Korea: Tax changes affecting loss carryforwards, excess retained earnings, others

Korea: Tax changes affecting loss carryforwards

Tax law amendments, approved by the National Assembly in late 2016 and generally effective in 2017, include the following provisions:

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  • An extension of time during which foreign workers can apply a “flat tax” to their employment income for their first five years of employment in Korea—extended to the end of 2018, but subject to an increase in the flat tax rate from 17% to 19%
  • Foreign companies allowed to apply a loss carryforward up to 80% of their taxable income for the tax year
  • A change to the “excess retained earning” tax rules—companies subject to the tax on “excess retained earnings” (i.e., earnings not paid out as investments, salaries, or dividends of certain taxpayers) can make a change to the method elected for determining the tax before the end of the three-year period
  • New business types identified for tax incentives, to encourage foreign investment in new industries
  • Tax deferral allowed for mergers between “sister” companies (companies wholly owned by the same parent company)

 

Read a 2017 report [PDF 605 KB] prepared by the KPMG member firm in South Korea

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