SOUTH KOREA

i. Name of country

SOUTH KOREA

ii. Region

Eastern Asia, southern half of the Korean Peninsula bordering the Sea of Japan and the Yellow Sea

iii. Population

51,715,162 (July 2021 est.)

iv. General Introduction

South Korea is an urban business and lifestyle hub in East Asia. Seoul, the capital city, is alive and well both during the day and at night, and it embodies the spirit of the country. The city has excellent infrastructure, including transportation, allowing residents easy access to the rest of the country. The economy of this forward-thinking country is highly industrialized and the third largest in Asia.

The Republic of Korea (Korea) is one of the most favoured destinations for inward investment worldwide and especially so in the Asia Pacific region. Korean economy, culture and social infrastructures have rapidly developed since the 1980s and the country is now a member of the Organisation for Economic Co-operation and Development (OECD).

Korea is an economic powerhouse with a:

  • Population of about 50 million.
  • Gross domestic product (GDP) of about USD1.4 trillion (USD28,000 per capita).
  • Korea is also recognised for its top-ranked information infrastructure and business-friendly legal system.

However, Korea is also faced with issues such as:

  • Polarisation in income and wealth.
  • A record-law birth rate.
  • A rapidly aging population.
  • A slowdown in economic growth.

South Korea has seen the following key recent developments:

  • According to the Act on External Audit of Stock Companies, limited liability companies (except for small-sized companies) which are the most common legal entity with regard to foreign investment also have been obligated to prepare financial statements and undergo an audit performed by extremal auditor as well as stock companies.
  • According to the revised Act on Promotion of Information and Communications Network Utilisation and Information Protection, a large-sized foreign company with a liaison office in South Korea must appoint an agent (person) in order to communicate with public authorities and to deal with grievance filings, or requests for submissions.
  • According to the recently revised Labour Standards Act, the maximum number of working hours in each week was reduced from 68 hours to 52 hours.
  • The South Korean Government plans to submit an amendment bill in relation to class actions. According to the amendment bill, an additional five categories (products, fair trade, advertisements, public information, food) of class actions will be permitted. As of now, only investors in securities may file class actions.

v. Wifi Speed

As of 2017, South Korea had the fastest average internet connection in the world at 28.6 Mbit/s, according to the report State of the Internet published by Akamai Technologies. South Korea's speed is four times faster than the world average of 7.0 Mbit/s.

vi. Electrical outlet

For South Korea the associated plug type is F, which is the plug that has two round pins with two earth clips on the side. South Korea operates on a 220V supply voltage and 60Hz.

vii. Per Capita GDP

Real GDP per capita
$42,300 note: data are in 2017 dollars (2020 est.)
$42,700 note: data are in 2017 dollars (2019 est.)
$41,900 note: data are in 2017 dollars (2018 est.)

note: data are in 2010 dollars

viii. Climate

temperate, with rainfall heavier in summer than winter; cold winters

ix. Residence-by-Investment

South Korea is one of the most desirable destinations in Asia and around the world, and it is a popular choice for investors. The South Korea Residence by Investment Program is the most efficient way to obtain such status for those who wish to reside in this appealing, forward-thinking country. The South Korean government has granted a large number of visas to individuals who wish to invest in the country in order to boost the economy through foreign direct investment. Individuals can become residents of South Korea in less than a month and permanent residents after five years under this program.

Processing Time

  • Approximately 20 days for the immigration procedure

Key Benefits

  • Economic stability and a thriving labor market
  • Residents must receive universal healthcare and attend school.
  • A highly industrialized, high-tech, service-based economy that is ideal for investment.
  • A vibrant capital city and breathtaking scenery throughout the country
  • After a five-year residency period, permanent residence is possible.
  • Excellent schools, with English instruction available.
  • Residence of a member state of the United Nations, the G-20, the ASEAN Regional Forum, and the World Trade Organization, among others.

Requirements

A foreign individual must invest in a bank deposit in South Korea as part of the South Korea Residence by Investment Program.

  • Applicants aged 55 and up must make a minimum bank deposit of KRW 300 million (approximately USD 300,000). The applicant must have at least KRW 300 million in assets (approximately USD 300,000).
  • Applicants under the age of 55 must make a minimum bank deposit of KRW 500 million (approximately USD 500,000).
  • Applicants of any age can apply for a permanent residence (F-5) permit with a minimum bank deposit of KRW 1.5 billion (approximately USD 1.5 million).

As part of the application process, documentary evidence of the investment must be provided.

Procedures and Time Frame

Applications for the program must be submitted using the prescribed forms and must be accompanied by the appropriate fees and supporting documentation. After a 20-day consideration period, residence permits are usually issued. They have an initial validity period of one–three years and are renewable for the same period as the initial validity, provided the applicant maintains a minimum investment in South Korea. Successful applicants will be required to enter the country at least once a year for the duration of their F-2 residence status, which is valid for five years.

To apply for the program, the applicant follows the steps outlined below:

  • Travel to South Korea.
  • Open a bank account in the country and deposit a minimum investment of KRW 300 million (approximately USD 300,000) for applicants under the age of 55, or KRW 500 million (approximately USD 500,000) for applicants under the age of 55.
  • Upon making the investment, you will be granted F-2 resident status. (Applicants must invest KRW 1.5 billion (approximately USD 1.5 million) to obtain F-5 permanent residence immediately.)
  • After making the required investment for five years, you will be granted permanent residence (F-5) status.

All permanent residents are eligible to apply for citizenship if all requirements are met. Furthermore, dual citizenship is not permitted in South Korea.

xi. Natural Resources

coal, tungsten, graphite, molybdenum, lead, hydropower potential

xii. Ethnic Groups

homogeneous

xiii. Languages

Korean, English (widely taught in elementary, junior high, and high school)

xiv. Religion

Protestant 19.7%, Buddhist 15.5%, Catholic 7.9%, none 56.9% (2015 est.)

xv. Median Age

total: 43.2 years
male: 41.6 years
female: 45 years (2020 est.)

xvi. Urbanization

urban population: 81.4% of total population (2021)
rate of urbanization: 0.31% annual rate of change (2020-25 est.)

xvii. Physician density

12.4 beds/1,000 population (2018)

xviii. Government type

presidential republic

xix. Unemployment Rate

3.76% (2019 est.)
3.85% (2018 est.)

x. Taxes

Headline Personal Income Tax Rate (highest marginal tax rate)

  •  42%+ 11.4%

A person who is domiciled in South Korea, or has a residence in South Korea for 183 days or more, is considered tax resident.

Domicile is determined by the individual's objective relationship with the place, such as the location of their family life or ownership of properties.

Residence is found to exist if an individual has dwelt for a significant period of time in a place other than his/her place of domicile.

Tax resident employees

Tax resident employees are subject to personal income tax for all income earned, including South Korean and foreign-source income. Taxes on personal income range from 6.6% to 46.2% of the tax base (gross salary less certain deductions) and are taxed on a calendar year basis for resident employees.

Foreign nationals whose employment started before the end of 2020 can elect to be taxed at a flat rate of 20.9% without deductions for the first five years that they are employed in South Korea. The same is true for foreign nationals employed in Korean regional headquarters of foreign companies but no sunset period is applied. Tax resident employees must also pay premiums for:

  • National pension (at 4.5% of their monthly salary, with a maximum payment of KRW218,700 per month). Certain foreign nationals may be exempt from Korean national pension contributions based on social security agreements between Korea and their home country.
  • National health insurance (3.335% of monthly salary).
  • Long-term medical treatment insurance (10.25% of the national health insurance premium).
  • Employment insurance (0.8% of monthly salary).

An employee's salary and bonus are subject to withholding tax by the employer. This must be paid to the relevant tax authority by the 10th day of the following month. Normally if a tax resident employee's income is limited to earnings through employment, tax filings and payments are made with year-end settlements of the monthly withholdings by the employer at the end of that year. If a tax resident employee has additional income, they will need to file and pay personal income tax in May of the following year for their global income earned in the previous year.

Non-tax resident employees

Non-tax resident employees are subject to personal income tax on South Korean-source income only. Tax rates range from 6.6% to 46.2% of the tax base and are taxed by calendar year. Normally, non-tax resident employees are not subject to the same deductions as those for resident employees. The same method that applies for tax resident employees applies for tax filings and payments of non-tax resident employees.

Headline Corporate Income Tax Rate (excluding dividend taxes)

  • 24.2%

Income Tax

  • Net taxable income of resident individuals is taxed at graduated rates ranging from 6 percent to 45 percent (excluding local income surtax). The maximum tax rate is currently 45 percent on income earned over 1, billion Korean won (KRW) effective from 1 January 2021

Corporate Tax Rate

  •  In South Korea, the Corporate Income tax rate is a tax collected from companies. Its amount is based on the net income companies obtain while exercising their business activity, normally during one business year. The benchmark we use refers to the top marginal corporate income tax rate for corporations with more than KRW 200 billion of taxable income a year. Revenues from the Corporate Tax Rate are an important source of income for the government of South Korea.

Corporate Tax Rate- 25%
Personal Income Tax Rate - 45%
Sales Tax Rate - 10%
Social Security Rate - 19.24%

Tax resident business

  • Tax resident companies are those that have their main office or a place of effective management in South Korea.

Non-tax resident business

  • Non-tax resident companies with a permanent establishment in South Korea are subject to corporate income tax on income earned by their permanent establishment in the same way as resident companies, with some exceptions.
  • Non-tax resident companies that have no permanent establishment in South Korea are subject to a withholding tax on their South Korean-source income and are not required to file corporate income tax returns, with the exception of capital gains from the sale of real estate in South Korea.

Permanent establishment means the fixed business place of a non-tax resident business vehicle, including:

  • Branches.
  • Stores.
  • Working sites.
  • Factories.
  • A place used for more than six months for construction.
  • A place where services are provided for more than six months.
  • A place where the business is run through a dependent agent.

The main taxes which apply to a tax resident business vehicle are:

  • Personal income tax. This is the main tax for an individual business vehicle. An individual running his/her own business in South Korea or who is a member of a partnership is subject to: Personal income tax on his/her worldwide income (resident individual); and Korean sourced income (non-resident individual).
  • The applicable personal income tax rates are from 6.6% to 46.2%. Tax filings and payments of individual business vehicles should be made in May of the year following the year that the relevant income is earned. The interim filings and payments for their individual business vehicles should be made in November of each year.
  • Corporate income tax. All types of resident companies are subject to corporate income tax, with the rates ranging from 11% to 27.5%. However, if the normal corporate income tax (based on the aforementioned rates) is less than the minimum rates of tax which vary from 7.7% to 18.7% (determined by the tax base and the size of a company) of the taxable income before certain tax deductions and credits pursuant to Korean tax acts, then resident companies are liable for the minimum rate of tax instead of the aforementioned normal corporate income tax. Their tax filings and payments are to be made within three months after the end of the relevant fiscal year. The interim filings and payments for corporate income tax should be made within two months after the end of the first six months of the relevant fiscal year.

Additionally, for companies with shareholders' equity exceeding KRW50 billion (excluding small and medium sized companies) or belonging to certain large conglomerates within which cross-shareholding between affiliates is not allowed, if they do not spend a certain amount of earnings for the current fiscal year on investment, employees' salary increase or mutual co-operation payments, they are subject to additional corporate income tax of 22% of the excessive reserve until 2020.

Capital gains tax. Capital gains of tax resident companies are included in their taxable income and are subject to corporate income tax, at rates ranging from 11% to 27.5%. Capital gains of tax resident companies from the transfer of certain residential and non-business real estate in specially designated areas would be subject to corporate income tax at rates from 11% to 44% which is levied in addition to the normal corporate income tax payable (see above). If the capital gains of an individual business vehicle are classified as business income, such gains are treated as taxable income of the individual business vehicle and therefore subject to personal income tax.

South Korea has tax treaties with more than 80 countries including the US, Japan, Germany, France, Italy and the UK.

Interest, dividends and royalties paid to a foreign company without a South Korean business place will be eligible for maximum withholding tax rates under the applicable double tax treaties.

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