allowance for Retirement Benefits
as Necessary Expenses)
Article 30 Deleted.
Article 32 (Calculation of Value of Assets for Business Acquired with National Subsidies
as Necessary Expenses)
Article 33 (Non-Inclusion of Necessary Expenses)
Article 34 (Non-Inclusion of Donations in Necessary Expenses)
Article 35 (Non-Inclusion of Entertainment Expenses in Necessary Expenses)
Article 36 Deleted.
Article 40 (Year for which Dividend Income, etc. is Included)
Sub-Section 3 Special Cases of Calculation of Income Amount
Article
41 (Calculation in Case of Wrongful Act)
Article 42 (Special Case of Calculation of Income Amount Accruing from Trade with
Nonresident, etc.)
Article 43 (Special Cases of Calculation of Income Amount Accruing from Joint Business)
Article 44 (Separate Calculation of Income
Amount in Case of Inheritance)
Article 45 (Deduction of Deficiency and Carryover of Deficits)
Article 46 (Special Cases regarding
Calculation of Income Amount Accruing from Bonds
and Submission of Payment Records, etc.)
Article 46-2 (Special Cases concerning Calculation of Interest Income Amount due to
Premature Termination)
Sub-Section 4 Earned Income Deduction, Annuity Income Deduction, and
Retirement Income Deduction
Article 47 (Earned Income Deduction)
Article 47-2 (Annuity Income Deduction)
Article 48 (Retirement Income Deduction)
Article 49 Deleted.
Article 50 (Basic Deduction)
Article 51 (Additional Deduction)
Article 51-2 (Additional Deduction for Persons with Many Children)
Article 51-3 (Pension Insurance Premium Deduction)
Article 51-4
(Interest Expense Deduction for Reverse Mortgage-Backed Retirement
Pension System)
Article 52 (Special Deduction)
Article 53 (Scope of Dependents Living Together with Resident and Time of Determination
Thereof)
INCOME TAX ACT
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Article 54 (Exclusion of Global Income Deduction)
SECTION 4 Calculation of Tax Amount
Sub-Section 1 Tax Rates
Article 55 (Tax Rates)
Sub-Section 2 Tax Credits
Article 56 (Tax Credits for Dividend Income)
Article 56-2 (Tax Credit for Book-Keeping)
Article 57 (Tax Credit for Payments in Foreign Country)
Article 58 (Tax Credit for Casualty Losses)
Article 59 (Tax Credit for Earned Income)
Article 59-2 Deleted.
Article 63 (Special Case in Calculation of Tax Amount on Excess Refund of Workplace
Mutual Aid Association)
Article 64 (Special Case in Calculation of Tax Amount for Real Estate Broker)
SECTION 6 Interim Prepayment, Preliminary Return and
Payment of Tax
Sub-Section 1 Interim Prepayment
Article 65 (Interim Prepayment)
Articles 66 and 67 Deleted.
Article 69 (Provisional Return on Gains Accruing from Trading of Land, etc. and Voluntary
Payment by Real Estate Broker)
SECTION 7 Final Return final return on tax base and Voluntary Payment
Article 70 (Final Return final return on tax base of Global
Income)
Article 71 (Final Return final return on tax base of Retirement Income)
Article 72 Deleted.
Article 77 (Payment in Installments)
SECTION 8 Report and Confirmation on Present Situation of Business
Place
Article 78 (Report on Present Situation of Business Place)
Article 79 (Investigation and Confirmation on Present Situation of Business
Place)
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SECTION 9 Determination, Rectification, Collection and Refund
Sub-Section 1 Determination and Rectification of Tax Base
Article
80 (Determination and Rectification)
Article 81 (Additional Tax)
Article 82 (Occasional Assessment)
Article 83 (Notification of Tax Base and Tax Amount)
Article 84 (Minimum Taxable Limit of Miscellaneous Incomes)
Sub-Section 2
Collection and Refund of Tax Amount
Article 85 (Collection and Refund)
Article 85-2 (Refund by Retroactive Deduction of Deficit)
Article 86 (Non-Collection of Small Sum)
SECTION 10 Special Cases for Joint Business Place
Article 87 (Special Case for Joint Business Place)
CHAPTER -2 TAX LIABILITY ON
SINCERE SMALL OR MEDIUM
BUSINESS PROPRIETORS GLOBAL INCOME
SECTION 1 Calculation of Tax Base and Tax Amount
Article 87-2 (Application of Sincere Tax Payment Method)
Article 87-3 (Special Exceptions for Calculation of Tax Base)
SECTION
2 Calculation of Tax Amount
Article 87-4 (Calculation of Tax Amount)
Article 87-5 (Standard Tax Deduction)
Article 87-6 (Tax Deduction for Increased Revenue)
SECTION 3 Reporting, Payment, etc.
Article 87-7 (Reporting, Payment, etc.)
CHAPTER RESIDENT S TAX LIABILITY ON TRANSFER INCOME
SECTION 1 Definition of Transfer
Article 88 (Definition of Transfer)
SECTION 2 Non-Taxation, Reduction and Exemption on Transfer Income
Article 89 (Non-Taxable Transfer Income)
Article 90 (Reduction and Exemption of Transfer Income Tax)
Article 91 (Exclusion of Non-Taxation of Transfer Income Tax)
SECTION
3 Computation of Tax Base and Tax Amount of Transfer
Income
Article 92 (Calculation of Tax Base of Transfer Income)
Article 93 (Order in Calculation of Tax Amount of Transfer Income)
SECTION
4 Computation of Transfer Income Amount
Article 94 (Scope of Transfer Income)
INCOME TAX ACT
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Article 95 (Transfer Income Amount)
Article 96 (Transfer Value)
Article 97 (Calculation of Necessary Expenses for Transfer Income)
Article 98 (Time of Transfer or Acquisition)
Article 99 (Computation of Standard Market Price)
Article 99-2 (Application for Re-computation and Pubic Notification of Standard
Market
Price)
Article 100 (Computation of Gains from Transfer)
Article 101 (Calculation of Transfer Income by Unlawful Act)
Article 102 (Separate Calculation of Transfer Income Amount)
SECTION
5 Basic Deduction for Transfer Income
Article 103 (Basic Deduction for Transfer Income)
SECTION 6 Calculation of Tax Amount of Transfer Income
Article 104 (Tax Rates
of Transfer Income)
Article 104-2 (Operation of Designated Area)
Article 104-3 (Scope of Land for Non-business)
SECTION 7 Preliminary Return and Voluntary Payment of Tax Base of
Transfer Income
Article 105 (Preliminary Return of Tax Base of Transfer Income)
Article 106 (Voluntary Payment by Provisional Return)
Article 107
(Calculation of Tax Amount to be Paid by Provisional Return)
Article 108 (Deduction of Tax Amount paid by Provisional Return)
Article
109 Deleted.
Article 110 (Final Return on Tax Base of Transfer Income)
Article 111 (Voluntary Payment by Final Return)
Article 112 (Payment of Transfer Income Tax in Installments)
Article 112-2 (Payment of Transfer Income Tax in Kind)
SECTION 9 Determination,
Reassessment, Collection and Refund of
Transfer Income
Article 113 Deleted.
Article 115 (Additional Tax on Transfer Income Tax)
Article 116 (Collection of Transfer Income Tax)
Article 117 (Refund of Transfer Income Tax)
Article 118 (Applicable Provisions)
SECTION 10 Transfer Income Tax on Transfer of Assets in Foreign
Countries
Article 118-2 (Scope of Transfer Income)
Article 118-3 (Value of Transfer)
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Article 118-4 (Calculation of Necessary Expenses in Transfer Income)
Article 118-5 (Tax Rate of Transfer Income)
Article 118-6 (Deduction of Tax Amount Paid to Foreign Countries)
Article 118-7 (Basic Deduction for Transfer Income)
Article 118-8
(Applicable Provisions)
CHAPTER TAX LIABILITY FOR NONRESIDENT
SECTION 1 Common Provisions concerning Calculation of Tax Amount
for Nonresident
Article 119 (Domestic Source Income of Nonresident)
Article 120 (Domestic Business Place of Nonresident)
Article 121 (Method of
Taxation on Nonresident)
SECTION 2 Global Taxation on Nonresident
Article 122 (Calculation of Tax Base and Tax Amount in Case of Global Taxation on
Nonresident)
Article 123 (Application of Nonresident for Reduction and Exemption of Tax Amount)
Article 124 (Return and Payment by Nonresident)
Article 125 (Determination and Collection of Tax Base and Tax Amount on Nonresident)
SECTION 3 Separate Taxation on Nonresident
Article 126 (Calculation of Tax Base and Tax Amount in Case of Separate Taxation
on Nonresident)
Article 126-2 (Special Case concerning Return by Nonresidents on Income Amount from
Transfer of Securities and Payment of Tax Amount,
etc.)
CHAPTER WITHHOLDING TAX
SECTION 1 Withholding Tax
Sub-Section 1 Withholding Agent, and Collection and Payment
Article 127 (Liability for Withholding)
Article 128 (Payment of Withholding Tax)
Article 129 (Withholding Tax Rates)
Sub-Section 2 Withholding from Interest Income, etc.
Article 130 (Method of Withholding from Interest Income, etc.)
Article 131
(Fictitious Payment Date of Interest Income)
Article 132 (Fictitious Payment Date of Dividend Income)
Article 133 (Delivery of
Withholding Receipt on Interest Income, etc.)
Sub-Section 3 Withholding from Earned Income
Article 134 (Method of Withholding from Earned Income)
Article 135 (Fictitious Payment Date of Earned Income)
Article 136 (Tax
Amount Withheld from Bonus, etc.)
Article 137 (Year-End Adjustment of Earned Income Tax Amount)
Article 138 (Year-End Adjustment
of Earned Income Tax Amount for Reemployed Person)
INCOME TAX ACT
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Article 139 (Collection of Carry-Over Shortage in Collection)
Article 140 (Report on Income Deduction for Person Having Earned Income)
Article 141 (Report on Income Deduction by Reemployed Person)
Article 142 (Report on Workplace)
Article 143 (Delivery of Receipt of Withholding from Earned Income)
Sub-Section 3-2 Withholding from Annuity Income
Article 143-2 (Method of Withholding from Annuity Income)
Article 143-3 Deleted.
Article 144-2 (Settlement of Accounts in Year-End on Tax Amount of Business Income
Except for Final Return of Tax Base)
Sub-Section 5 Collection of Tax on Miscellaneous Incomes through Withholding
Article 145 (Method of Collection of Tax on Miscellaneous
Incomes through Withholding
and Delivery of Withholding Receipt)
Sub-Section 6 Withholding from Retirement Income
Article 146 (Method of Withholding from Retirement Income and Delivery of Withholding
Receipt)
Article 147 (Fictitious Payment Date of Retirement Income)
Article 148 (Withholding Tax Amount on Retirement Income)
SECTION 2
Collection of Tax through Withholding by Tax Association
Article 149 (Organization of Tax Association)
Article 150 (Liability of Tax Association for Collection of Taxes)
Article 151 (Payment of Tax Amount Collected by Tax Association)
Article 152 (Method of Collection by Tax Association)
Article 153 (Management of Tax Payment by Tax Association)
SECTION 3 Special
Case of Collection of Tax through Withholding
Article 154 (Exemption from Withholding)
Article 155 (Exclusion from Withholding)
Article 156 (Special Case of Withholding from Domestic Source Income of Nonresident)
Article 156-2 (Application for Non-Taxation,
etc. on Domestic Source Incomes of
Nonresident)
Article 156-3 (Special Cases for Withholding on Debentures, etc. of Non-resident)
Article 156-4 (Special Cases for Procedures for
Withholding on Non-residents)
Article 156-5 (Special Cases concerning Withholding Procedures Related to Services
Performed by Nonresident
Entertainers)
Article 157 (Succession to Withholding)
INCOME TAX ACT
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SECTION 4 Additional Tax for Unfaithfulness in Withholding, Collection
and Payment of Tax
Article 158 (Additional Tax for Unfaithfulness in Withholding, Collection and Payment
of Tax)
Article 159 (Additional Tax for Nonpayment by Tax Association)
CHAPTER SUPPLEMENTARY PROVISIONS
Article 160 (Keeping and Entry of Books)
Article 160-2 (Receipt and Keeping of Evidence of Disbursement of Expenses)
Article 160-3 (Obligation to Make and Keep Records on
Issuance of Donation Receipts)
Article 160-4 (Obligation of Financial Institutions to Make and Keep Records on Issuance
of Certificates)
Article 160-5 (Obligation to Open and Use Business Account)
Article 161 (Separate Entry)
Article 162 (Installation and Use of Cash Register)
Article 162-2 (Obligation to Subscribe for Credit Card Member Store and to Issue
Credit
Card Sales Slip)
Article 162-3 (Obligation to Subscribe for Cash Receipt Member Store and to Issue Cash
Receipt)
Article 163 (Preparation, Delivery, etc. of Account Statement)
Article 163-2 (Submission of Table of Sum of Tax Invoices by Sellers)
Article 164 (Submission of Payment Record)
Article 164-2 (Special Cases concerning Duties for Submission of Payment Records on
Nonresident s Domestic Source Income, etc.)
