[Korean Foreign-Invested Company] Key Tax Schedule

[Korean Foreign-Invested Company] Key Tax Schedule

Korean taxation is the system by which the central government or local governments impose taxes on people who bear tax obligations without providing an offsetting benefit in order to raise revenues. There are national taxes and local taxes in Korea.

National taxes are collected by the National Tax Service (tax office) and the Korea Customs Service (customs office) to finance the central government. National tax is largely divided into internal taxes and customs duty. There are direct taxes and indirect taxes, depending on how the tax is paid. A direct tax refers to tax collected directly from the taxpayer, while an indirect tax refers to tax collected by an intermediary from the person who bears the ultimate economic burden of the tax. Direct taxes include income tax, corporate tax, inheritance tax, and gift tax. Indirect taxes include value added tax, special excise tax, liquor tax, and securities transaction tax.

Local tax is collected primarily to finance the expenses required to provide administrative service to local residents, but also has the functions of distribution of income, development of the local industry and economy, and contribution to balanced national development. Local tax can be categorized into taxation of property, taxation of income and taxation of consumption. Property taxation includes property tax, aggregate land tax, automobile tax, acquisition tax, and registration and license tax. Income taxation includes local income tax, and consumption taxation includes registration and license tax, leisure tax, tobacco consumption tax, regional resource facilities tax, local consumption tax and local education tax.

By When	How	For What
Monthly 10th of the next month	File and Pay withholding tax	1 prior month
Quarterly the end of the next month	File the statement of daily worker’s incomes (By Feb. 28th of the next year for 4th quarter)	3 prior months
Quarterly 25th of the next month	File and Pay Value Added Tax(VAT)	3 prior months
August 31th of the current year	File and Pay interim corporation income tax return (corporation for fiscal year Jan.~Dec.)	Jan.~Dec. of the prior year
February 28th of the next year	File the statement of payment (except withholding tax receipt, wage/business/retirement income)	Jan.~Dec. of the prior year
March 10th of the next year	File the statement of payment for wag/business/retirement income (withholding tax receipt)	Jan.~Dec. of the prior year
March 10th of the next year	File employees’ year-end income tax settlement	Jan.~Dec. of the prior year
March 31th of the next year	File and Pay annual corporation income tax return + international transaction schedule (corporation for fiscal year Jan.~Dec.)	Jan.~Dec. of the prior year
March 31th of the next year	File the statement of foreign company outside Korea (corporation for fiscal year Jan.~Dec.)	Jan.~Dec. of the prior year
March 31th of the next year	File the statement of foreign real estate purchase and investment operation(lease) (corporation for fiscal year Jan.~Dec.)	Jan.~Dec. of the prior year
April 30th of the next year	File and Pay annual corporation Local income tax return + international transaction schedule (corporation for fiscal year Jan.~Dec.)	Jan.~Dec. of the prior year
May 31th of the next year	File and Pay global individual income tax return	Jan.~Dec. of the prior year
May 31th of the next year	File the statement of foreign company outside Korea (Individual)	Jan.~Dec. of the prior year
May 31th of the next year	File the statement of foreign real estate purchase and investment operation(lease) (individual)	Jan.~Dec. of the prior year
June 30th of the next year	File and Pay compliant global individual income tax return	Jan.~Dec. of the prior year
June 30th of the next year	File the report of foreign financial accounts	Jan.~Dec. of the prior year
June 30th of the next year	File related-documents of report by countries (corporation for fiscal year Jan.~Dec. if applicable)	Jan.~Dec. of the prior year
December 31th of the next year	File the report of comprehensive international transaction information (corporation for fiscal year Jan.~Dec.)	Jan.~Dec. of the prior year

* The above tax information is translated from Korean for foreign-invested companies, and is not legally binding.

* Source: Korean National Tax Service, Invest Korea

[Korean Foreign-Invested Company] Guide to global income tax return and Recent tax amendments regarding business registration matter and foreigners staying in Korea for foreign investment

[Korean Foreign-Invested Company] Guide to global income tax return and Recent tax amendments regarding business registration matter and foreigners staying in Korea for foreign investment

1) Guide to filing global income tax return

For income attributable to 2017

(a) Persons who should file a return

1. Resident: An individual with global income* incurred from Korea and abroad who has a domicile (place of sojourn) in Korea or has had a place of residence in Korea for 183 days or longer in Korea

2. Non-resident : An individual who is not a resident and has global income among domestic-source income

* Global income: The sum of interest income, dividend income, business income, wage & salary income**, pension income, and other income.

