l Amended Presidential Decrees (“PD”) of tax laws (February 28, 2023)
The amended PD of tax laws were proclaimed on February 28, 2023.
There were a few changes compared to the original bill, and the major changes are as follows.
¡ Clarification on the scope of a qualifying overseas subsidiary when applying the dividend received deduction (“DRD”) rules
- Regarding the requirements for overseas subsidiaries (i.e., holding at least 10% of the shares for at least 6 months prior to the dividend record date), the amended PD of the Corporate Income Tax Law clarifies that if shares of an overseas subsidiary succeeded from another domestic company by a qualified merger, spin-off or property contribution in kind, the requirement shall be determined based on the original acquisition date of the other domestic company.
¡ Relaxation of requirements for an overseas grandchild (or second tier) subsidiary when applying for indirect foreign tax credit
- The amended PD of the Corporate Income Tax Law relaxed criteria for an overseas grandchild subsidiary to receive an indirect foreign tax credit: (1) a threshold of shareholding from 25% to 10%, (2) a holding period from at least six months prior to the dividend declaration date to at least six months prior to the dividend record date to align the criteria for an overseas subsidiary for DRD rules.
l Amended Enforcement Rule of tax laws (March 20, 2023)
The amended Enforcement Rule of tax laws which was announced on February 22, 2023, was also proclaimed on March 20, 2023.
¡ The scope of facilities to commercialize national strategic technologies1 is expanded.
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31 categories of facilities in
three sectors (semiconductors, secondary battery, and vaccine)
→ 37 categories of facilities in four sectors including facilities of
the display and semiconductor sector
(*1) Application of higher credit rates for investments (8%, 8%, and 16% for large companies, medium-scale companies, and small and midsize enterprises (SME), respectively) compared to general facilities (1%, 5%, and 10%)
¡ The scope of facilities to commercialize new growth and source technologies2 is expanded.
- 181 categories of facilities in 13 industrial sectors, including future cars and carbon-neutral technologies → 190 categories of facilities in 13 industrial sectors by adding facilities mainly in the carbon-neutral technologies sector
(*2) Application of higher credit rates for investments (3%, 6%, and 12% for large companies, medium-scale companies, and small and midsize enterprises (SME), respectively) compared to general facilities (1%, 5%, and 10%)
¡ The interest rate applied on refund of overpaid national taxes or customs duties and deemed rental income from a rental deposit on real property is raised from 1.2% to 2.9% per annum, reflecting the recent upward trend in market interest rates.
l Amended Local Tax Law (March 14, 2023)
¡ The marginal local income tax rate for corporations has been lowered by 0.1 percent point for each tax base bracket in conjunction with the revision of Corporate Income Tax Law.
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After revision |
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(*) The equivalent of 10% of Korean corporate income tax rate |
¡ The lower tax base bracket of local income tax for individuals has been raised from KRW 12 and 46 million to KRW 14 and 50 million in conjunction with the revision of Individual Income Tax Law.
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After revision |
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- Tax base brackets exceeding KRW 88 million are omitted.
(*) The equivalent of 10% of Korean individual income tax rate |