Article 165 (Submission of Supporting Documents for Income Deduction and
Administrative Guidance)
Article 166 (Use of Computer Processing Information Data on Resident Registration)
Article 167 (Submission of Certified Copy of
Resident Registration or Such)
Article 168 (Registration of Business or Trade Operators and Assignment of Taxpayer
Code Numbers)
Article 169 (Payment of Grant)
Article 170 (Question and Investigation)
Article 171 (Consultation)
Article 172 (Perusal, etc. of Documents Related to Sale, Registration, Entry, etc.)
Article 173 (Cooperation for Collection of Taxation
Data)
Article 174 (Submission of Material of Payment of Insurance Money against Loss)
Article 175 (Sample Surveys)
CHAPTER GENERAL PROVISIONS
Article 1 (Liability for Tax Payment)
(1) Any person who falls under any of the following subparagraphs shall
INCOME TAX ACT
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be liable to pay the income tax on his income under this Act:
1. A person who holds his domicile in Korea or has held his temporary
domicile in Korea for one or more years (hereinafter referred
to as
a "resident"); and
2. A person who is not a resident (hereinafter referred to as a "nonresident"),
but has any income derived from the Korean source.
(2) Any person who falls under any of the following subparagraphs shall
be liable to pay the income tax withheld under this Act:
1. Resident;
2. Nonresident;
3. Corporation having its head office or principal office in Korea (hereinafter
referred to as a "domestic corporation");
4. Domestic branch or business office (including any sub-branch and
other similar ones; hereinafter the same shall apply) of a corporation
having its head office or principal office in a foreign country (hereinafter
referred to as a "foreign corporation"); and
5. Any other withholding agent as prescribed by this Act.
(3) Any unincorporated association, foundation or other organization, which
is not an organization considered as a corporation under Article 13 (4)
of the Framework Act on National Taxes (hereinafter referred
to as an
"organization considered as corporation"), shall be considered as a resident
and subject to the application of this Act.
(4) The matters concerning the distinction between the domicile and
temporary domicile and between the resident and nonresident
as referred
to in paragraph (1) shall be determined by the Presidential Decree.
Article 2 (Scope of Tax Liability)
(1) When calculating under the provisions of Article 43 the amount of
income derived from a joint business, each relevant resident
shall be liable
to pay the tax concerned: Provided, That where the income amount of
any specially related persons is summing up
to the income amount of
the major joint businessman under the provisons of Article 43 (3) (hereafter
in this paragraph referred
to as the "major joint businessman") for taxation,
the specially related persons shall be jointly liable to pay the tax on
the
sum of the relevant income amounts with the major joint businessman
within the extent of the income amount corresponding to his
profit-and-loss
INCOME TAX ACT
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distribution ratio under the provisions of paragraph (2) of the same Article.
(4) Where it is deemed that a donor has directly transferred the property
under Article 101 (2), the donor and donee shall be severally
and jointly
liable to pay a tax on the transfer income.
(5) Any person who has any income which is subject to the withholding
under Article 127 and which is not added to the tax base for
the global
income tax under Article 14 (3) or any other Acts, shall be liable to pay
the income tax to be withheld.
In case of a resident, the income tax shall be levied on all the incomes
as prescribed by this Act, and in case of a nonresident,
only on the domestic
source income as prescribed in Article 119.
Article 4 (Classification of Income)
(1) The income of a resident shall be classified as follows: 1. Global income: Income calculated by summing up interest income,
dividend income, real estate rental income, business income, earned
income, annuity income and miscellaneous income accruing during the
corresponding year;
2. Retirement income: Income accruing from retirement and lump-sum
payment under the National Pension Act or the Public Officials
Pension
Act, etc. (including such lump-sum payments as additional payments,
allowances, etc., paid in forms other than annuity;
hereinafter the
same shall apply);
3. Transfer income: Income accruing from a transfer of assets; and
4. Deleted.
12
accounts of the insurance companies under the provisions of Article 135
of the Indirect Investment Asset Management Business Act)
shall be made
by the contents of income accruing from the property rights which have
been transferred to the trustees under the
provisions of Article 1 (2) of
the Trust Act or which have been otherwise disposed of.
(1) The income tax shall be levied on the amount of income for one year
from January 1 to December 31.
(2) If a resident dies, the income tax shall be levied on the amount of
income accruing in the period from January 1 to the date
of death.
(3) If a resident becomes a nonresident due to the moving of the domicile
or temporary domicile to a foreign country
(hereinafter referred to as
"departure from country"), the income tax shall be levied on the amount
of income accruing from January
1 to the date of departure from the
country.
Article 6 (Place of Tax Payment)
(1) The payment place of the income tax on a resident shall be the place
of his domicile: Provided, That if there is no such place
of domicile, it
shall be the place of his temporary domicile.
(2) The payment place of the income tax on a nonresident shall be the
seat of the domestic business place as prescribed in Article
120 (if there
are two or more domestic business places, the principal one): Provided,
That if there is no domestic business place,
it shall be the place where
the domestic source income accrues.
(3) If the place for tax payment is obscure, it shall be determined under
the conditions as prescribed by the Presidential Decree.
Article 7 (Tax Payment Place in Case of Withholding Tax, etc.)
(1) The payment place of the income tax withheld from the source
shall
be as follows:
1. If the person who collects the income tax through withholding is a
resident, it shall be the seat of his principal business place:
Provided,
That if the tax is withheld from a business place other than the principal
one, it shall be the seat of such business
place, and if there is no
INCOME TAX ACT
13
business place, it shall be the place of his domicile or temporary domicile;
2. If the person who collects the income tax through withholding is a
nonresident, it shall be the seat of his principal domestic
business
place: Provided, That if he collects the income tax through withholding
at a domestic business place other than his principal
domestic business
place, it shall be the seat of such domestic business place, and if there
is no domestic business place, it shall
be his place of temporary settlement
or his place of sojourn;
3. If the person who collects the income tax through withholding is a
corporation, it shall be the seat of its head office or principal
office;
4. Notwithstanding the provisions of subparagraph 3, if the person who
collects the income tax through withholding is a corporation,
and its
branch, business office and other business place independently manage
the accounting affairs on a pay-as-you-go basis,
it shall be the seat
of such business place (excluding the cases where the seat of such
business place is located in a foreign
country): Provided, That, in cases
as prescribed by the Presidential Decree, the seat of the head office
or principal office of
the corporation may be treated as the place of
payment of the income tax to be collected through withholding; and
5. If the withholding agent as prescribed in Article 156, has no place
of tax payment as referred to in subparagraphs 1 through 4,
it shall
be the place as prescribed by the Presidential Decree.
(2) The place of payment of the income tax collected by the tax
association
under Article 150, shall be the seat of the tax association concerned.
Article 8 (Tax Payment Place in Case of Inheritance,
etc.)
(1) In case where an inheritor of a resident or nonresident becomes a
person liable to pay the income tax on the predecessor,
due to the death
of the resident or nonresident, the place of payment of the income tax
shall be the place of the locality of domicile
or temporary domicile of the
predecessor, inheritor or tax manager, which the inheritor or tax manager
reports as the place of
tax payment to the superintendent of the competent
district tax office, under the conditions as prescribed by the Presidential
Decree.
(2) If a nonresident appoints a tax manager, the place of payment of the
income tax on the nonresident shall be the seat of his
domestic business
place or the locality of domicile or temporary domicile of his tax manager,
INCOME TAX ACT
14
which is reported as a tax payment place to the superintendent of the
competent district tax office, under the conditions as prescribed
by the
Presidential Decree.
(3) When the report as referred to in paragraph (1) or (2) is made, the
reported place shall, thereafter, be considered as the place
for tax payment
of the resident or nonresident.
(4) If there is no report as referred to in paragraph (1) or (2), the place
of payment of income tax on the resident or nonresident
shall be subject
to the provisions of Articles 6 and 7.
(5) The place of payment of income tax on a public official who has no
address in Korea, shall be such place as prescribed by the
Presidential
Decree.
Article 9 (Designation of Tax Payment Place)
(1) Notwithstanding the provisions of Articles 6 through 8, the
Commissioner of the National Tax Service or the commissioner of
the
competent regional tax office may designate separately the tax payment
place, under the conditions as prescribed by the Presidential
Decree, in
the following cases: 1. Where a resident having any real estate rental income or business
income, requests as tax payment place in the seat of his business
place;
and
2. In case of a resident other than the resident as referred to in subparagraph
1 or nonresident, if it is deemed that the tax payment
place as prescribed
in Articles 6 through 8 is unreasonable in view of the income situation
of the taxpayer, or inconvenient for
making the tax payment.
(2) In the event that the tax payment place is designated under paragraph
(1), or the request as referred
to in subparagraph 1 of the said paragraph
is filed but the designation of the tax payment place is not made as requested
because
it is deemed unreasonable for the convenience of tax administration
to designate the seat of business place as the tax payment place,
the
Commissioner of the National Tax Service or the commissioner of the
competent regional tax office shall notify it in writing
to the taxpayer,
his inheritor, tax manager, or tax association, respectively.
(3) If the cause of designation of the tax payment
place as referred to
in paragraph (1), is extinguished, the Commissioner of the National Tax
Service or the commissioner of the
competent regional tax office shall revoke
INCOME TAX ACT
15
the designation of the tax payment place.
(4) Even though the designation of the tax payment place as referred
to in paragraph (1) is revoked, any return, request, claim,
payment, or
other Acts on the income tax, made prior to the revocation, shall not be
affected.
Article 10 (Report on Change of Tax Payment Place)
If the tax payment place as referred to in Articles 6 through 9, is changed,
it shall be reported to the superintendent of the competent district tax
office in the place where the tax payment is to be paid,
within fifteen
days after the change takes place, under the conditions as prescribed by
the Presidential Decree.
The income tax shall be levied by the superintendent of the district tax
office or the commissioner of the regional tax office having
the jurisdiction
over the tax payment place as prescribed in Articles 6 through 10.
