Newsletter | August 2014, Issue 3
	TAX
	Update on Korea-Hong Kong Tax Treaty
	The Korean government and the Hong Kong government officially signed the Korea-Hong Kong tax treaty (“Tax Treaty”) on July 8, 2014.  The Tax Treaty is expected to come into force after the announcement of ratification from the National Assembly followed by an exchange by both governments on the ratification of the Tax Treaty in their respective countries. In the event a domestic company pays dividends, interest or royalties to a Hong Kong company, such payments are, in general, subject to a withholding tax rate of 22% under Korean Tax Laws.  Investments from and through Hong Kong are expected to increase due to applicability of the Tax Treaty’s reduced withholding tax rates.  In addition, measures to ensure compliance and proper enforcement have been included.  An example of such a measure is a provision allowing for the exchange of tax information between the tax authorities of both governments upon request. Withholding rules and rates on main income incurred by taxpayers residing in the other country under the Tax Treaty are as follows:
	Reduced Withholding Tax Rate on Dividend Income:  10% when a beneficial owner directly holds 25% or more of the equity, otherwise 15%
	Reduced Withholding Tax Rate on Interest Income:  10%
	Reduced Withholding Tax Rate on Royalty Income:  10%
	Taxation on Capital Gain:  Taxable in the source country where the relevant income was earned
	Taxation on Incomes not Separately Specified in the Tax Treaty:  Taxable only in the country where the income earner resides
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	If you have any questions regarding this article, please contact below:
	Woo Hyun Baik whbaik@kimchang.com Christopher Sung chrissung@kimchang.com Jae Hun Suh jaehun.suh@kimchang.com
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	www.kimchang.com General Tax Consulting Practice Group