Korea, Republic of

The recently amended regulations of the Individual Income Tax Law have introduced several significant changes aimed at stimulating capital market growth, addressing demographic concerns, and ensuring equitable taxation across financial products.  A key modification is the abolition of the scheduled financial investment income tax.  This change is intended to boost the capital market and safeguard domestic investors, encouraging more participation and investment in the financial markets.  To address the issue of low birth rates, the tax law now exempts corporate childbirth support payments from taxation. Additionally, child tax credits have been increased, providing further financial relief to families.

In a bid to enhance equity in tax treatment among financial products, profits from fractional investment products, such as investment contract securities or non-monetary trust beneficiary certificates, will be classified as dividend income.  Enhancements have been made to entice foreign investment in government bonds by streamlining the procedure for obtaining tax exemptions on interest and capital gains. 

The non-taxable limit for discounts provided to employees has also been introduced.  Specifically, if goods or services provided or supplied by a company or its affiliates are offered at a discount to their executives or employees, any discount amount exceeding the greater of KRW 2,400,000 per year or 20% of the fair market value (FMV) is considered taxable income for the employees or executives.  To qualify for non-taxable treatment, certain conditions must be met, such as restrictions on the resale of the discounted goods.

Residency criteria have been updated, now stipulating that staying in Korea for 183 consecutive days over two tax years qualifies for residency. This change aims to provide clearer guidelines for determining tax residency status.

The scope of withholding tax for foreign professional athletes has also been broadened. A 20% withholding tax rate will be applied to income earned by foreign professional athletes residing in the country under a contract with a professional sports team, irrespective of the contract duration.