CHAPTER TAX LIABILITY ON
RESIDENT'S GLOBAL
INCOME AND RETIREMENT
INCOME
SECTION 1 Non-Taxation, Reduction and Exemption
Article 12 (Non-Taxable Income)
Any income tax shall not be levied on the following incomes: 1. The profits of the public trust under the provisions of Article 65 of
the Trust Act;
2. Real estate rental income accruing from using the paddies and dry
fields for the production of crops and from the house rent,
which is
prescribed by the Presidential Decree;
3. Business income accruing from any side business of the farm household
INCOME TAX ACT
16
which is prescribed by the Presidential Decree;
3-2. Business income accruing from manufacturing traditional liquors,
which is prescribed by the Presidential Decree;
3-3. Business income accruing from the felling or transfer of the growing
trees on the forestland having five years or more of afforestation
period,
which does not exceed six million won in a year. In this case, necessary
matters for calculating afforestation period and
tax amount shall be
prescribed by the Presidential Decree;
4. Earned income or retirement income, which falls under any of the
following items:
(a) Salary received by a soldier on active service, and prescribed by
the Presidential Decree;
(b) Wage received by a person mobilized under law, from the workplace
which mobilizes him;
(c) Medical care benefits, temporary disability compensation benefits,
disability benefits, nursing benefits, survivor's benefits,
survivor's
special benefits, and special disability benefits, funeral expenses
received by the beneficiary under the Industrial
Accident
Compensation Insurance Act, and pay of a compensatory, reparative,
or consolatory nature, received by an employee or his
bereaved family
in connection with any injury, disease or death caused while offering
labor services;
(d) Medical treatment compensation, temporary disability
compensation, injury or disease compensation, lump sum
compensation, disability
compensation, survivor's compensation,
compensation for missing, compensation for loss of personal
belongings, funeral expenses,
and funeral service compensation
received by an employee, seaman, or his bereaved family under
the Labor Standards Act or the Seafarers
Act;
(e) Unemployment benefits, childcare leave benefits, and maternity
leave benefits received under the Employment Insurance Act and
the lump sum refund (limited to that received due to death) or
the lump sum for death received under the National Pension Act;
(f) Medical treatment expenses, lump sum for medical treatment,
disability compensation, death condolence money, death
compensation,
survivor's compensation, survivor's lump sum, lump
INCOME TAX ACT
17
sum of survivor's pension, additional money to survivor's pension,
special additional money to survivor's pension, accident relief
money, and accident compensation, or wages received during leave
for a physical or mental disability or disease under the Public
Officials
Pension Act, the Veterans' Pension Act, the Pension for Private
School Teachers and Staff Act, or the Special Post Offices
Act;
(g) School expenses as determined by the Presidential Decree;
(h) Allowances for the compensation of actual expenses, which
are
determined by the Presidential Decree;
(i) Pay received by the person working for a foreign government (including
the local government of the foreign country, and the
State government
of a foreign federal state; hereinafter the same shall apply), or
an international organization as prescribed
by the Presidential
Decree, who is prescribed by the Presidential Decree: Provided,
That it is limited to a case where the foreign
government does not
levy any income tax on the pay received by any public official of
Korea who works in that country;
(j) Reward benefits and school expenses received under the Act on
the Honorable Treatment and Support of Persons, etc. of
Distinguished
Services to the State, and annuity received under
the Honorable Treatment of Ex-Presidents Act;
(k) Allowances received by military personnel and military service
officials who are stationed in a foreign country to carry out
any
operational mission;
(l) If military personnel or military service officials who serve in a
war, dies in action (including death caused by any war wound;
hereinafter the same shall apply), the pay for the year in which
death ensues;
(m) Wages prescribed by the Presidential Decree received for services
furnished abroad or in North Korea as provided under the
Inter-Korean Exchange and Cooperation Act;
(n) Shares borne by the State or local governments or employers under
INCOME TAX ACT
18
the National Health Insurance Act, the Employment Insurance Act,
the National Pension Act, the Public Officials Pension Act, the
Pension for Private School Teachers and Staff Act, the Veterans'
Pension Act, the Guarantee of Workers' Retirement Benefits Act
or Long-term Care Insurance for the Aged;
(o) Allowances received by workers who are engaged in any production
and related works for the extended work, night work or holiday
work as prescribed by the Presidential Decree, which are prescribed
by the Presidential Decree taking the level of wages, categories
of work, etc. into account;
(p) Meals or meal expenses determined by the Presidential Decree;
(q) Wages received by workers from employers in connection with
their
or their spouses' childbirth or with upbringing of their children
under the age of six, which amount not more than 100,000
won
per month; and
(r) Remunerations and retirement lump sum money received by the
ROK Armed Forces Prisoners of War under the Act on the Repatriation
and Treatment of ROK Armed Forces Prisoners of War Detained
in NK;
4-2. Deleted;
4-3. Income falling under any of the following items among annuity incomes:
(a) Survivor's pension or disability pension received
under the National
Pension Act;
(b) Survivor's pension, disability pension, or injury annuity received
under the Public Officials Pension Act, the Veterans' Pension
Act,
the Pension for Private School Teachers and Staff Act, or the Special
Post Offices Act;
(c) Various annuities received under the Industrial Accident
Compensation Insurance Act; and
(d) Pension received by the ROK Armed Forces Prisoners of War under
the Act on the Treatment of ROK Armed Forces Prisoners of War
Detained in NK; and
5. Miscellaneous incomes, which fall under any of the following items:
INCOME TAX ACT
19
(a) Reward benefits and school expenses received under the Act on
the Honorable Treatment and Support of Persons, etc. of
Distinguished
Services to the State, and the settlement money,
recompense money and other money and valuables received under
the Act on the Protection
and Settlement Support of Residents
Escaping from North Korea;
(b) Prizes and reward received under the National Security Act; prizes
as prescribed by the Presidential Decree;
(c) Supplementary prizes received in connection with any decoration
as prescribed by the Awards and Decorations Act, and other prizes
and supplementary;
(d) The following compensations paid to an employee for an outstanding
invention related to the employee's work, which is prescribed
by
the Presidential Decree:
( ) Compensation paid to en employee from his employer, pursuant
to Article 15 of the Invention Promotion Act; or
( ) Compensation paid to the faculty or staffs from the
industry-academic cooperation, founded in the university they
belong to,
under the Promotion of Industrial Education and
Industry-Academic Cooperation Act, pursuant to Article 32 of
the same Act; and
(e) Settlement money and other money and valuables received by the
ROK Armed Forces Prisoners of War under the Act on the Treatment
of ROK Armed Forces Prisoners of War Detained in NK.
Article 13 (Reduction and Exemption of Tax Amount)
(1) If any income falling
under any one of the following subparagraphs
is included in the global income amount, the income tax amount shall
be calculated
by applying the tax rate as prescribed in Article 55 (hereinafter
referred to as the "basic tax rate") to the balance amount after
taking
the deduction under the provisions of Articles 50, 51, 51-2, 51-3, 51-4
and 52 from the said global income amount (hereinafter
referred to as
the "global income deduction"), and an amount equivalent to the amount
calculated by multiplying the said tax amount
by the rate at which the
relevant earned income amount or business income amount occupies the
global income amount shall be reduced
or exempted:
20
1. Allowances received by a foreigner dispatched to Korea pursuant to
any intergovernmental convention, from both or one of the countries
concerned;
2. Deleted; and 3. Income earned by a resident who is not a national of the Republic
of Korea and a nonresident (hereafter in this Article referred
to as
"nonresident, etc."), from any overseas navigation business of such
vessel and aircraft as prescribed by the Presidential
Decree: Provided,
That it shall be limited to a case where the country the nationality
of which the nonresident, etc. holds, allows
the equal exemption on
any vessel and aircraft operated by a national of the Republic of Korea.
(2) Deleted.
(3) Even though income tax is reduced or exempted pursuant to Acts other
than this Act, the income tax calculated by applying mutatis
mutandis
the provisions of the text of paragraph (1) shall be reduced or exempted,
except as provided otherwise by such Acts.
SECTION 2 Calculation of Tax Base and Tax Amount
Sub-Section 1 Common Provisions concerning Calculation
of Tax Amount
Article 14 (Calculation of Tax Base)
(1) Tax base for a resident's global income and retirement income shall
be calculated separately.
(3) The income falling under any of the following subparagraphs shall
not be added up in calculating the global income tax base
as referred to
in paragraph (2):
No. 8144, Dec. 30, 2006; Act No. 8825, Dec. 31, 2007>
1. Non-taxable income under the Restriction of Special Taxation Act or
Article 12;
2. Wages of a daily-paid worker as prescribed by the Presidential Decree;
3. Interest and dividend incomes withheld at the tax rates as prescribed
in Article 129 (1) 1 (a) or (2), and the excessive refund
of the workplace
mutual-aid association as prescribed in Article 16 (1) 11;
3-2. Interest and dividend incomes received from financial
institutions
by the organization making a financial transaction with an indication
of its title, which does not distribute its
profits to the constituting
members, from among other organizations than those deemed to be
a juristic person;
3-3. Incomes subject to separate taxation under the Restriction of Special
Taxation Act;
4. In case where the aggregate amount of interest income and dividend
income (excluding the dividend income amount under the provisions
of Article 17 (1) 6-3) other than those as referred to in subparagraphs
3, 3-2 and 3-3 does not exceed 40 million won (hereinafter
referred
to as the "standard amount of global taxation on any interest income,
etc."), the income amount to which the provisions
of Article 127 are
applied;
5. Miscellaneous incomes prescribed in Articles 21 (1) 1 through 22 which
do not exceed three million won and to which the provisions
of Article
127 apply (excluding the cases where a resident with the relevant income
intends to add it up in the case of calculation
of the global income
tax base; hereinafter referred to as the "miscellaneous incomes subject
to separate taxation"); and
6. Annuity income under Article 20-3 where the gross annuity amount
under paragraph (3) of the same Article does not exceed six million
won (excluding the cases where a resident having such income intends
to add it up in calculating the global income tax base; hereinafter
referred
to as "annuity income subject to separate taxation").
(4) Deleted.
(5) In computing the standard amount of global taxation on any interest
income, etc. pursuant to paragraph (3) 4, the amount that
is added
pursuant to the proviso of Article 17 (3) shall not be included in the
INCOME TAX ACT
22
dividend income.
(7) Tax base for retirement income (hereinafter referred to as the "retirement
income tax base") shall be the amount obtained by
deducting the retirement
income amount as prescribed in Article 22 from the retirement income
amount as prescribed in Article 48.
(8) Deleted.
Article 15 (Order in Calculation of Tax Amount)
Except as otherwise provided for in this Act, income tax on a resident's
global income and retirement income shall be calculated
as follows:
1. The calculated tax amount on global income and the calculated tax
amount on retirement income shall be calculated, respectively,
by
applying the basic tax rate to each tax base calculated under the
provisions of Article 14;
2. The final tax amount on global income and the final tax amount on
retirement income shall be calculated, respectively, by taking
the
deduction prescribed in Articles 56 through 59 from each of the tax
amounts calculated under the provisions of subparagraph
1 (hereinafter
referred to as the "tax credit"). In this case, when there is any tax
credit for dividend income under the provisions
of Article 56, the amount
obtained by making the tax credit under Articles 56-2 and 57 through
59 for the amount obtained by making
a tax credit for dividend income
from the calculated tax amount or the amount under the provisions
of subparagraph 2 of Article
62, whichever is larger shall be the tax
amount, and if there is any tax amount reduced or exempted under
the provisions of Article
13, each final tax amount shall be calculated
by deducting it; and
3. The gross final tax amount on global income and the gross final tax
amount on retirement income shall be calculated, respectively,
by adding
the additional tax prescribed in Article 81 of this Act and Articles
INCOME TAX ACT
23
47-2 through 47-5 of the Framework Act on National Taxes to the
final tax amounts calculated under the provisions of subparagraph
2.
Sub-Section 2 Categories and Amount of Incomes
Article 16 (Interest Income)
(1) The interest income shall be the following incomes accruing during
the corresponding year:
1. Interest and discount amount of any bonds or securities issued by
the State or the local government;
2. Interest and discount amount of any bonds or securities issued by
a domestic corporation;
3. Interest and discount amount of deposits (including the installment
savings, security deposits, deposits and postal transfer;
hereinafter
the same shall apply) received in Korea;
4. Profits accruing from the credit fraternity or credit installments as
prescribed by the Mutual Savings Banks Act;
5. Deleted; 6. Interest and discount amount of any bonds or securities issued by
a domestic branch or business office of a foreign corporation;
7. Interest and discount amount of any bonds or securities issued by
a foreign corporation;
8. Interest of deposits received from abroad;
9. Marginal profits from sales of bonds or securities under a repurchase
agreement as prescribed by the Presidential Decree;
10. Marginal profits of any insurance of nature of savings as prescribed
by the Presidential Decree;
11. Excessive refund of any workplace mutual association as prescribed
by the Presidential Decree;
12. Profits accruing from a non-business loan; and
13. Incomes similar to those under subparagraphs 1 through 12, which
bear a nature of price following any use of money.
(2) The
interest income amount shall be included in the total gross income
amount accruing during the corresponding year.
(3) Matters necessary for the interest income as referred to in each
subparagraph of paragraph (1) and the scope of interest income
amount
INCOME TAX ACT
24
under the provisions of paragraph (2) shall be determined by the Presidential
Decree.
Article 17 (Dividend Income)
(1) The dividend income shall be the following incomes accruing during
the corresponding year:
1. Dividends or shares of any profits or surplus received from a domestic
corporation, and dividends of the interest during construction
as
prescribed in Article 463 of the Commercial Act;
2. Dividends or shares received from an organization considered as
corporation;
3. Fictitious dividends;
4. Amounts disposed as dividend under the Corporate Tax Act;
5. Profits accruing from investment trusts prescribed by the Presidential
Decree which are received at home or from abroad;
6. Dividends or shares of any profits or surplus received from a foreign
corporation, and dividends of the interest during construction
as
prescribed by the laws and regulations of the relevant foreign country,
and dividends of the similar nature;
6-2. Amount regarded as allotted under the provisions of Article 17 of
the Adjustment of International Taxes Act;
6-3. Income amount accruing from the joint business referred to in Article
43 that is distributed to the joint investment businessmen
according
to the profit-and-loss distribution ratio under the provisions of Article
43 (1); and
7. Incomes similar to those under subparagraphs 1 through 6 and 6-2,
which bear a nature of profit distribution.
