Tax and Accounting
QWhat are the penalties for withdrawal entries in the bankbooks that do not have the necessary supporting proofs?A
Where there are no company-related receipts for withdrawal entries in the bankbooks, the corresponding income tax would be imposed on the company’s representative director; as such, the company needs to carefully manage its bankbooks.
QWhat is the size of social insurance payments in Korea in addition to employees’ wages?A
In addition to employees’ wages, companies bear around 10 percent as social insurance payments; the relevant employee also bears the same or similar proportion.
QAt the time of company establishment, for how much do I determine the representative director’s salary?A
At the time of company establishment, the representative director can make a filing that he/she works without pay for a certain period. Such filing can be submitted to the Social Insurance Services via BOD’s minutes, etc. so that pension and health insurance can be excluded. Foreign representative directors, if necessary, can be excluded from the application of pension and health insurance pursuant to subscriptions in his/her home country.
QWould it be possible to convert an individual corporate entity to a Corporate company and what would be the relevant considerations?A
It is possible to establish an individual corporate entity first and convert it to a company afterwards. Such conversion can take a form of the individual transferring his/her interest to the company and the individual making a contribution in kind. It is also possible to close the individual corporate entity and establish a new company; however, if continuity of business is required, the abovementioned methods of transfer or contribution in kind could be used.
QWhat are the different tax treatments in case of establishments in the form of foreign individual and the form of company?A
Different tax rates are applicable between individual entities and corporate entities. Individual entities can be subject to the tax rates of 6.6% ~ 41.8% depending on the applicable income segments whereas corporate entities would be subject to the tax rates of 11%~22% depending on the applicable taxable income. Moreover, individual entities need to conduct the VAT filings twice per annum whereas corporate entities conduct the VAT filings four times per annum. Individual entities’ income taxes are filed in May whereas corporate entities’ corporate taxes are filed in March.
QAre there tax benefits for FDI companies?A
Depending on applicable industries, FDI companies – if established in the free economic zones, etc. – can enjoy benefits of certain rates for corporate tax and income tax with respect to the cash investment of at least KRW 5 billion at the time of establishment.