** In the case of wage & salary income subject to special taxation for foreign workers

(Article 18-2 of the Restriction of Special Taxation Act), such income shall not be included in the global income tax base, and a flat tax rate of 19% shall apply instead.

(b) Submission of return

1. Submission period: May 1-31, 2018

2. Business operators subject to confirmation of compliant filing who submitted a document confirming compliant filing: May 1-Jul. 2, 2018

3. Individuals who leave the country before the deadline for submission: A return for income attributable to 2017 and income generated from Jan. 1, 2018 through the date of departure should be filed until one day before the date of departure.

(c) Service for foreign taxpayers

1. English hotline (Tel. 1588-0560)

2. Individual income tax guide (English version to be posted in mid-May)

www.nts.go.kr/eng -> Resources -> Publication -> Individual Income Tax and Benefit Guide for Foreigners 2018

3. Global Income Tax Return Form(English version)

www.nts.go.kr/eng -> Resources -> Forms -> Individual Income Tax Return Form 40-1 or 40-4

(d) Tax rate for income attributable to 2017

Tax base (won)	Tax rate
Not over 12 million	6%
Over 12 million∼Not over 46 million	720,000 won + 15% of the amount exceeding 12 million won
Over 46 million∼Not over 88 million	5,820,000 won + 24% of the amount exceeding 46 million won
Over 88 million∼Not over 150 million	15,900,000 won + 35% of the amount exceeding of 88 million won
Over 150 million∼Not over 500 million	37,600,000 won + 38% of the amount in exceeding of 150 million won
Over 500 million ∼	170,600,000 won + 40% of the amount in exceeding of 500 million won

* For information on amendments to tax laws regarding the raise in tax rates for global income attributable to 2018, refer to the February edition of Tax News.

2) Recent amendments to tax laws (1) - Submission of documents when reporting change in business registration matters (Newly inserted; Article 14 (2) of the Enforcement Decree of the Value Added Tax Act)

(a) Before: When reporting a change in business registration matters such as change of type of business, there were no regulations on submission of related documents (e.g., copy of permit in the case where a permit is required according to law).

(b) After: Where a business operator intends to change business registration matters due to change in type of business, etc., a new regulation requires the submission of a report of change of business registration matters in addition to the related documents under Article 11 (3) of the Value Added Tax Act.

♧ Applied to report of change in business registration matters submitted on or after Feb. 13, 2018.

3) Recent amendments to tax laws (2) - Exemption of submission of foreign investment related documents for foreigners staying in Korea for a short-term (Article 165-2 (1) of the Income Tax Act)

(a) Before: Where a resident makes a foreign direct investment (FDI) under the Foreign Exchange Transaction Act or acquires overseas real estate or rights thereof, legal documents such as a statement of FDI and statement of investment in real estate should be

submitted.

(b) After: To ease taxpayers’ burden of having to submit taxation documents, the submission of foreign investment related documents has been exempted for short-term foreign residents*.

* Short-term foreign residents: A foreign resident who has had his/her domicile or place of residence for not more than five years in total from ten years before the end of the relevant taxable period (Article 3 of the Income Tax Act)

♧ Applied to tax base filed on or after J an. 1, 2018

* The above tax information is translated from Korean for foreign-invested companies, and is not legally binding.

* Source: Korean National Tax Service

[US Corporation] Crowd Funding Information and its tax accounting update for a corporation doing business in the USA

[US Corporation] Crowd Funding Information and its tax accounting update for a corporation doing business in the USA

Why Crowd Funding

There are a few main reasons for using crowd funding instead of traditional means of raising capital as follows.

(1) Accessibility

The crowd funding has the appeal of a direct investment, particularly one that is relatively seamless online because the public is very comfortable with electronic platforms for commerce, shopping, and investing its costs are relatively low while financial institutions were not good at evaluating risk for technology innovation or creative ventures, making traditional access to capital more tightened and more difficult.

(2) Community

By building a community around a venture or an idea, entrepreneurs and business owners immediately connect with customers, clients, and supporters. Such connection is invaluable to entities as they grow and evolve. And the community serves as a venue for market research as well, not only for minimally viable products, but also for testing new ideas, gauging enthusiasm, and soliciting feedback. Furthermore, investors—particularly younger ones—crave a connection with the companies they support, and crowd funding is a way to connect these early adopters more closely with a company's brand. Financial institutions have relatively poor relations with the public.

(3) Return

Those with funds in savings accounts may be looking for slightly better returns on their cash, while minimizing risk through pooled (or crowd-based) investments while Interest rates on savings accounts of a financial institution are very low (close to zero).

(4) Diversity

Not only is there diversity in investment options, but crowd funding investors appreciate the inherent diversity these investments provide to their overall portfolios.

(5) Regulation

The Jumpstart Our Business Startups (or JOBS) Act of 2012 by Obama Administration and subsequent regulations facilitates startups and small businesses funding through the crowd funding, which contributes to startups and small and medium sized business ecosystem, and represents a disruption in the environment that will change some aspects of the industry.

Crowd funding comparison

Category	Equity crowd funding	Debt crowd funding	Contribution crowd funding
Definition	Investors exchange cash for a share of future profits in the company (equity).	When investors exchange cash for debt, this is often called microlending. Microlending is "a form of financing that provides [relatively] small amounts of money to entrepreneurs.”	Members of the public in contribution crowd funding make a contribution (gift) to something they find compelling in exchange for a small token of gratitude.
Funding scale	$662 million in the first quarter of 2015 and $483 million in the fourth quarter of 2014	As of March 15, 2016, 1,394,336 lenders have loaned $827,356,850 through Kiva with a 97.1% repayment rate.	9.3 million people, $1.9 billion pledge, and 91,000 projects since 2009 for Kickstarter Monthly 15 million people visit in its site from 224 countries for Indiegogo
Platform	Grow Venture Community, MicroVentures, Angel List, CircleUp, Alpha Works, Founders, and Seed Invest, Quirky, Crowdrise, Rock the Post, Fundable, Early Shares, Razoo, Sprigster (for veterans), Empasis (for journalism projects), Microryza (for science projects), TuneFund (for music projects), FundOurPark (for parks), SportyFunder (for sports projects), etc.	Kiva, Prosper, Endurance Lending Network, etc.	Kickstarter, Indiegogo, Rocket Hub, GoFundme (commonly for medical expenses, funerals, memorials or educational endeavor), etc.
Accounting treatment	The cash raised from equity crowd funding investors is recorded as equity, and fee to host platform is booked as investment expense.	The cash raised from debt crowd funding investors is recorded as payable, fee to host platform is booked as investment expense, and the debt’s interest is recorded as interest expense.	Contributions are recorded as unearned income until token are distributed to contributors.
Tax treatment	Investment expenses are generally deductible.	Investment and interest expenses are generally deductible.	Incomes including unearned income are taxable and ordinary and necessary business expenses are generally deductible.

※ Note: there may be subtle differences among the crowd-funding platforms, including fees (who is charged and how much), timing (how long a campaign will remain open), and type (an all-or-nothing funding model versus an anything-goes model).

Funding reference

Type	Platform	Description
Contribution crowd funding	Kickstarter	Zach Danger Brown raised $55,492 from 6,911 people to make potato salad during the summer of 2014. Tokens of gratitude ranged from a thank-you message posted to Brown’s website to a copy of his recipe book. Source: ttps://www.kickstarter.com/projects/zackdangerbrown/potato-salad
Contribution crowd funding	Indiegogo	Stone Groundbreaking Collaborations California raised $2,532,180 from 13,977 people to produce rare craft brews from Stone Brewing Co during the summer of 2014. Perks raged from one 1.5-liter bottle of beer to an invitation to pre-opening party Source: https://www.indiegogo.com/projects/stone-groundbreaking-collaborations--2#/
Contribution crowd funding	GoFunMe	One family raised $101,350 from 922 people in 23 months to repair their home and cars, which were severely damaged by the storm in Colorado during 2013. Source: https://www.gofundme.com/McCroskey-Family-Fund
Contribution crowd funding	Kickstarter	A total of 91,585 backers pledged $5,702,153 to support to revive the cancelled TV show, the Veronica Mars. Contributors received movie swage, tickets to advance screenings, copies of the DVD, and even a walk-on role in the movie in exchange for contributions. Source: https://www.kickstarter.com/projects/559914737/the-veronica-mars-movie-project
Contribution crowd funding	Kickstarter	About 24,833 people pledged $1,192,793 to support the next album of artist Amanda Palmer whose record label was disappointed with the low sales figures on the previous album of her. Source: https://www.kickstarter.com/projects/amandapalmer/amanda-palmer-the-new-record-art-book-and-tour

Source: Becker, Kickstarter, Indiegogo, GoFunMe, etc.

The following tax information is for your reference, and is not legally binding.