(2) The fictitious dividend referred to in paragraph (1) 3 shall mean the
amount falling under any of the following subparagraphs,
and shall be
considered to have been paid to the relevant stockholders, employees and
other investors: 1. Amount of money or value of other property acquired by a stockholder
due to a retirement of stocks or reduction of capital, or
by an employee
or investor due to retirement or withdrawal from a company or reduction
of investment, which exceeds the amount
disbursed by the stockholder,
INCOME TAX ACT
25
employee or investor for acquiring the stocks or investment shares;
2. Value of the stocks or investment shares acquired by capitalizing he
whole or part of the surplus fund of a corporation or the
amount of
investment: Provided, That this shall not apply to the cases where
any amount falling under any of the following items
is capitalized:
(a) The capital reserve fund under the provisions of Article 459 (1)
1, 1-2, 1-3, 2, 3 and 3-2 of the Commercial
Act (excluding the
amount of the stocks, etc. issued exceeding the market price of
the relevant stocks, etc. in case where the
stocks, etc. are issued
in a debt-equity swap; excluding the marginal gains accruing from
evaluation of corporations undergoing
merger or from evaluation
of dividing companies under the conditions as prescribed by the
Presidential Decree; and limited to the
gains from the retirement
of treasury stocks or treasury shares that are capitalized after two
years from the date of retirement
in case where the market price
under the provisions of Article 52 (2) of the Corporate Tax Act
does not exceed the acquisition
value at the time of retirement);
and
(b) Revaluation reserve fund in accordance with the Assets Revaluation
Act (excluding the amount equivalent to the revaluation excess
of land under Article 13 (1) 1 of the same Act);
3. The amount of money or value of other properties acquired by a
stockholder, an employee, an investor or a member of a dissolved
corporation (including any organization considered as a corporation),
as a share of the remaining assets of the dissolved corporation,
which
exceeds the amount disbursed for acquiring the stocks, investment
shares, or capital: Provided, That this shall not apply
to cases of changing
structures of a domestic corporation and falling any of the following
subitems:
(a) Where a corporation changes its structures under the Commercial
Act;
(b) Where a corporation that was established by a special law changes
its structure, due to amendment or annulment to a corporation
under the Commercial Act; and
(c) Where a domestic corporation changes its structures as prescribed
by the Presidential Decree;
4. The sum of money and value of stocks or investment shares acquired
INCOME TAX ACT
26
due to a merger, by a stockholder, employee or investor of a corporation
extinguished by the merger, from a corporation continuing
to exist after
the merger or established newly due to the merger, which exceeds the
amount disbursed for acquiring the stocks or
investment shares of the
corporation extinguished by the merger;
5. Where the ratio of stockholding of stockholders other than the corporation
concerned is increased due to the capitalization under
each item of
subparagraph 2 in such status that the corporation retains the treasury
stocks or treasury shares, the value of the
stocks equivalent to the
increased ratio of stockholding; and
6. The amount by which the total sum of price of stocks, money, and
other asset values (hereinafter referred to as the "price of
division")
which are gained by the stockholder of a corporation which is divided
when a corporate division occurs (hereinafter
referred to as a "divided
corporation") or by the stockholder of an extinguished party of a
merger by division, through division
from a corporation established
as a result of division or from the other party of the merger by division,
exceeds the amount disbursed
in acquiring the stocks of the divided
corporation or the extinguished party of the merger by division (limited
to the stocks which
are decreased due to their retirement, etc., if the
divided corporation continues to exist).
(3) The dividend income amount shall be included in the total gross income
amount accruing during the corresponding year: Provided,
That where
the dividends falling under any of the following subparagraphs are excluded
from the dividend incomes referred to in
paragraph (1) 1 through 4, the
amount equivalent to 15/100 of the said dividend incomes shall be added
up to the total gross income
amount accruing during the corresponding
year:
1. Fictitious dividend resulted from capitalizing the marginal profit from
retirement of treasury stocks or treasury shares under
paragraph (2)
2 (a);
2. Fictitious dividend resulting from capitalizing the marginal profit from
revaluation of land under paragraph (2) 2 (b);
3. Fictitious dividends under the provisions of paragraph (2) 5; and
4. Where there is a dividend income from a corporation prescribed by
INCOME TAX ACT
27
the Presidential Decree from among corporations which are subject
to a non-taxation, exemption, reduction and exemption, income
deduction of the corporate tax to which the minimum tax under Article
132 of the Restriction of Special Taxation Act does not apply
(including
a non-taxation, exemption, reduction and exemption, or income
deduction pursuant to other Acts than the Restriction
of Special Taxation
Act), the amount which are calculated by multiplying the amount of
the dividend income by the rate prescribed
by the Presidential Decree.
(4) In applying the provisions of paragraph (2) 1, 3, 4 and 6, in cases
where the amount spent for
acquiring stocks or investment shares is not
clear, their par value or investment amount shall be considered the amount
spent for
their acquisition.
(6) Matters necessary for the dividend income under the provisions of
each subparagraph of paragraph (1) and the scope of dividend
income
amount under the provisions of paragraph (3) shall be prescribed by the
Presidential Decree.
(1) The real estate rental income shall be the following incomes accruing
during the corresponding year:
1. Income accruing from a lease of any real estate or right to the real
estate;
2. Income accruing from a lease of a factory or mining foundation; and
3. Income accruing from a lease of the right to mine by the owner of
a mining right, person holding the mining concession right,
or
subcontractor of mining.
(2) The real estate rental income shall be the amount calculated by deducting
the necessary expenses disbursed for it, from the
total gross income amount
accruing during the corresponding year.
(3) The term "lease" used in paragraph (1) means to establish a right
to lease on a deposit basis or other right to receive consideration
for it,
and to have another person use anything or right, or benefit from it, by
a lease contract or other way, to receive consideration
for it.
(4) Matters necessary for the scope of the real estate rental income, shall
INCOME TAX ACT
28
be determined by the Presidential Decree.
Article 19 (Business Income)
(1) The business income shall be the following income accruing during
the corresponding year:
1. Incomes accruing from agriculture (excluding cash crops cultivating
business; hereinafter the same shall apply) and forestry business;
2. Incomes accruing from the fishery business;
3. Incomes accruing from the mining business;
4. Incomes accruing from the manufacturing industry;
5. Incomes accruing from the electricity, gas and water supply businesses;
6. Incomes accruing from the construction business (including such sales
business of newly constructed houses as prescribed by the
Presidential
Decree; hereinafter the same shall apply);
7. Incomes accruing from the wholesale business and retail business;
8. Incomes accruing from the restaurant business and lodging business;
9. Incomes accruing from the transportation business and communication
business;
10. Incomes accruing from the banking business and insurance business;
11. Incomes accruing from the real estate business (excluding the incomes
accruing from the real estate rental business and the real
estate sale
business as referred to in subparagraph 12; hereinafter the same shall
apply), lease business and enterprise service
business;
12. Incomes accruing from the real estate sale business as prescribed by
the Presidential Decree;
13. Incomes accruing from the educational service business;
14. Incomes accruing from the health and social welfare business;
15. Incomes accruing from service business related to recreation, culture,
or sports, public services, repair services, or private
services; and
16. Incomes accruing from the domestic service business.
(2) Business income shall be the amount calculated by deducting the
necessary
expenses disbursed for it, from the total gross income amount
accruing during the corresponding year.
(3) Matters necessary for the scope of the business income shall be
determined by the Presidential Decree.
Article 20 (Earned Income)
(1) The earned income shall be the following incomes accruing during the
INCOME TAX ACT
29
corresponding year:
1. Class A:
(a) Salary, pay, remuneration, annual allowance, wage, bonus,
allowance, and other benefits of a similar nature, which
are received
for offering labor;
(b) Income received as a bonus by a resolution at the general meetings
of stockholders or partners of a corporation, or similar
deliberative
organs;
(c) Amount considered as a bonus under the Corporate Tax Act; and
(d) Income received due to a retirement, which is not included
in the
retirement income; and
2. Class B:
(a) Pay received from a foreign organization or the United Nations
Forces (excluding the United States Armed Forces)
stationed in
Korea; and
(b) Pay received from a foreigner or foreign corporation located abroad
(excluding domestic branch or business office), excluding
that
appropriated as necessary expenses or loss in calculating the
domestic source income amount accruing from the domestic business
place of a foreigner as prescribed in Article 120 (1) and (2) and
from the domestic business place of a foreign corporation as
prescribed
in Article 94 (1) and (2) of the Corporate Tax Act.
(2) The earned income shall be the amount calculated by deducting
the
amount as prescribed in Article 47 from the income amounts referred to
in the subparagraphs of paragraph (1) (excluding non-taxable
incomes;
hereinafter referred to as "gross pay").
30
value of such stocks, shall not be regarded as an earned income.
(4) Matters necessary for the scope of earned incomes shall be determined
by the Presidential Decree.
Article 20-2 Deleted.
(1) The annuity income shall be the following incomes accruing during
the corresponding year:
1. Various annuities received under the National Pension Act;
2. Various annuities received under the Public Officials Pension Act, the
Veterans' Pension Act, the Pension for Private School Teachers
and
Staff Act, or the Special Post Offices Act;
3. Where the retirement insurance money as determined by the Presidential
Decree is received in the form of annuity, the annuities
received by
a retiree as the relevant annuity or other similar payments;
4. Income received in the form of annuity by participating in the pension
savings plan under Article 86-2 of the Restriction of Special
Taxation
Act (referring to the annuity income computed by the formula under
paragraph (3) of the same Article; hereinafter the
same shall apply);
4-2. Pension received under the Guarantee of Workers' Retirement
Benefits Act; and
5. Incomes similar to those under subparagraphs 1 through 4, which are
paid in the form of annuities as prescribed by the Presidential
Decree.
(2) The annuity income under the provisions of paragraph (1) 1 and 2
shall be the annuity income received based on either
the contributions
to pension and employer contributions (including the contributions by the
State or a local government; hereinafter
the same shall apply) paid on
or after January 1, 2002, or the offer of labor made on or after January
1, 2002, and the annuity
income under the provisions of paragraph (1)
4-2 shall be the annuity income received based on an amount which has
been deducted
under the provisions of Article 51-3 (1) 3.
(3) The annuity income amount shall be the amount calculated by deducting
the amounts referred to in Article 47-2 from the sum of
the incomes under
any subparagraph of paragraph (1) (excluding those that are excluded
INCOME TAX ACT
31
from annuity income under paragraph (2) and the no-taxable income;
hereinafter referred to as "gross annuity amount").
(4) The
scope of annuity income, calculation methods of annuity income
and other necessary matters shall be prescribed by the Presidential
Decree.
[This Article Newly Inserted by Act No. 6292, Dec. 29, 2000]
Article 21 (Miscellaneous Incomes)
(1) The miscellaneous incomes shall be the incomes other than interest
income, dividend income, real estate rental income, business
income,
earned income, annuity income, retirement income and transfer income
that are provided for in any of the following subparagraphs:
1. Prize, award, reward, compensation for service, or similar money and
valuables;
2. Money and other valuables obtained by winning in any lottery, premium
or other tickets;
3. Financial profits obtained by participating in any act as prescribed
by the Act on Special Cases concerning Regulation and Punishment
of Speculative Acts, etc.;
4. Refunds received by a purchaser of a horse racing ticket prescribed
by the Korean Racing Association Act (hereinafter referred
to as the
"horse racing ticket"), a winner voting ticket prescribed by the Bicycle
and Motorboat Racing Act (hereinafter referred
to as the "winner voting
ticket"), a bullfighting match voting ticket prescribed by the Traditional
Bullfighting Match Act (hereinafter
referred to as the "bullfight match
voting ticket"), and a sports promotion voting ticket prescribed by the
National Sports Promotion
Act (hereinafter referred to as the "sports
promotion voting ticket");
5. Money and other valuables received by a person other than the author,
stage performer, phonograph record maker or broadcasting
business
operator, in consideration of a transfer or use of the copyright or
neighboring rights;
6. Money and other valuables received in consideration of a transfer,
lease or use of any asset or right of the following items:
(a) Movie films;
INCOME TAX ACT
32
(b) Tapes or films for the radio and television broadcast; and
(c) Others similar to those referred to in items (a) and (b), which
are prescribed by the Presidential Decree;
7. Money and other valuables received in consideration of the transfer
or lease of mining rights, fishing rights, industrial property
rights and
industrial information, industrial secrets, trademark rights, business
rights (including the rights to lease a store
prescribed by the Presidential
Decree), rights incidental to permission to collect earth, sand and rocks,
rights to develop and
use underground water, and other assets or rights
similar thereto;
8. Money and other valuables received as rent for a temporary lease of
any goods or place;
9. Money and other valuables received for establishment or lease of
servitude or superficies (including the rights established under
the
ground or in air space);
10. Overdue charge or indemnities caused by a breach or cancellation of
a contract;
11. In case where any compensation is paid, or any new ownership is
acquired, for finding any lost articles or buried property, such
compensation or assets;
12. Assets the ownership of which is acquired by possessing any ownerless
thing;
13. Money and other valuables received by a specially related person with
a resident, nonresident or corporation prescribed by the
Presidential
Decree from the relevant resident, nonresident or corporation on the
reason of such special relation, which are not
considered as pay, a
dividend or donation but considered as an economy profit: Provided,
That where a member of an employee stockholders
association has
acquired the stocks of the corporation concerned through the
association and is a minor stockholder, the income
accruing from the
difference between the acquisition value and the market value of such
stocks shall be excluded;
14. Money and other valuables for prize winning or allotment or others
corresponding to them (hereinafter referred to as "prize money
and
other valuables, etc.") received by participating in acts using slot
machines (including video games) and cointossing machines
and other
similar machines and tools (hereinafter referred to as "slot machines,
INCOME TAX ACT
33
etc.");
15. Incomes received in the capacity of the original author for creative
works of literature, academic, fine arts, music, or photography
(including
the illustrations or cartoons printed in periodicals under the Act on
the Freedom of Newspapers, etc. and Guarantee
of Their Functions,
and translation of Korean creative works or classics into foreign
languages or modern Korean) that falls under
any of the following
items:
(a) Manuscript fees;
(b) Royalties that are paid for use of copyrighted materials; or
(c) Costs received for creative works of fine arts, music, or photography;
16. Fee of a brokerage as to any property right;
17. Recompense;
18. Lump-sum payments received from cancelation of account of mutual
aid fund for small corporations or small enterprises prescribed
by the
Presidential Decree;
19. Rewards received for temporarily furnishing personal services
(excluding those falling under subparagraphs 15 through 17) that
fall
under any of the following items:
(a) Services like lectures, speeches or similar services, made to multiple
persons without an employer-employee relation, for which
rewards
are received;
(b) Services like commentation, enlightenment, or screening of
performances, etc. on the radio, television broadcasting, etc. for
remuneration or other rewards of a similar nature;
(c) Services rendered by a lawyer, certified public accountant, tax
accountant,
architect, surveyor, patent lawyer, or other person
having professional knowledge or special expertise using his
corresponding
knowledge or expertise for remuneration or
consideration; or
(d) Services other than those under items (a) through (c) provided
without an employer-employee relation for allowances or other
similar costs;
20. Income that has been disposed of as miscellaneous income pursuant
to Article 67 of the Corporate Tax Act;
21. Lump-sum payments for termination of personal pension savings
deposits under the Presidential Decree (including amounts received
INCOME TAX ACT
34
in the form other than annuity after the maturity of an installment
payment contract);
22. Gains from exercising after retirement the stock options that have
been granted before retirement, or from exercising those granted
without an employer-employee relation;
23. Bribes; and
24. Money and other valuables received by means of the acceptance of
property through mediation, or the acceptance of property through
breach of trust.
