Tax Law Changes in 2013 - Update (May 2013)

We summarized below some of the major tax law changes additionally proposed by the government that are expected to be announced before the end of June 2013 to keep you updated. 

 

1. Increase of immediate depreciation limit of the cost of a work of art(Article 19 of the Presidential Decree of the Corporate Tax Law)

 

In case where a company purchases a work of art for display in public places such as an office and a lobby of the company to decorate or beautify the environment, the limit of the cost of a work of art for immediate depreciation will be increased from KRW 3 million to KRW 5 million.  

The proposed revision above will be applied to purchases to be made on or after the enforcement date of the above proposed tax law change.

 

2. Foreign invested company will be exempted from deemed gift taxation on sales transaction between specially related parties(Article 45-3 of the Presidential Decree of the Inheritance and Gift Tax Law)

Under Article 45-3 of the Inheritance and Gift Tax Law, if the amount of sales made by a company (“beneficiary company”) to its specially related company (“SRC”) owned by controlling shareholder of the beneficiary company exceeds 30% of the beneficiary company’s total sales amount on a fiscal year basis, the controlling shareholder and his/her relative having more than 3% of share ownership in the beneficiary company directly and indirectly are deemed to be gifted some portion of income of the beneficiary company from SRC, and the deemed income is subject to gift tax. However, under the proposed revision, if a beneficiary company is a foreign invested company under the Foreign Investment Promotion Act (“FIPA”) and the foreign share ownership in the beneficiary company is 50% or more, the beneficiary company will be exempted from the above deemed gift taxation.

 

The proposed revision above will be applied for the gift tax filing to be made on or after the enforcement date of the above proposed tax law change.