(2) The miscellaneous incomes shall be the amount obtained by deducting
the necessary expenses, from the total gross income amount
accruing during
the corresponding year.
(3) The detailed scope, calculation method and other necessary matters
of miscellaneous incomes shall be prescribed by the Presidential
Decree.
Article 22 (Retirement Income)
(1) Retirement income shall be the following incomes accruing during the
corresponding year: 1. Class A:
(a) Lump sum payments for retirement paid to a person having Class
A earned income;
(b) Honorable retirement allowances paid to public officials in various
services;
(c) Lump sum payments from among retirement insurance as provided
in the Presidential Decree that are received by a person having
Class A earned income for his retirement;
(d) Lump sum return payments or lump sum death payments under
the National Pension Act;
(e) Lump sum payments paid under the Public Officials Pension Act,
the Veterans' Pension Act, the Pension for Private School Teachers
and Staff Act, or the Special Post Offices Act; and
(f) Other lump sum payments similar to those under items (a) through
(e),
which are provided for in the Presidential Decree; and
2. Class B:
Income paid to a person having any Class B earned income, for his
INCOME TAX ACT
35
retirement.
(2) The retirement income under paragraph (1) 1 (d) and (e) shall be
the lump sum payment received based on either contributions
to pension
or employer contributions made on or after January 1, 2002 or on the
offer of labor made on or after January 1, 2002.
(3) Retirement income shall be the amount adding up the incomes as referred
to in each subparagraph of paragraph (1).
(4) The retirement income as referred to in paragraph (1) (excluding income
under subparagraph 1 (d)) shall be limited to the retirement
income paid
to an employee of a resident, non-resident or corporation for his actual
retirement.
(6) The scope of retirement income, methods of calculation and other necessary
matters shall be prescribed by the Presidential Decree.
Article 23 Deleted.
Sub-Section 1 Total Gross Income Amount
Article 24 (Calculation of Total Gross Income Amount)
(1) The total of each income of a resident shall be calculated by summing
up the amounts received or to be received in the corresponding year.
(2) In the case of paragraph (1), if those other than money
are received,
the income amount shall be calculated by the value at the time of the
transaction.
(3) In the calculation of the total gross income amount, the matters necessary
for the scope, calculation and determination date
of the amount received
or to be received, shall be determined by the Presidential Decree.
INCOME TAX ACT
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Article 25 (Special Case for Calculation of Total Gross Income Amount)
(1) If a resident lends any real estate (excluding houses
and land appurtenant
thereto, which are prescribed by the Presidential Decree; hereafter in this
Article, the same shall apply)
or any right to such real estate, and receives
the guarantee money, security money for lease on a deposit basis, or other
money
of a similar nature, the amount calculated under the Presidential
Decree shall be counted in the total gross income amount in the
calculation
of the real estate rental income amount.
(2) Even though a resident consumes any inventory assets or trees for
his domestic use or pays them to his employees or other persons,
the amount
equivalent to the value thereof at the time of consumption or payment
shall be counted in the total gross income amount
in the calculation of
the business income amount or miscellaneous income amount in the year
to which the consumption date or payment
date belongs.
Article 26 (Non-Inclusion in Total Gross Income Amount)
(1) The amount appropriated for other tax amounts, among the income
tax
amount or resident tax amount that has been refunded or is to be
refunded, shall not be counted in the total gross income amount
in the
calculation of the income amount accruing during the corresponding year.
(2) The amount appropriated for making up such
deficit carried-over as
prescribed by the Presidential Decree, among the value of any assets received
gratuitously by a resident,
and the debt amount reduced by exemption
or extinguishment of his obligation, shall not be counted in the total gross
income amount
in the calculation of the income amount accruing during
the corresponding year.
(3) In calculating the real estate rental income or the business income
of a resident, the income amount brought forward from the
preceding year
shall not be counted in the total gross income amount in the calculation
of the income amount accruing during the
corresponding year.
(4) When a resident who engages in the agriculture, forestry, fishery,
mining or manufacturing industry, has used the agricultural
products,
prize, livestock products, forest products, marine products, mining products,
earth, sand and rock which were mined,
caught, bred, cultivated or collected
by him, or has used products manufactured by him, as raw materials or
INCOME TAX ACT
37
fuel for manufacture of other products produced by him, the amount
equivalent to the used portion thereof shall not be counted in
the total
gross income amount in the calculation of the income amount accruing
during the corresponding year.
(6) If a resident carrying on the electricity, gas or water supply business,
has used the electricity, gas or water produced by
him for the power,
fuel or water for other business purposes carried on by him, the amount
equivalent to the used portion shall
not be counted in the total gross income
amount in the calculation of the income amount accruing during the
corresponding year.
(7) The individual consumption tax, liquor tax, and traffic, energy and
environment tax paid or to be paid by a resident who is
liable to pay
such individual consumption tax, liquor tax, and traffic, energy and
environment tax imposed on the amount earned
or to be earned as his
total gross income amount, shall not be counted in the total gross income
amount in the calculation of the
income amount accruing during the
corresponding year, except for any tax amount to be borne in purchasing,
importing or using raw
materials, fuel or other goods.
(9) The sales tax amount of the value-added tax shall not be counted
in the total gross income amount, in calculation of the income
amount
accruing during the corresponding year.
Sub-Section 2 Necessary Expenses and Year of Reversion
Article 27 (Calculation of Necessary Expenses)
INCOME TAX ACT
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(1) The amount to be counted in the necessary expenses in the calculation
of the real estate rental income amount, business income
amount or
miscellaneous income amounts, shall be a sum total of the expenses which
correspond to the total gross income amount
accruing during the
corresponding year and are generally admitted.
(3) Matters necessary for calculating the necessary expenses, shall be
determined by the Presidential Decree.
Article 28 (Calculation of Allowance for Bad Debts as Necessary Expenses)
(1) If a resident having any real estate rental income
or business income
(hereinafter referred to as the "businessman") appropriates as necessary
expenses the allowance for bad debts
with respect to any credit account,
outstanding amount and other credits corresponding thereto, such allowance
for bad debts shall
be counted in the necessary expenses in the calculation
of the income amount accruing during the corresponding year within the
scope as determined by the Presidential Decree.
(2) The balance of the allowance for bad debts appropriated as necessary
expenses under paragraph (1), shall be counted in the total
gross income
amount in the calculation of the income amount in the following year.
(3) Matters necessary for dealing with the allowance
for bad debts shall
be determined by the Presidential Decree.
Article 29 (Calculation of Allowance for Retirement Benefits as Necessary
Expenses)
(1) If a businessman accounts the allowance of retirement benefits to the
retirement benefits of employees as necessary expenses,
such allowance
of retirement benefits shall be counted in the necessary expenses in the
calculation of the income amount accruing
during the corresponding year,
within such limit as determined by the Presidential Decree.
(2) Matters necessary for dealing with
the allowance for retirement benefits,
shall be determined by the Presidential Decree.
Article 30 Deleted.
39
Article 31 (Calculation of Gain from Insurance Settlement Used for
Acquisition of Fixed Assets as Necessary Expenses)
(1) If a
resident acquires the same kinds of fixed assets as a substitute
for any destroyed assets, with the insurance money received for
destruction
or damage of the fixed assets, or improves the fixed assets acquired as
a substitute or damaged assets, the gain from
insurance settlement required
for such acquisition or improvement of the fixed assets, may be appropriated
as necessary expenses
in the calculation of the income amount accruing
during the year to which the day he receives the insurance money belongs,
under
the conditions as prescribed by the Presidential Decree.
(2) If it is impossible to acquire or improve the fixed assets under paragraph
(1) in the year to which the day he receives the insurance money belongs,
the provisions of paragraph (1) shall be applicable mutatis
mutandis only
to those acquired or improved within two years from the beginning of the
year following the corresponding year.
(3) Any person who desires to appropriate the gain from insurance settlement
as necessary expenses under paragraph (2), shall submit
a use plan for
the insurance money received to the chief of a tax office having jurisdiction
over the place of tax payment, under
the conditions as prescribed by the
Presidential Decree.
(4) If a person who appropriates the insurance gain as necessary expenses
under paragraph (2), falls under any of the following
subparagraphs, it
shall be counted in the total gross income amount in the year when the
cause thereof has taken place:
1. Where he fails to use the insurance gain within the time limit to acquire
or improve the fixed assets as referred to in paragraph
(1); and
2. Where he discontinues the business within the period as referred to
in paragraph (2).
Article 32 (Calculation of Value of Assets for Business Acquired with
National Subsidies as Necessary Expenses)
(1) The amount of any subsidy as prescribed by the Act on the Budgeting
and Management of Subsidies (hereinafter referred to as
"national
subsidy"), which a resident receives for the purpose of acquiring or improving
any assets for business, and disburses
for such purpose, may be appropriated
as necessary expenses in the calculation of the income amount accruing
during the year to
which the day he receives the national subsidy belongs,
under the conditions as prescribed by the Presidential Decree.
by Act No. 8144, Dec. 30, 2006>
(2) If it is impossible to acquire or improve the assets for business as
referred to in paragraph (1) in the year to which the day
he receives the
national subsidy belongs, the provisions of paragraph (1) shall apply mutatis
mutandis only to those acquired or
improved by the end of the year following
the corresponding year. In this case, if national subsidies can not be used
within a
fixed period due to unavoidable circumstances that are prescribed
by Presidential Decree such as delay of approval or authorization
on
construction works, the last day of the taxation period, to which the day
of the circumstance concerned ended belong, shall
be the period.
(3) Any person who desires to appropriate the national subsidy as necessary
expenses under paragraph (2), shall submit the use plan
for the national
subsidy received to the chief of a tax office having jurisdiction over the place
of tax payment, under the conditions
as prescribed by the Presidential
Decree.
(4) If the resident who has appropriated the national subsidy as necessary
expenses under paragraph (1) or (2), falls under any
of the following
subparagraphs, it shall be counted in the total gross income amount in
the year when the cause thereof has taken
place:
1. Where he fails to use the national subsidy for the acquisition or
improvement of the assets for business within the time limit
as referred
to in paragraph (1); and
2. Where he discontinues the business within the period as referred to
in paragraph (2).
Article 33 (Non-Inclusion of Necessary Expenses)
(1) The amount paid or to be paid by a resident in the corresponding
year, which falls under any of the following subparagraphs,
shall not be
counted in the necessary expenses in the calculation of the real estate
rental income amount, business income amount,
or miscellaneous income
amount:
1. Income tax and resident tax on a proportional basis of income tax;
2. Fine and penalty (including the amount equivalent to the fine or penalty
by a noticed disposition), and fines for negligence;
3. Additional dues and disposition fees for arrears as prescribed by the
INCOME TAX ACT
41
National Tax Collection Act and other Acts related to taxes;
4. Tax amount (including the additional dues) paid or to be paid due
to nonperformance of the liability for collection as prescribed
by Acts
related to taxes;
5. Expenses for such domestic affairs as prescribed by the Presidential
Decree, and those related thereto;
6. Amounts exceeding the depreciation cost of such depreciable assets,
appropriated for each year, and calculated under the conditions
as
prescribed by the Presidential Decree;
7. Loss from the difference of valuation on assets other than the assets
as prescribed by the Presidential Decree, such as the inventory
assets:
Provided, That the loss from the difference of valuation between the
normal value and the book value of such fixed assets
as prescribed
by the Presidential Decree, shall be excluded;
8. Amount in arrears of the individual consumption tax, liquor tax, or
traffic, energy and environment tax on the products carried
out, but
not sold: Provided, That in cases where an amount equivalent to such
tax amount is added to the value of such products,
this shall not apply;
9. Purchase tax amount of value-added tax: Provided That, for the
value-added tax paid by a person exempted from such tax or others
as prescribed by the Presidential Decree, and for the value-added tax
paid by a person eligible for simplified taxation, this shall
not apply;
10. Interest of the amount of a loan, appropriated for such construction
funds as prescribed by the Presidential Decree;
11. Interest of any loan the creditor of which is obscure;
12. Public charges or imposts that are not mandatory under Acts and
subordinate statutes or those imposed for non-performance of
duties
or violation of prohibited or restricted acts under Acts and subordinate
statutes;
13. Amount of the expenses disbursed in each year, which is deemed not
to be connected directly to the businesses, under the conditions
as
prescribed by the Presidential Decree;
14. Prepaid expenses; and
15. Compensation for damages to be paid by infringing another person's
right on purpose or by negligence in connection with the business.
(2) Where the provisions under paragraph (1) 5, 10, 11 and 13 are applicable
INCOME TAX ACT
42
at the same time, they shall be applied according to the order provided
in the Presidential Decree.
1. Donation to religious organizations:
Minimum amount to be counted in necessary expenses = [Income amount
in the corresponding
year (income amount before adding the donations
pursuant to paragraph (2) and designated donations into necessary
expenses) - donation
amounts counted in necessary expenses pursuant
to paragraph (2), and deficit carried-over (hereafter "statutory
donations" in this
Article)] 10/100 + [smaller amount between (income
amount in the corresponding year - statutory donations) 10/100
(5/100, for donations
made until December 31, 2009) and all donations
made except for to religious organizations; or
2. Cases not falling under item 1;
Minimum amount to be counted in necessary expenses = (income amount
in the corresponding year
- statutory donations) 20/100 (15/100,
for donations made until December 31, 2009).
(2) The provisions of paragraph (1) shall not be applicable to the donation
falling under any of the following subparagraphs: Provided,
That where
the sum of the donations falling under any of the following subparagraphs
exceeds the amount obtained by deducting the
deficit carried-over as
prescribed in the provisions of Article 45 from the income amount accruing
during the corresponding year,
the excess amount shall not be counted
in necessary expenses in the calculation of the income amount accruing
during the corresponding
year:
Dec. 30, 2003; Act No. 7837, Dec. 31, 2005; Act No. 7908, Mar. 24, 2006; Act No. 8144, Dec.
30, 2006; Act No. 8825, Dec. 31, 2007>
1. Money and other valuables donated gratuitously to the State or local
governments (including local governments associations; hereinafter
the
same shall apply): Provided, That the money and other valuables to
which the Donations Collection and Their Use Act is applicable
shall
be limited to those received under the provisions of Article 5 (2) of
the same Act;
2. National defense donation and consolatory money and goods;
3. Value of the relief money and goods for sufferers from any natural
disaster and other reasons as prescribed by the Presidential
Decree,
etc.;
3-2. Value of a voluntary service that is rendered for the restoration
of any special disaster area under the Frame Work Act on
the
Management of Disasters and Safety. In such case, matters necessary
for the method of computation etc. of services shall be
prescribed by
the Presidential Decree;
4. Money or other valuables donated to welfare facilities prescribed by
the Presidential Decree, which are available for public use
free of charges
or at practical charges from among welfare facilities installed under
the Social Welfare Services Act;
5. Money or other valuables donated to needy neighbors through
institutions established to facilitate the formation of relationship
between citizens and needy neighbors, which are prescribed by the
Presidential Decree;
6. Donations paid to the schools, etc. under each of the following items
as the facilities expenses, educational expenses, scholarships
or research
expenses:
(a) Private schools under the Private School Act;
(b) Non-profit educational foundation (limited to the non-profit juridical
foundation
established for the purpose of a new construction,
extension, expansion of facilities and other improvements of
educational environment
of private schools);
(c) Polytechnic colleges under the Polytechnic College Act;
(d) Lifelong educational facilities in the form of a cyber college under
the Lifelong Education Act (hereinafter referred to as a "cyber
college");
INCOME TAX ACT
44
(e) National university-affiliated hospitals under the Act on the
Establishment of National University-affiliated Hospitals;
(f)
Seoul National University Hospital under the Establishment of Seoul
National University Hospital Act;
(g) Seoul National University Dental Hospital under the Establishment
of Seoul National University Dental Hospital Act;
(h) Foreign
educational institutions under the Special Act on
Establishment and Operation of Foreign Educational Institutions
in the Free Economic
Zones and Jeju International Free City;
(i) Industry-academic cooperation groups under the Promotion of
Industrial Education and
Industry-Academic Cooperation Act; and
(j) Korea Advanced Institute of Science and Technology under the Korea
Advanced Institute
of Science and Technology Act, Gwangju Institute
of Science and Technology under the Gwangju Institute of Science
and Technology
Act and Daegu-kyeongbuk Institute of Science and
Technology under the Daegu-kyeongbuk Institute of Science and
Technology Act;
7. Donations made to the Community Chest of Korea under the Community
Chest of Korea Act; and
8. Donations made to the Korean National Red Cross under the Organization
of the Korean National Red Cross Act.
(3) An amount (excluding the amount deducted when a global income tax
return is filed under Article 52 (6) and 54 (2)) which is
donated in excess
of the limit of inclusion of designated donations in necessary expenses
and that is not counted in a necessary
expense under paragraph (1)
may, under the conditions as prescribed by the Presidential Decree, be
carried over to each taxable
period which ends within three years from
the commencement date of a taxable period following the corresponding
taxable period
and counted in a necessary expense.
(1) Where the amount of entertainment expenses (not including the portion
INCOME TAX ACT
45
not counted in a necessary expense under paragraph (2)) disbursed by
a businessman in the corresponding taxable period, exceeds
the sum of
the amounts falling under each of the following subparagraphs, it shall
not be counted in a necessary expense in the
calculation of the income
amount accruing during the corresponding taxable period:
1. Amount calculated by multiplying twelve million won (eighteen million
won in the case of small and medium enterprises determined
by the
Presidential Decree) by the number of months of the corresponding
taxable period, the total of which is divided by 12;
2. Deleted; and 3. Amount obtained by multiplying the sum of the revenue amount
(limited to such revenue amount as determined by the Presidential
Decree) accruing from the business concerned during the corresponding
taxable period, by the applicable rate prescribed by the
following chart:
Provided, That with respect to the revenue amount accruing from
transactions with persons who are in special relation
determined by
of the amount calculated by multiplying such revenue amount by the
applicable rate under the following chart:
Revenue Amount Applicable Rate
Under 10 billion won 20/10,000
Over 10 billion won
Under 50 billion won
20 million won + 10/10,000 of the amount
exceeding 10 billion won
Over 50 billion won 60 million won + 3/10,000 of the amount
exceeding 50 billion won
(2) The entertainment expenses which exceed the amount determined by
the Presidential Decree from among the entertainment expenses
disbursed
by a businessman for one time of entertainment and do not fall under
any one of the following subparagraphs, shall not
be counted in necessary
expenses in the calculation of the income amount accruing during each
taxable period: Provided, That the
same shall not apply to the case of
the entertainment expenses disbursed in the regions out of Korea as
prescribed by the Presidential
Decree where it is difficult to have evidences
provided for in any of the following subparagraphs and for which the fact
INCOME
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46
of disbursement is objectively obvious:
1. Entertainment expenses disbursed by using any one of the following
items (hereinafter referred to as the "credit cards and so
on"):
(a) Credit cards under the Specialized Credit Financial Business Act
(including those similar to the credit cards as determined
by the
Presidential Decree); and
(b) Cash receipts under the provisions of Article 126-3 (3) of the
Restriction of Special Taxation Act (hereinafter referred to
as the
"cash receipts"); and
2. Entertainment expenses disbursed after receiving the account statement
under the provisions of Article 163 of this Act or Article
121 of the
Corporate Tax Act or the tax invoice under the provisions of Article
16 of the Value-Added Tax Act, or issuing the tax
invoice issued by
a purchaser under the provisions of Article 126-4 (1) of the Restriction
of Special Taxation Act.
(3) Deleted.
(4) The term "entertainment expenses" used in paragraphs (1) and (2)
means the entertainment expenses, social expenses, recompense,
and other
expenses of a similar nature regardless of the pretext thereof, which are
disbursed by a businessman in connection with
his business (including
the expenses for welfare facilities, as prescribed by the Presidential Decree,
that are disbursed by a
businessman to the association or organization
formed by employees).
(5) In applying paragraph (2) 1, the amount disbursed with sales slips,
etc, issued in the name of a participating store for credit
cards, etc. other
than the one that has actually offered the corresponding goods or services
shall not be included in the entertainment
expenses under the same
subparagraph of the same paragraph.
(6) Deleted.
Article 36 Deleted.
47
be as follows:
1. In case of the refund payable to a purchaser of a horse racing ticket,
winner voting ticket, bullfighting match voting ticket
or sports promotion
voting ticket as prescribed in Article 21 (1) 4, the sum of the unit
voting amount of the relevant horse racing
ticket, winner voting ticket,
bullfighting match voting ticket, or sports promotion voting ticket
purchased by the winner of such
tickets shall be counted in the necessary
expenses;
1-2. In cases of prize money and other valuables, etc. under Article 21
(1) 14, the amounts put into slot machines, etc. at the
time of winning
such prize money and other valuables, etc. shall be counted in the
necessary expenses; and
2. In case where the provisions of subparagraphs 1 and 1-2, and Article
27 (3) are not applicable, the sum of the expenses corresponding
to
the total gross income amount accruing during the corresponding year
shall be counted in the necessary expenses.
Article 38 Deleted.
(1) The year during which the total gross income amount and necessary
expenses of a resident in each year, are calculated, shall
be the year to
which the day such total gross income amount and necessary expenses
become definite belongs.
(2) The acquisition value of any assets which a resident has acquired
by purchase, manufacture, etc., shall be the amount obtained
by adding
the incidental expenses to the purchasing value or manufacturing cost
of such assets.
(3) If a resident has, in calculating the income amount of each taxable
period, continuously applied the corporate accounting standards
or practices
which are deemed generally fair and proper as to the year during which
the total gross income amount and necessary
expenses are calculated or
the acquisition or evaluation of any assets and obligation, it shall be subject
to such corporate accounting
standards or practices except in cases where
this Act or the Restriction of Special Taxation Act stipulates otherwise.
INCOME TAX ACT
48
(4) Matters necessary for the year during which the total gross income
amount and necessary expenses are calculated, as referred
to in paragraph
(1), and the calculation of the acquisition value or valuation of assets,
obligation, etc., as referred to in paragraph
(2), shall be determined by
the Presidential Decree.
Article 40 (Year for which Dividend Income, etc. is Included)
(1) The year for which any dividend, bonus and retirement benefit
which
a resident receives by the disposal of any surplus, are included, shall be
the year to which the day when a general meeting
of stockholders or partners
of the corporation concerned or a similar deliberative organ corresponding
thereto has passed a resolution
for such disposal, belongs: Provided, That
the year for which the dividend income under the provisions of Article
17 (1) 6-3 is
included shall be the year during which the total gross income
amount and necessary expenses of the relevant joint business are
calculated
in accordance with the provisions of Article 39.
(2) The year for which the fictitious dividend as prescribed in Article 17
(2) 1, 2 and 5 is included, shall be the year to which
the day when a
general meeting of stockholders or partners, or similar deliberative organ,
decides the writing-off of stocks, reduction
of capital, or transfer of surplus
to capital or investment, or he retires or withdraws from the corporation,
belongs.
(3) The year for which the fictitious dividend as prescribed in Article 17
(2) 3, 4, and 6 is included, shall be the year falling
under any of the
following subparagraphs: 1. If a corporation extinguishes by a merger, the year to which the merger
registration day belongs;
2. If the corporation extinguishes by a dissolution, the year in which
the day the value of the remaining property becomes definite,
is included;
and
3. If a corporation undergoing corporate division or the other extinguished
party of a corporate merger by division, is extinguished
or continues
to exist as a result of corporate division, the year to which the date
of registration of the corporate division belongs.
(4) In determining the income amount of a corporation accruing during
the corresponding fiscal year, the year for which any income
considered
INCOME TAX ACT
49
as a bonus paid to officers, stockholders, partners or other investors of
the corporation is included, shall be the fiscal year
in which the corporation
makes a settlement of accounts. In this case, if the calculation of the
monthly average amount is made
through two years, it shall belong to
each year, respectively.
Sub-Section 3 Special Cases of Calculation of Income Amount
Article 41 (Calculation in Case of Wrongful Act)
(1) If it is deemed that any act or calculation of a resident having any
dividend income (applicable to the dividend income only
as referred to
in Article 17 (1) 6-3), real estate rental income, business income or
miscellaneous incomes reduce unreasonably
the burden of tax on such income
by a transaction with a person having a special relationship with the resident,
the Commissioner
of the competent Regional Tax Office or the chief of
a tax office having jurisdiction over the place of tax payment may calculate
the income amount accruing during the corresponding year regardless of
such act or calculation of the resident.
(2) The scope of those having the special relationship as referred to in
paragraph (1), and other matters necessary for the calculation
by wrongful
act, shall be determined by the Presidential Decree.
Article 42 (Special Case of Calculation of Income Amount Accruing from
Trade with Nonresident, etc.)
(1) In the event that an agreement is made with the other country of
a treaty concluded by the Republic of Korea to prevent a double
taxation
(hereinafter referred to as the "tax treaty") according to the provisions
concerning the mutual agreement of the tax treaty,
competent authorities
agreeing on the amount of a trade made by a resident with a nonresident
living abroad or foreign corporation,
the Commissioner of the competent
Regional Tax Office or the chief of a tax office having jurisdiction over
the place of tax payment
may adjust and calculate the income amount
of the resident in each taxable period, in accordance with such agreement.
(2) Matters
necessary for the application for the adjustment of the
resident's income amount as referred to in paragraph (1), and other
adjustment,
shall be determined by the Presidential Decree.
Article 43 (Special Cases of Calculation of Income Amount Accruing from
INCOME
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50
Joint Business)
(1) In the case of the joint business wherein a business from which the
real estate rental income or the business income accrue
is jointly run and
the profits and losses thereof are shared [including the joint businesses
which have joint businessmen who do
not participate in management but
make investment as prescribed by the Presidential Decree (hereinafter
referred to as the "joint
investment businessmen")], the income amount
shall be calculated by the joint business places by considering the place
where the
relevant business is managed (hereinafter referred to as the
"joint business place") as one resident.
Article 45 (Deduction of Deficiency and Carryover of Deficits)
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51
(1) Any deficient amount (when the necessary expenses accruing during
the corresponding year exceed the aggregate revenue amount
accruing during
the same corresponding year, it refers to such excess amount; hereinafter
the same shall apply) resulting from
the calculation of any business income
amount accruing during the corresponding year based on the books entered
and kept by a resident
having the business income shall be deducted from
his real estate rental income, earned income, annuity income, miscellaneous
income,
interest income, and dividend income, in that order, in calculating
his global income tax base in the corresponding year.
(2) The deficient amount resulting from the calculation of any income
amount accruing during the corresponding year based on the
books kept
and entered by a resident having any real estate rental income, and
the deficient amount which results from the calculation
of the business
income amount and is left after the deduction in the calculation of the
global income tax base for the corresponding
year under the provisions
of paragraph (1) (hereinafter referred to as the "deficit carried-over"),
shall be deducted from each
relevant income in consecutive order beginning
with the deficit carried-over in the year of first occurrence in the calculation
of the income amount accruing during the taxable period which is terminated
within five years from the end of the year when the
relevant deficit
carried-over accrues.
(4) Deleted.
(5) If there exists any dividend income or any interest income which is
subject to the global taxation under Article 14 in the calculation
of the
tax amount under Article 62, the portions of the dividend income or the
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52
interest income which are subject to the application of the withholding
tax rate shall be excluded from the deduction of the deficiency
and the
deficit carried-over pursuant to the provisions of paragraphs (1) and (2),
and the portions of the dividend income or the
interest income which are
subject to the application of the basic tax rate, a taxpayer may determine
whether the deduction is made
or not and the amount of deduction within
the limit of the amount of his income.
(6) In deducting the deficiency and the deficit carried-over under paragraphs
(1) and (2), where any deficiency occurs and there
exists any deficit
carried-over in the corresponding year, the deficiency for the corresponding
year shall be first deducted from
the amount of income.
Article 46 (Special Cases regarding Calculation of Income Amount
Accruing from Bonds and Submission of Payment Records, etc.)
(1)
With respect to any interest and discount amount (hereafter in this
Article referred to as "interest, etc.") accruing from the bonds
or securities
as prescribed in Article 16 (1) 1, 2, 6 and 7, or from such securities alienable
to another person, as prescribed
by the Presidential Decree (hereafter
in this Article referred to as "bonds, etc."), the income amount shall be
calculated deeming
that the amount equivalent to the interest for the
holding period would be attributed respectively to a resident or nonresident
(hereafter in this Article referred to as the "resident, etc.") who has held
such bonds, etc. during the relevant period of the
redemption thereof.
(2) If a resident, etc. receives the interest, etc. on bonds, etc. (including
receipt of stocks from conversion
or exchange of convertible or exchangeable
bonds; hereinafter the same shall apply) from a corporation issuing them
or any such
other corporation as prescribed by the Presidential Decree
(hereafter in this Article referred to as an "issuing corporation, etc."),
or if a resident, etc., before the receipt of interest, etc. on such bonds,
etc., sells them (including the cases of changes in
the ownership of bonds,
etc. or in the right to receive the interest thereon such as donation,
repayment, contribution, etc. and
the cases where their sale is entrusted,
mediated or arranged, but excluding the cases as prescribed by the
Presidential Decree
such as the sales of repurchase agreements; hereafter
in this Article the same shall apply) to the issuing corporation, etc., the
tax amount shall be collected pursuant to Articles 127 through 131, 133,
INCOME TAX ACT
53
156, 164, and 164-2 by regarding as the interest income under Article
16 the amount equivalent to interest for the period calculated
by the methods
as stipulated by the Presidential Decree (hereafter in this Article referred
to as the "tax withholding period"),
treating the issuing date of such bonds,
etc. or the immediately preceding date of tax withholding as the beginning
date and the
payment date of the interest, etc. or the sale date of the
bonds, etc. as the ending date, by having the issuing corporation, etc.
as a withholding agent, and by treating the date as stipulated by the
Presidential Decree, such as the payment date of the interest,
etc. or the
sale date of the bonds, etc., as the time of the tax withholding.
(3) In calculation of the income amount under paragraphs (1) and (2),
if the relevant resident, etc. fails to prove the holding
period of such bonds,
etc. during the tax withholding period under the conditions as prescribed
by the Presidential Decree, the
income amount shall be calculated
considering that the interest amount for the tax withholding period would
be imputed to the relevant
resident, etc.
(4) Deleted.
(5) The method of calculating the holding period of the bonds, etc. and
the interest amount corresponding to the tax withholding
period and the
method of proving the holding period under paragraphs (1) through (3)
and other matters necessary for tax withholding
shall be prescribed by
the Presidential Decree.
In the event that any deposit or trust contract is terminated prematurely
after the tax base of global income is returned definitely,
and the interest
income amount for the taxable period which has already elapsed is thereby
reduced, the reduced interest income
amount may be deducted in calculating
the interest income amount, from that included in the global income amount
for the taxable
period in which the day of premature termination is included:
Provided, That this shall not apply where the rectification of the
tax base
and tax amount is requested under Article 45-2 of the Framework Act
on National Taxes.
[This Article Newly Inserted by Act No. 5031, Dec. 29, 1995]
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54
Sub-Section 4 Earned Income Deduction, Annuity Income
Deduction, and Retirement Income Deduction
Article 47 (Earned Income Deduction)
(1) For a resident having any earned income, the following amount shall
be deducted from his gross pay earned during the corresponding
year:
Not more than 5 million won Gross pay
More than 5 million won but not
more than 15 million won
5 million won 50/100 of the amount
exceeding 5 million won
More than 15 million won but
not more than 30 million won
10 million won 15/100 of the amount
exceeding 15 million won
More than 30 million won but
not more than 45 million won
12.25 million won 10/100 of the
amount exceeding 30 million won
More than 45 million won 13.75 million won 5/100 of the
amount exceeding 45 million won
(2) Notwithstanding the provisions of paragraph (1), for a daily-paid worker,
the amount of deduction shall be 80 thousand won per
day.
(4) The deduction as referred to in paragraphs (1) through (3) shall be
referred to as "earned income deduction".
(5) In the case of paragraph (1), if a person other than a daily-paid worker
receives wages from two or more persons, the earned
income deductions
as referred to in paragraph (1) for the sum of his wages shall be taken
from the amount of wages at the principal
workplace, under the conditions
as prescribed by the Presidential Decree: Provided, That if the wages of
the principal workplace
are short of the earned income deductions, the
earned income deductions for the portion exceeding the wages shall be
INCOME TAX
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55
taken from the wages at the subordinate workplace.
(6) The principal workplace as referred to in paragraph (5) shall be one
reported
under Article 142: Provided, That if no report is made, the
workplace where the largest wages are paid shall be the principal workplace.
Article 47-2 (Annuity Income Deduction)
(1) For a resident having any annuity income, the amount provided for
in the following Table shall be deducted from his total annuity
income
received during the corresponding year: Provided, That in case where
the deducted amount exceeds 9 million won, 9 million
won shall be
deducted:
3.5 million won or less Total annuity amount
Over 3.5 million won but not
more than 7 million won
3.5 million won + 40/100 of the
amount exceeding 3.5 million won
Over 7 million won but not more
than 14 million won
4.9 million won + 20/100 of the
amount exceeding 7 million won
Over 14 million won 6.3 million won + 10/100 of the
amount exceeding 14 million won
(2) The deduction under paragraph (1) shall be referred to as "annuity
income deduction".
[This Article Newly Inserted by Act No. 6292, Dec. 29, 2000]
Article 48 (Retirement Income Deduction)
(1) For a resident having any retirement income, the following amounts
shall be deducted in consecutive order from the retirement
benefit amount
accruing during the corresponding year (in case of Class A retirement
benefits, it includes the honorable retirement
allowances and the insurance
money for the collective retirement insurance; hereinafter the same shall
apply): 1. An amount equivalent to 45/100 of the retirement benefit amount;
and
2. The following amount determined by the number of service years (it
shall be treated as one year if he retires before one year
elapses, and
in the case of Article 22 (1) 1 (d) and (e), it shall mean the number
of years calculated by the method as prescribed
by the Presidential
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56
Decree; hereinafter the same shall apply):
not more than 5 years 300,000 won number of service years
more than 5 but not
more than 10 years
1.5 million won + 500,000 won (number
of service years 5 years)
more than 10 but not
more than 20 years
4 million won + 800,000 won (number
of service years 10 years)
over 20 years 12 million won + 1.2 million won (number of
service years 20 years)
(2) If the retirement benefit amount accruing during the corresponding
year is short of the deduction amount as referred to in paragraph
(1)
1, the retirement benefit amount shall be the deduction amount.
(3) The deduction as referred to in paragraphs (1) and (2)
shall be referred
to as "retirement income deduction".
(4) If a resident having any retirement income has received retirement
benefits by retiring two or more times in the corresponding
year, the
retirement income deductions shall be taken only once from the sum of
the retirement benefits accruing during the corresponding
year.
(5) The provisions of Article 47 (5) shall apply mutatis mutandis to the
retirement income deduction as referred to in paragraph
(1) 2.
Article 49 Deleted.
Article 50 (Basic Deduction)
(1) For a resident (limited to a natural person) having any global income,
the amount calculated by multiplying the number of family
members falling
under any of the following subparagraphs, by one million won per capita
a year, shall be deducted from the resident's
global income amount accruing
during the corresponding year:
1. The resident;
2. A person who is the spouse of the resident having no annual income,
or having the total annual income not exceeding one million
won; and
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57
3. A person who is a dependent falling under any of the following items,
and living together with the resident (including the dependent's
spouse;
hereafter in this subparagraph the same shall apply), and has the
total annual income not exceeding one million won: Provided,
That
if the handicapped persons as prescribed in Article 51 (1) 2 shall not
be subject to the age limit:
(a) A person who is a lineal ascendant of the resident (in cases where
a lineal ascendant has remarried, including the lineal ascendants'
spouse prescribed by the Presidential Decree), and is sixty years
old or older (in cases of women, fifty-five years old or older;
hereafter
in this subparagraph the same shall apply);
(b) A person who is prescribed by the Presidential Decree from among
the lineal descendants of a resident or an adoptee prescribed
by
Presidential Decree, living together with the resident (hereinafter
referred to as an "adoptee"), and is twenty years old or
younger.
In this case, if the lineal descendant concerned and his spouse,
or the adoptee concerned and his spouse both are handicapped
persons pursuant to Article 51 (1) 2, the spouse shall be included;
(c) A person who is a brother or sister of the resident, and
is twenty
years old or younger, or sixty years old or older; and
(d) A person, prescribed by the Presidential Decree, who are protected
by the National Basic Living Security Act.
(2) The deduction as referred to in paragraph (1) shall be referred to
as "basic deduction".
(3) In the case of a spouse or dependent of a resident falls under the
dependent of another resident, the deductions shall be taken
from the
global income amount of one resident only, under the conditions as prescribed
by the Presidential Decree.
Article 51 (Additional Deduction)
(1) If anyone who becomes subject to a basic deduction (hereinafter referred
to as the "person subject to a basic deduction") as
prescribed in Article
50 falls under any of the following subparagraphs, the amount stipulated
in the respective subparagraphs
shall be deducted from the resident's global
income amount accruing during the corresponding year, in addition to the
basic deduction
as prescribed in Article 50: 1. Where the person is sixty-five years old or older (hereinafter referred
INCOME TAX ACT
58
to as a "senior"), one million won per capita a year (where the person
is 70 years old or older, 1.5 million won per capita a year);
2. Where the person is a handicapped person as prescribed by the
Presidential Decree (hereinafter referred to as a "handicapped person"),
two million won per capita a year;
3. Where the resident is a woman having no spouse and is a head of
the family having dependents under the provisions of Article 50
(1)
3, or is a woman having a spouse, five hundred thousand won per
capita a year;
4. Where the person is a lineal descendant or an adoptee, who is six
years old or younger, one million won per capita a year; and
5. Where the person is a lineal descendant who was born, or an adoptee
who was reported as adopted, in the taxation period, one million
won
per capita a year.
(2) The deduction as referred to in paragraph (1) shall be referred to
as "additional deduction".
(3) and (4) Deleted.
(2) The basic deduction under the provisions of Article 50, the additional
deduction under the provisions of Article 51 and the
additional deduction
for persons with many children shall be referred to as "personal deductions".
(3) In the cases where an aggregate
of the personal deductions under the
provisions of paragraph (2) exceeds the global income amount, such excess
amount shall be
treated as non-existent.
[This Article Wholly Amended by Act No. 8144, Dec. 30, 2006]
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Article 51-3 (Pension Insurance Premium Deduction)
(1) Where a resident having any global income has paid insurance premium,
etc.
that falls under any of the following subparagraphs, the insurance
premium, etc. paid during the corresponding year shall be fully
deducted
from his global income accruing during the corresponding year: 1. Pension premium, etc. payable under the National Pension Act
(excluding the portion paid by employers);
2. Contributions or shares payable by an employee under the Public Officials
Pension Act, the Veterans' Pension Act, Pension for
Private School
Teachers and Staff Act, or the Special Post Offices Act; and
3. Shares to be borne by an employee under the Guarantee of Workers'
Retirement Benefits Act: Provided, That in case where the aggregate
amount of the relevant amount and the savings payment amount under
the provisions of Article 86-2 of the Restriction of Special
Taxation
Act exceed 3 million won, such excess amount shall be considered as
nonexistent.
(2) The deduction under paragraph (1) shall be referred to as "pension
insurance premium deduction".
(3) Where the total amount of pension insurance premium deduction under
paragraph (1) exceeds the global income amount, such excess
amount shall
be treated as non-existent.
(4) Deleted.
(5) Matters necessary for the calculation method, etc. of the pension
insurance premium deduction under the provisions of paragraphs
(1)
through (3) shall be prescribed by the Presidential Decree.
(1) Where a resident having any annuity income has been paid benefits
from reverse mortgage-backed retirement pension system that
meets the
requirements as prescribed by the Presidential Decree, an amount
equivalent to the interest on the loan that corresponds
to the benefits
for the relevant year shall be deducted from the annuity income amount
accruing during the relevant year (hereinafter
referred to as the "interest
expense deduction for reverse mortgage-backed retirement pension
INCOME TAX ACT
60
system"). In this case, where the amount equivalent to the interest to
be deducted exceeds 2 million won, 2 million won shall be
deducted, and
where it exceeds the annuity income amount, such excess amount shall
be considered non-existent.
(2) The interest expense deduction for reverse mortgage-backed retirement
pension system shall apply when the relevant resident
applies therefor.
(3) Application for the interest expense deduction for reverse
mortgage-backed retirement pension system, method
to confirm the amount
equivalent to interest and other necessary matters shall be prescribed
by the Presidential Decree.
[This Article Newly Inserted by Act No. 8144, Dec. 30, 2006]
Article 52 (Special Deduction)
(1) The amount falling under any of the following subparagraphs that
is paid by a resident having any earned income (excluding daily-paid
workers) in the corresponding year, shall be deducted from the earned
income amount accruing during the corresponding year: 1. Premiums borne by an employee under the National Health Insurance
Act, the Employment Insurance Act, or the Long-Term Care Insurance
for the Aged Act;
2. Premiums paid for the insurer under an insurance contract the insured
of which is those subject to the basic deduction as prescribed
in Article
50 (1), by which the maturity repayment does not exceed the paid-in
premiums, and which is prescribed by the Presidential
Decree. In this
case, if the sum of the premiums exceeds one million won per year,
such excess amount shall be considered as non-existent;
2-2. Premiums paid for the insurer under an insurance contract that
is provided for in the Presidential Decree (hereafter in this
Article referred
to as a "guaranty-nature insurance exclusively for handicapped
persons") among insurance contracts in which a
handicapped person
subject to the basic deduction under Article 50 (1) is named the insured
INCOME TAX ACT
61
or beneficiary (limited to those whose the maturity repayment does
not exceed the paid-in premiums). In this case, where the sum
of the
premiums exceeds 1 million won a year, such excess amount shall be
treated as non-existent;
3. The amounts obtained by adding up those falling under each of the
following items, which are the medical expenses prescribed by
the
Presidential Decree which have been paid for a person subject to the
basic deduction (not subject to any age limit and income
limit):
(a) Medical expenses paid for the relevant resident, seniors and
handicapped persons: Provided, That if the amount of medical
expenses for those subject to item (b) falls short of the amount
calculated by multiplying the total wage amount by 3/100, such
excess amount shall be deducted; and
(b) The amount exceeding those calculated by multiplying the total
wage amount by 3/100, which are the medical expenses paid for
the person subject to the basic deduction with the exclusion of those
subject to item (a): Provided, That if the relevant amount
exceeds
five million won per year, it shall be five million won per year;
4. The amount calculated by adding up educational expenses paid for
the relevant resident and the person subject to the basic deduction
(not subject to any age limit), such as school tuition, entrance fees,
childcare expenses, lecture fees and other regular payments
for school
(hereafter referred to as "educational expenses" in this subparagraph).
In this case, educational expenses for elementary
and middle school
children shall include the charge for school lunch paid to schools that
provide school lunch pursuant to the
School Meals Act, expenses for
textbooks purchased by schools, and after-school charges prescribed
by the Presidential Decree:
Provided, That educational expenses, which
are exempted from income tax or donation tax as prescribed by the
Presidential Decree,
shall be deducted:
(a) Total educational expenses as follows, paid for the spouse, a lineal
descendent, a bother or sister, or an adoptee: Provided,
That
expenses paid to graduate schools are excluded, and the limits shall
be seven million won per capita a year, in cases of a
college students,
and twenty million won per capita a year, in cases of children
INCOME TAX ACT
62
not-yet-enrolled in elementary school, and students enrolled in
elementary schools, middle schools, or high schools:
( ) Educational
expenses paid to schools under the Early Childhood
Education Act, the Elementary and Secondary Education Act,
Higher Education
Act or special laws;
( ) Educational expenses paid to cyber colleges under the Life-long
Education Act, and educational expenses paid for educational
courses prescribed by the Presidential Decree from among the
courses under the Act on Recognition of Credits, etc. or the
Act
on the Acquisition of Academic Degrees through
Self-Education (hereafter referred to as "courses to obtain a
degree" in this subparagraph);
( ) Educational expenses paid to an overseas educational institute
(limited to students prescribed by the Presidential Decree, if
a resident who pays educational expense for students enrolled
in an overseas educational institute); and
( ) Educational expenses paid to childcare centers under the Infant
Care Act, private teaching institutes under the Act on the
Establishment and Operation of Private Teaching Institutes
and Extracurricular Lessons, or sports facilities prescribed by
the
Presidential Decree (limited to the amount prescribed by
the Presidential Decree, in cases of payment to private teaching
institutes
or sports facilities);
(b) Total educational expenses as follows, paid for the resident
concerned:
( ) Educational expenses pursuant to subitems ( ) through ( )
of item(a);
( ) Educational expenses paid for educational courses corresponding
to one or more semesters of a college (including a cyber college
and courses to obtain a degree) or a graduate school, and paid
to enroll an hour-based programs under Article 36 of the Higher
Education Act; and
( ) Lecture fees paid for vocational education provided by the
vocational institutes under Article 2 of the Act on the
Development
of Occupational Abilities of Workers; and
(c) Expenses for special education, prescribed by the Presidential Decree,
INCOME TAX
ACT
63
for the handicapped who are subject to basic deduction (no limitation
for amount of income), paid to the persons as follows:
(
) Social welfare facilities or non-profit organizations, which are
prescribed by the Presidential Decree; or
( ) Overseas facilities or organizations similar to those referred
to in subitem (i);
4-2. and 5. Deleted; and 6. Deleted.
(3) Where a resident (excluding any daily-paid worker), who is the head
of a family that does not own a house, and has any earned
income (referring
to a family member who has any earned income where the head of the
family is not subject to the deduction pursuant
to paragraph (2), Article
87 (2) of the Restriction of Special Taxation Act, and this paragraph)
redeems the interest on a long-term
mortgage loan (including the long-term
mortgage loan inherited by acquisition of the house of national housing
scale; hereafter
in this Article referred to as "long-term mortgage loan")
prescribed by the Presidential Decree that he has taken from a financial
institution or the National Housing Fund established under the Housing
Act to acquire the house of national housing scale with
the standard market
price under the provisions of Article 99 (1) not exceeding 300 million won
at the time of acquisition after
having settled a mortgage on such house,
INCOME TAX ACT
64
the amount of interest repaid during the corresponding year shall be
deducted from the amount of the earned income accruing during
the
corresponding year: Provided, That where the resident, and each member
of his household, becomes to own two or more houses
on the last day of
the taxation period or a term of ownership of two or more houses exceeds
three months during the taxation period
concerned, the amount of interest
repaid during the taxable year whereto the relevant possessing period
belongs shall not be deducted
from the amount of the earned income.
1. For a resident, the provisions of paragraph (3) shall apply to him
regardless of whether he actually resides or not in such house:
Provided,
That where he is not the head of a family, it shall be limited to the
case where he actually resides in such house;
2. Deleted; 3. Where the head of a family who does not have his own house gains
a right which is priced at 300 million won or less as prescribed
by
the Presidential Decree and which is a right (hereafter in this
subparagraph referred to as the "right to purchase a house")
enabling
him to acquire a house of national housing scale which is constructed
by obtaining the approval for a project plan under
the Housing Act
(including any house acquired by any member of a housing association
established under the Housing Act and any
member of a consolidation
project association established under the Act on the Maintenance and
Improvement of Urban Areas and Dwelling
Conditions for Residents
or any house acquired through such associations; hereafter the same
in this subparagraph shall apply),
and gets a loan from a financial
institution or the National Housing Fund under the Housing Act to
acquire the relevant house on
condition that the loan shall be converted
to a long-term mortgage loan at the time when the construction of
said house is completed
(including the cases where the borrowing
conditions of the relevant loan are changed before the completion of
INCOME TAX ACT
65
the construction of said house into the conditions that the loan shall
be converted to a long-term mortgage loan at the time when
the
construction of said house is completed), the relevant loan shall be
deemed a long-term mortgage loan from the borrowing date
thereof
(where the borrowing conditions are newly changed, the date of change
thereof) to the date of registration for preservation
of ownership of
the relevant house, and the provisions of paragraph (3) shall apply
to the amount of interest redeemed: Provided,
That where the resident
comes to possess two or more rights to purchase a house, the same
shall not apply during the taxation year
whereto the relevant possessing
period belongs; and
4. Where an individual or apartment house is financed before their values
are publicly notified under Public Notice of Values and
Appraisal of
Real Estate Act, the value first notified in public under the same Act,
after the day such loan was made, shall be
deemed as the value of
the house concerned.
(5) In the application of paragraphs (2) and (3), where the total sum
of amounts under paragraphs (2) and (3), and Article 87 (2)
of the Restriction
of Special Taxation Act exceeds 10 million won per year, such excess amount
shall be deemed to be nonexistent,
and whether a resident is a head of
a family or not shall be determined taking circumstances as of the end
of the taxable period
into account: Provided, That when the total sum
of amounts under paragraph (2) 1 and 2 exceeds 3 million won per year,
such excess
amount shall be deemed to be nonexistent.
(6) An amount subtracting donations accounted as necessary expenses
in the calculation of any business income and real estate rental
income
from the aggregate amount of donations falling under any of the following
subparagraphs, which are made by a resident [including
a donation made
by those who falls under Article 50 (1) 2 and 3 (b) (excluding one to
whom the basic deduction of another resident
was applied)] during the
corresponding year, shall be deducted from the global income amount subject
to the comprehensive taxation
during the corresponding year (where
donations are accounted as necessary expenses in the calculation of any
business income and
any real estate rental income, the global income amount
shall be based after such donations are accounted as such expenses and
INCOME TAX ACT
66
shall not include any interest income and dividend income subject to the
application of withholding tax rates under Article 62).
In this case, where
the donation of subparagraph 1 and the donation of subparagraph 2 are
made simultaneously, the donation of
subparagraph 1 shall be first
deducted: