Corporate Tax Act

INTRODUCTION

Details of Enactment and Amendment

● Enactment: The Corporate Tax Act is a statute that provides the regulatory details of corporate taxes which are assessed on the earnings and liquidation incomes of a corporation for each fiscal year. This Act was enacted on November 7, 1949 as Act No. 62.

● Amendment: This Act has been amended almost every year, almost as an annual event, including being wholly amended in the year 1961, 1967 and 1998.

Main Contents

● The details of amendment after 1998 was such that the transparency of enterprise management shall be elevated, the corporate restructuring such as a merger or division, etc. shall be smoothly executed, and the procedure for return or payment shall be simplified.

● It is intended that the support shall be rendered to the smooth incorporation and operation of a holding company, by taking such measures as all of dividends shall not be included in operating income in case where a holding company receives the dividends from its subsidiary wherein it has made the 100% investment, as a part of dividends shall not be included in operating income pursuant to its investment ratio, even for the dividends received by the holding company from any other subsidiaries and for those received by any domestic corporations, other than the holding company, from other domestic corporations, and thus as ensuring that no double taxation shall be imposed to the dividend incomes.

● Requirements for various expenditures that are allowed as a deduction for expenditures shall be clarified pursuant to the international standards, and in case where a corporation has purchased any goods or services, such expense vouchers shall be those verifiable by the other party, such as credit card sales slips, and tax invoices, etc. but with respect to the expenditures which fail to meet the requirements of such vouchers, the amount equivalent to 2/100 of such amounts shall be imposed as an additional tax.

● The entertainment expenses in excess of a specified amount shall be recognized as expenditures only if they are paid by using credit cards or tax invoices, etc. and the limit on secret service expenses that can be recognizable as expenditures even without any evidence of expenditure shall be reduced from 20 percent to 10 percent of the maximum entertainment expenses recognizable as expenditures, and from the year 2000, the system of secret service expenses is altogether abolished.

● Corporate reorganization, for example by a merger or division, is allowed to proceed with less difficulties by allowing a merged corporation to succeed to the carry-over deficits of the extinguished corporation for a tax deduction and allowing a corporation that is divided to postpone payment of the corporate tax.

● Where a special purpose company, securities investment company, corporate restructuring investment company, or corporate restructuring real estate investment company pays a dividend of 90 percent or more of divisible profits, such amount is allowed to be deducted from the earnings in each fiscal year, and the tax withholding rates when paying the interest incomes or the dividends of profits from the securities investment trust to a domestic corporation, are reduced from 22 percent to 15 percent.

● In order to induce honesty in reporting, the rate of additional tax for failure to report or for filing under-reporting, which has been assessed uniformly 10 through 20 percent, is now differentially applied at 10 through 30 percent depending on the relative importance of dishonesty, and in case where securities are transferred at the price falling short of a normal price between the foreign corporations, which are mutually connected in special relations and have no domestic places of business, it is intended that any tax evasion shall be prevented by imposing taxes under an adjustment of such price to the normal level.

● In case where any foreign corporation transfers the stocks or subscription certificates of a domestic corporation, only the acquisition price has been previously allowed to be deducted from the transferred price in calculating gains on transfer, however, it is now ensured that an equity between the foreign corporations and domestic corporations is secured by providing that both the acquisition price and transfer expenses are to be deducted, etc.

● In case where any foreign corporation renders the services falling short of 6 months in Korea, if it carries on such services continually and repeatedly for not less than 2 years, its service places are deemed to be the domestic business places, so that any unfair tax evasion in the international transactions is prevented.

● In view of such points as having no effectiveness as a tax system in the case of special surtax to be imposed in addition to the general corporate tax on the capital gains from the transfer of real estates by the corporation, it shall be abolished, however, with respect to any capital gains from the transfer of the land and building located in the area in which the price of real estates is rapidly elevated, such system is newly set forth as adding to the corporate tax the tax amount computed by applying a 10-percent tax rate, in preparation for any recurrence of real estate speculations hereafter.

● While a 15-percent tax rate has been previously applied to the relevant excessive reserves in case where any unlisted large corporation has retained in the firm in excess of an adequate level without making any dividend from its earned surplus, it is abolished since there exists an aspect of hampering the expansion of equity capital through internal retaining of the enterprise's profits.

Wholly Amended by Dec. 28, 1998 Act No. 5581

Amended by Dec. 28, 1999 Act No. 6047

Feb. 3, 2000 Act No. 6259

Dec. 29, 2000 Act No. 6293

Dec. 31, 2001 Act No. 6558

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CHAPTER I GENERAL PROVISIONS

■■■■ Article 1 (Definitions)

The definitions of terms used in this Act shall be as follows:

1. The term "domestic corporation" shall mean a corporation whose headquarters or main office is located in the Republic of Korea;

2. The term "non-profit domestic corporation" shall mean a domestic corporation which falls under any of the following:

(a) Corporation established under Article 32 of the Civil Act;

(b) Corporation established under the Private School Act or other special Acts whose purpose is similar to that as prescribed in Article 32 of the Civil Act (excluding any corporation other than a partnership corporation as prescribed by the Presidential Decree, which is capable of paying dividends to stockholders, employees or investors); and

(c) Unincorporated organization which is treated as a corporation under Article 13 (4) of the Framework Act on National Taxes (hereinafter, an "organization treated as a corporation");

3. The term "foreign corporation" shall mean a corporation whose headquarters or main office is located in any foreign country;

4. The term "non-profit foreign corporation" shall mean the Government or any other local government of a foreign country, or a foreign corporation (including an organization treated as a corporation) whose business purpose is not to pursue profits; and

5. The term "fiscal year" shall mean one accounting period for which the income of a corporation is calculated.

■■■■ Article 2 (Tax Liability)

(1) Corporations as prescribed in any of the following subparagraphs shall be liable to pay corporate tax on their income under this Act:

1. Domestic corporations; and

2. Foreign corporations that generate income in the Republic of Korea.

(2) Where domestic corporations and foreign corporations have any income from the transfer of land, etc. under Articles 55-2 and 95-2, they shall be liable to pay corporate tax thereon under this Act.

(3) Corporate tax shall not be imposed on the State and local governments (including local government associations; hereinafter the same shall apply) from among domestic corporations.

(4) Domestic corporations, foreign corporations, and residents and non-residents under the Income Tax Act shall be liable to pay corporate tax withheld under this Act.

■■■■ Article 3 (Scope of Taxable Income)

(1) Corporate tax shall be imposed on such income as prescribed in any of the following subparagraphs, provided that with respect to non-profit domestic corporations and foreign corporations, corporate tax shall be imposed only on such income as prescribed in subparagraph 1:

1. Income for each fiscal year; and

2. Liquidation income.

(2) Income of non-profit domestic corporations for each fiscal year shall be income obtained through business or revenue falling under any of the following subparagraphs (hereinafter, "profit-making business"):

1. Business which generates earnings and which is prescribed by the Presidential Decree, such as manufacturing, construction, wholesale or retail sale, consumer product repair, real estate, rent, and business service;

2. Interest, discounts and profits under any subparagraph of Article 16 (1) of the Income Tax Act;

3. Dividends or funds distributed under any subparagraph of Article 17 (1) of the Income Tax Act;

4. Revenue accruing from the transfer of stocks, pre-emptive subscription rights or investment equities;

5. Revenue accruing from the disposal of fixed assets (excluding fixed assets which are directly used for any business with the proper purpose and which are prescribed by the Presidential Decree); and

6. Revenue accruing from continuing acts other than that under subparagraphs 1 through 5, as prescribed by the Presidential Decree.

(3) Income of foreign corporations for each fiscal year shall be income generated in the Republic of Korea under Article 93 (hereinafter, "income generated in Korea"), provided that in case of non-profit foreign corporations, this shall be limited to income generated in Korea through profit-making businesses.

■■■■ Article 4 (Substantial Taxation)

(1) Where the corporation to which all or part of the revenue from assets or business is legally attributable and the corporation to which it is substantially attributable are different, this Act shall apply to the corporation to which the revenue is substantially attributable.

(2) The provisions concerning the calculation of the amount of taxable income subject to corporate tax shall apply to the substantial income and earnings, notwithstanding their designation or form.

■■■■ Article 5 (Trust Income)

(1) With regard to income accruing to a trust estate, the beneficiary of the trust (where no beneficiary is specified or no beneficiary exists, the trustee of the trust or his successor) shall be deemed the owner of the trust estate in the application of this Act.

(2) With regard to revenues and expenditures accruing to trust estates of corporations regulated by the Trust Business Act and the Securities Investment Trust Business Act, the revenue and expenditures shall be deemed not to accrue to the corporation.

■■■■ Article 6 (Fiscal Year)

(1) The fiscal year shall be the one accounting period prescribed by Acts and subordinate statutes or the corporation's articles of incorporation, provided that this period shall not exceed one year.

(2) Domestic corporations with no provisions concerning the fiscal year in relevant Acts and subordinate statutes or their articles of incorporation shall separately determine their fiscal year and report it together with the report on incorporation under Article 109 (1) or the registration of business under Article 111 to the chief of the regional tax office having jurisdiction over the place of tax payment (the head of the tax office under Article 12; hereinafter, the same shall apply).

(3) Foreign corporations with a place of business in the Republic of Korea under Article 94 (hereinafter "domestic place of business") that have no provisions concerning the fiscal year in relevant Acts and subordinate statutes or their articles of incorporation shall separately determine their fiscal year and report it together with the report on the establishment of a domestic place of business under Article 109 (2) or the registration of business under Article 111 to the chief of the regional tax office having jurisdiction over the place of tax payment.

(4) Foreign corporations with no domestic place of business that earn income under subparagraph 3, 7 or 8 of Article 93 shall separately determine their fiscal year and report it to the chief of the regional tax office having jurisdiction over the place of tax payment within one month of the date on which such income was first generated.

(5) Where a corporation that must report under paragraphs (2) through (4) fails to report, the corporation's fiscal year shall be from January 1st to December 31st each year.

(6) Matters relevant to the determination of the beginning date of a corporation's first fiscal year in the application of the provisions of paragraphs (1) through (5) shall be prescribed by the Presidential Decree.

■■■■ Article 7 (Change of Fiscal Year)

(1) A corporation that intends to change its fiscal year shall make report to the chief of the regional tax office having jurisdiction over the place of tax payment within three months of the date of the last day of the immediately preceding fiscal year as prescribed by the Presidential Decree.

(2) Where a corporation does not make report within any such period as prescribed in paragraph (1), its fiscal year shall be deemed to be not changed, provided that where a corporation's fiscal year which is prescribed by Acts and subordinate statutes is changed by amendment thereto, the fiscal year shall be deemed to be changed according to such amendment even if a report as prescribed in paragraph (1) is not made.

(3) Where the fiscal year is changed under paragraph (1) and the proviso of paragraph (2), the period from the beginning date of the previous fiscal year to the day before that of the changed fiscal year shall be deemed to be one fiscal year, provided that where such period is less than one month, it shall be included in the changed fiscal year.

■■■■ Article 8 (Legal Fiction of Fiscal Year)

(1) Where a domestic corporation is dissolved during a fiscal year (excluding any case in which it is dissolved due to merger, division, or merger after division), the period from the beginning date of the fiscal year to the date of registration of such dissolution (referring to the date of registration of bankruptcy in case of dissolution due to bankruptcy, and the date of dissolution in case of an organization treated as a corporation; hereinafter the same shall apply), and the period from the day after the date of such registration to the last day of said fiscal year shall each be deemed to be one fiscal year; and where the value of residual assets of a domestic corporation in the course of liquidation is settled during the fiscal year, the period from the beginning date of said fiscal year to the date of such settlement shall be deemed to be one fiscal year.

(2) Where a domestic corporation is dissolved during a fiscal year due to a merger or division (including division and merger; hereinafter, the same shall apply), the period

from the first day of the fiscal year until the date of registration of the merger or division shall be deemed to be one fiscal year of the dissolved corporation.

(3) Where a domestic corporation in the process of liquidation under Article 229, 285, 519, or 610 of the Commercial Act continues to conduct business, the period from the first day of the fiscal year until the date of registration of continuation (where registration of continuation is not made, the date of actual continuation of business; hereinafter, the same shall apply) and the period from the day after the date of registration of continuation until the last day of the fiscal year shall each be deemed to be one fiscal year.

(4) Where a foreign corporation with a domestic place of business loses that domestic place of business during the fiscal year, the period from the first day of the fiscal year until the date on which it loses that place of business shall be deemed to be one fiscal year of the corporation, provided that this shall not apply where it has another place of business in Korea.

(5) Where a foreign corporation with no domestic place of business reports to the chief of the regional tax office having jurisdiction over the place of tax payment that it is no longer generating income under subparagraph 3, 7, or 8 of Article 93, the period from the first day of the fiscal year until such report is made shall be deemed to be one fiscal year.

■■■■ Article 9 (Place of Tax Payment)

(1) The place of payment of corporate tax of domestic corporations shall be the location of the registered headquarters or main offices of each corporation, provided that for organizations to be treated as corporations, it shall be the place prescribed by the Presidential Decree.

(2) The place of payment of corporate tax of foreign corporations shall be the location of that corporation's domestic place of business, provided that for a foreign corporation with no domestic place of business earning income under subparagraph 3, 7, or 8 of Article 93, it shall be the location of each corporation's assets.

(3) Where a foreign corporation under paragraph (2) has two or more domestic places of business, the location of the place of business as prescribed by the Presidential Decree shall be the place of tax payment, and where the corporation has assets in two or more locations, the place prescribed by the Presidential Decree shall be the place of tax payment.

(4) The place of payment of corporate tax withheld under Articles 73, 98 and 98-3 shall be the location of the person liable for collecting such withholding tax as prescribed by the Presidential Decree, provided that where the person liable for collecting withholding tax under Articles 98 and 98-3 does not have the location in the Republic of Korea, the place of payment shall be the place as prescribed by the Presidential Decree.

■■■■ Article 10 (Designation of Place of Tax Payment)

(1) Where the director of a regional tax office (the director of the regional tax office under Article 12; hereinafter, the same shall apply) or the Commissioner of the National Tax Administration deems that a corporation's place of tax payment under Article 9 is inappropriate, he may, notwithstanding the provisions of Article 9, designate a place of tax payment under conditions as determined by the Presidential Decree.

(2) Where the director of the regional tax office or the Commissioner of the National Tax Administration designates a place of tax payment under paragraph (1), he shall notify the concerned corporation as prescribed by the Presidential Decree.

■■■■ Article 11 (Change of Place of Tax Payment)

(1) Where a corporation's place of tax payment changes, it shall report the change to the chief of the regional tax office having jurisdiction over the new place of tax payment within 15 days of date of the change as prescribed by the Presidential Decree. In this case, where the corporation whose place of tax payment has changed reports the change under Article 5 of the Value-Added Tax Act, it shall be deemed to have also reported the change of the place of tax payment.

(2) Where no report is made under paragraph (1), the previous place of tax payment shall be the corporation's place of tax payment.

(3) Where foreign corporation comes to have no domestic place of tax payment falling under Article 9 (2), it shall report to the chief of the regional tax office having jurisdiction over the former place of tax payment.

■■■■ Article 12 (Jurisdiction of Taxation)

Corporate tax shall be levied by the head of the tax office or director of the regional tax office with jurisdiction over the place of tax payment under Articles 9 through 11.

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CHAPTER II CORPORATE TAX ON INCOME OF DOMESTIC CORPORATIONS FOR EACH FISCAL YEAR

SECTION 1 Tax Base and its Calculation

Subsection 1 Common Provisions

■■■■ Article 13 (Tax Base)

The tax base for corporate tax on the income of domestic corporations for each fiscal year shall be, with regards to the income for each fiscal year, the remaining sum after the amount under any of the following subparagraphs is deducted sequentially from the income amount:

1. Net operating losses incurred during each fiscal year within the five years prior to the first day of the current fiscal year that were not previously deducted in the calculation of the basis for assessment of taxes;

2. Non-taxable income under this Act and other Acts; and

3. Amount of income deduction under this Act and other Acts.

■■■■ Article 14 (Income during Each Fiscal Year)

(1) The income of a domestic corporation during each fiscal year shall be any such amount as given by deducting the deductible expenses during the fiscal year from the gross income during said fiscal year.

(2) Net operating losses of a domestic corporation during each fiscal year shall, if the deductible expenses during the fiscal year exceeds the gross income during said fiscal year, be such excesses.

Subsection 2 Calculation of Gross Income

■■■■ Article 15 (Scope of Gross Income)

(1) Gross income shall mean all the revenue accruing from transactions that create any increase in the net assets of the corporation concerned, excluding paid-up capital or equities, and others as prescribed in this Act.

(2) The amount as prescribed in any of the following subparagraphs shall be deemed to be gross income:

1. Amount of the difference between the market price and the purchase price, where securities are purchased from an individual with any special relationship as prescribed in Article 52 (1) at a price below said market price under Article 52 (2); and

2. Amount of foreign corporation tax under Article 57 (4) (limited to any case in which it is deducted).

(3) Necessary matters concerning the scope and classification of revenue under paragraph (1) shall be prescribed by the Presidential Decree.

■■■■ Article 16 (Legal Fiction as Dividends or Distributions)

(1) The amount falling under any of the following subparagraphs shall be deemed to be dividends or surplus funds distributed by a corporation, and this Act shall apply accordingly:

1. Excess of the total value of funds and other assets acquired by a stockholder, employee or investor (hereinafter "stockholder") through the retirement of stocks, the reduction of capital or investment, or employee's resignation or withdrawal over the

amount necessary for the stockholder to acquire said stocks or investment equities (hereinafter "stocks");

2. Par value of stocks acquired through the transfer of all or part of a corporation's surplus funds into capital or investment, provided that this shall not apply where funds falling under any of the following items are transferred into capital:

(a) Capital reserve funds under Article 459 (1) 1 through 3 and 3-2 of the Commercial Act (excluding profits from the evaluation of a merger or division as prescribed by the Presidential Decree, and limited to the transfer to capital after the passage of two years from the date of retirement of any corporation's own stocks or investment equities where there are profits from such retirement and the market price under Article 52 (2) of this Act does not exceed the acquisition value at the time of the retirement); and

(b) Revaluation reserve funds under the Assets Revaluation Act (excluding the amount of any difference in the revaluation of land under Article 13 (1) 1 of the same Act);

3. Par value of stocks equivalent to the ratio of increased equities, where the ratio of equities of stockholders except for a corporation is so increased by its transfer to capital under any item of subparagraph 2 while holding its own stocks or investment equities;

4. Amount of funds and the value of other assets acquired by stockholders of a dissolved corporation (including members of an organization to be treated as a corporation) through the distribution of the residual assets of the corporation in excess of the amount necessarily spent for the acquisition of the concerned stocks;

5. Sum of the value of stocks, funds, and other assets which stockholders of a corporation that is extinguished through a merger (hereinafter "extinguished corporation") receive from a corporation that is established or maintained through the merger (hereinafter "merged corporation") due to the merger (hereinafter "cost of merger") in excess of the amount necessary for the acquisition of the stocks of the extinguished corporation; and

6. Where a corporation is divided, the sum of the value of stocks, funds, and other assets that stockholders of the divided corporation (hereinafter "divided corporation") or counterpart corporation to a corporation extinguished through division and merger receive from the corporation established through the division (hereinafter "corporation established by division") or the counterpart corporation to the division and merger due to the division (hereinafter "cost of division"), in excess of the amount necessary the acquisition of the stocks of the divided corporation or counterpart corporation to the corporation extinguished through division and merger (where the divided corporation continues to exist, limited to stocks reduced by retirement).

(2) In the application of the provisions of paragraph (1), matters relevant to the period of the distribution of profit dividends or surplus funds and the evaluation of the value of stocks shall be prescribed by the Presidential Decree.

■■■■ Article 17 (Exclusion of Proceeds from Capital Transactions from Gross Income)

In calculating the amount of income of a domestic corporation for each fiscal year, proceeds falling under any of the following subparagraphs shall not be included in gross income:

1. Surplus amount of par value of stocks issued;

2. Gains from retirement of stocks;

3. Profits from a merger, provided that profits from the evaluation of merger (hereinafter, "merger evaluation profits") as prescribed by the Presidential Decree shall be excluded; and

4. Profits from a division, provided that profits from the evaluation of division (hereinafter, "division evaluation profits") as prescribed by the Presidential Decree shall be excluded.

■■■■ Article 18 (Exclusion of Evaluation Profits from Gross Income)

In calculating the amount of income of a domestic corporation for each fiscal year, proceeds falling under any of the following subparagraphs shall not be included in gross income:

1. Profits from the evaluation of assets, provided that profits accruing from the evaluation under any subparagraph of Article 42 (1) shall be excluded;

2. Gross income carried forward;

3. The amount appropriated for taxes other than corporate tax but not included in the calculation of deductible expenses under subparagraph 1 of Article 21 or the income- proportional resident tax refunded or to be refunded;

4. Interest on refunded national or local taxes paid in error;

5. Output tax amount of value-added tax;

6. The value of 90/100 of the dividend income an institutional investor, as prescribed by the Presidential Decree, receives from stock-listed corporations (hereinafter, "stock-listed corporations") and association-registered corporations (hereinafter, "association-registered corporations") under the Securities and Exchange Act, other than those prescribed by the Presidential Decree;

7. Deleted; and

8. The amount appropriated for the prevention of net operating losses carried forward, as prescribed by the Presidential Decree, from among the value of assets received without compensation, and the amount of the reduction of debt due to the exemption from or extinction of financial obligations.

■■■■ Article 18-2 (Exclusion of Dividend Amount Received by Holding Company from Gross Income)

(1) Where the sum calculated under subparagraphs 1 and 2 exceeds that calculated under subparagraphs 3 and 4, out of profit dividends or surplus distributions which a holding company as prescribed by the Presidential Decree (including a financial holding company established under the Financial Holding Company Act; hereafter in this Article, a "holding company"), from among domestic corporations that are designated as holding companies under the Monopoly Regulation and Fair Trade Act, receives from its subsidiary (referring to any domestic corporation that is invested in by the said holding company and that meets such requirements as prescribed by the Presidential Decree in consideration of the holding company's investment ratio in the subsidiary; hereafter the same shall apply in this Article) and fictitious dividends or distributions under Article 16 (hereafter in this Article and Article 18-3, "received dividend amount"), such an excess shall not be included in gross income in calculating the amount of income for each fiscal year:

1. Any such amount as given by multiplying the received dividend amount from a subsidiary by 90/100, where an investment is made in excess of 80/100 of the total number of stocks issued by the said subsidiary or the total investment amount (40/100, in case of a stock-listed corporation or association-registered corporation), provided that it shall mean the total received dividend amount from a subsidiary, where a holding company invests in all of the total number of stocks issued by the said subsidiary or the total investment amount;

2. Any such amount as given by multiplying the received dividend amount from a subsidiary by 60/100, where the ratio of investment in the said subsidiary is below that as prescribed in subparagraph 1;

3. Any such amount as calculated under the Presidential Decree in consideration of the ratio of exclusion from gross income under subparagraphs 1 and 2, out of the interest on borrowings related to investments in a subsidiary, where there is that interest which is paid by a holding company in each fiscal year; and

4. Any such amount as given by multiplying the received dividend amount from a subsidiary by the ratio prescribed by the Presidential Decree, taking into account the subsidiary's investments in any other corporation, where the said subsidiary makes such investments in any other affiliate under the Monopoly Regulation and Fair Trade Act (hereafter in this subparagraph, "affiliate") or does so in any domestic corporation other than the affiliate in excess of 1/100 of the total number of stocks issued or total investment amount (excluding any case in which a subsidiary as prescribed in Article 2 (1) 2 of the Financial Holding Company Act makes an investment in a sub-subsidiary as prescribed in subparagraph 3 of said paragraph and a subsidiary as prescribed in said subparagraph is an institutional investor as prescribed in subparagraph 6 of Article 18 of this Act).

(2) The provisions of paragraph (1) shall not apply to the received dividend amount accruing from stocks of a subsidiary which a holding company acquires and holds within three months prior to the dividend standard date of the subsidiary.

(3) In applying the provisions of paragraphs (1) and (2), necessary matters concerning the method of calculating the ratio of investment of a holding company in a subsidiary, the calculation of amount excluded from gross income, and the submission of a detailed statement of received dividend amount, etc. shall be prescribed by the Presidential Decree.

■■■■ Article 18-3 (Exclusion of Received Dividend Amount from Gross Income)

(1) Where the sum calculated under subparagraphs 1 and 2 exceeds that calculated under subparagraph 3, out of the dividend amount which any domestic corporation receives from other domestic corporations in which it makes an investment, such an excess shall not be included in gross income in calculating the amount of income for each fiscal year:

1. Any such amount as given by multiplying by 50/100 the dividend amount which any domestic corporation receives from other domestic corporations in which it makes an investment in excess of 50/100 (30/100, in case of a stock-listed or association-registered corporation) of the total issued stocks or the total investment amount;

2. Any such amount as given by multiplying by 30/100 the dividend amount which any domestic corporation receives from other domestic corporations in which it makes an investment below the ratio as prescribed in subparagraph 1; and

3. Any such amount as calculated under the Presidential Decree in consideration of the ratio of exclusion from gross income under subparagraphs 1 and 2, out of the interest on borrowings related to investments in any other domestic corporation, where there is that interest which is paid by a domestic corporation in each fiscal year; and

(2) The provisions of paragraph (1) shall not apply to the received dividend amount as prescribed in any of the following subparagraphs:

1. Deleted;

2. Received dividend amount accruing from the holding of stocks acquired within three months prior to the dividend standard date;

3. Received dividend amount subject to the application of subparagraph 6 of Article 18 and Article 18-2; and

4. Received dividend amount from a corporation falling under any subparagraph of Article 51-2 (1).

(3) In applying the provisions of paragraphs (1) and (2), necessary matters concerning the method for calculating the ratio of investment, the calculation of amount excluded from gross income and the submission of a detailed statement of received dividend amount, etc. shall be prescribed by the Presidential Decree.

Subsection 3 Calculation of Deductible Expenses

■■■■ Article 19 (Scope of Deductible Expenses)

(1) Deductible expenses shall mean expenses incurred from transactions that cause any decrease in the net assets of a corporation, excluding the return of capital or equities, the disposal of surplus funds, and other transactions as prescribed in this Act.

(2) Except as otherwise prescribed by this Act and any other Acts, expenses under paragraph (1) shall be those losses or expenses which are incurred in connection with the business of a corporation and which are generally accepted as normal or directly related to profit-making activities.

(3) Necessary matters concerning the scope and classification of expenses under paragraphs (1) and (2) shall be prescribed by the Presidential Decree.

■■■■ Article 20 (Exclusion of Expenses due to Capital Transactions from Deductible Expenses)

In calculating the amount of income of a domestic corporation for each fiscal year, expenses falling under any of the following subparagraphs shall not be included in deductible expenses:

1. Amount appropriated as expenses in the disposal of surplus funds, provided that this shall not apply to piece rates as prescribed by the Presidential Decree;

2. Dividends on interest during construction; and

3. Margins from the discount issue of stocks.

■■■■ Article 21 (Exclusion of Various Taxes or Public Imposts from Deductible Expenses)

In calculating the amount of income of a domestic corporation for each fiscal year, taxes or public imposts falling under any of the following subparagraphs shall not be included in deductible expenses:

1. Corporate tax (including the amount of foreign corporate tax under Article 57) or income-proportional resident tax paid or to be paid in each fiscal year, the tax amount (including additional tax) paid or to be paid due to non-performance of duties as prescribed by respective tax Acts, and the purchase tax amount of value-added tax (excluding any such case as exempted from value-added tax or as otherwise prescribed by the Presidential Decree);

2. Any unpaid value of special consumption tax, liquor tax, or transport tax on unsold manufactured goods, provided that this shall not apply where the price of manufactured goods includes a reasonable tax amount;

3. Deleted;

4. Fines and penalties (including appropriate amounts for fines or penalties under noticed dispositions), fines for negligence (including penalties), additional charges for default, and fees for delinquency in payment;

5. Public imposts which are not subject to the compulsory payment under relevant Acts and subordinate statutes; and

6. Public imposts which are imposed as sanctions against the non-performance of such duties as prescribed in relevant Acts and subordinate statutes or the violation of prohibition and restriction thereunder.

■■■■ Article 22 (Exclusion of Losses from Evaluation of Assets from Deductible Expenses)

In calculating the amount of income of a domestic corporation for each fiscal year, the losses from the evaluation of assets in its possession shall not be included in deductible expenses, provided that this shall not apply to losses incurred by the evaluation of assets under Article 42 (2) and (3).

■■■■ Article 23 (Exclusion of Depreciation Costs from Deductible Expenses)

(1) In calculating the amount of income of a domestic corporation for each fiscal year, depreciation costs of fixed assets shall, only where it appropriates them for deductible expenses in the relevant fiscal year (referring to where they are appropriated for expenses in the confirmation of the settlement of accounts; hereinafter, the same shall apply), be included in deductible expenses to the extent of any such amount as calculated under the Presidential Decree (hereafter in this Article, "scope of depreciation amount"), but the portion of the appropriated amount which exceeds the scope of depreciation amount shall not be included therein.

(2) Fixed assets under paragraph (1) shall mean those assets which are prescribed by the Presidential Decree, such as buildings, machines, equipments and patent rights, other than land.

(3) Domestic corporations that appropriate depreciation costs for deductible expenses under paragraph (1) shall submit a detailed statement on depreciation costs as prescribed by the Presidential Decree to the chief of the regional tax office having jurisdiction over that corporation's place of tax payment.

(4) In applying the provisions of paragraph (1), necessary matters concerning the method of appropriation of depreciation costs for deductible expenses and the settlement of the amount exceeding the scope of the depreciation amount shall be prescribed by the Presidential Decree.

■■■■ Article 24 (Exclusion of Donations from Deductible Expenses)

(1) Of donations made during each fiscal year by a domestic corporation to support social welfare, culture, arts, education, religion, charity, or learning, as prescribed by the Presidential Decree (hereinafter, "designated donations"), any amount in excess of 5/100 of the figure obtained by subtracting the amount under subparagraph 2 from the

amount under subparagraph 1 (hereafter in this Article, "limit amount of inclusion in deductible expenses"), and donations other than designated donations shall not be included in deductible expenses in calculating the amount of income for the relevant fiscal year:

1. The income amount for the relevant fiscal year (the value prior to the inclusion of donations under paragraph (2) and designated donations in the calculation of deductible expenses; hereinafter, in this Article the same shall apply); and

2. Donations included in the calculation of deductible expenses under paragraph (2) and the total amount of net operating losses under subparagraph 1 of Article 13.

(2) The provisions of paragraph (1) and Article 29 shall not apply to donations under any of the following subparagraphs, provided that where the total amount of the donations under any of the following subparagraphs is in excess of the amount obtained by subtracting the net operating losses under subparagraph 1 of Article 13 from the income amount of the concerned fiscal year, the amount in excess shall not be included when calculating deductible expenses in the calculation of income amount for the concerned fiscal year:

1. Money and other valuables contributed to the national or a local government municipality without compensation, provided that for contributed items under application of the Act on the Regulation of Donations Collection, this shall be limited to items requisitioned under Article 5 (2) of the same Act;

2. The value of contributions for national defense, and money and other valuables contributed for the consolation and comfort of soldiers of the national armed forces; and

3. The value of money and other valuables contributed for victims of natural disasters.

(3) The value of designated donations in excess of the limit for inclusion in deductible expenses that is not included in the calculation of deductible expenses under paragraph (1) may be carried forward and included in the calculation of deductible expenses for each fiscal year that completed within three years of the first day of the fiscal year following the concerned fiscal year, as prescribed by the Presidential Decree.

■■■■ Article 25 (Exclusion of Entertainment Expenses from Deductible Expenses)

(1) Of entertainment expenses paid by a domestic corporation in each fiscal year (excluding the amount falling under paragraph (2)), the amount exceeding the sum of that which is prescribed in any of the following subparagraphs shall not be included in deductible expenses in calculating the amount of income for the relevant fiscal year:

1. The amount obtained by multiplying the monthly income for the relevant fiscal year by 12,000,000 won (18,000,000 won for small-and medium-sized enterprises as prescribed by the Presidential Decree) and dividing by 12; and

2. The amount obtained by multiplying the revenue amount for the concerned fiscal year (limited to the revenue amount as prescribed by the Presidential Decree) by the rates under the following table, provided that for revenue amounts generated by transactions with a person with a special relationship under Article 52 (1), the appropriate amount shall be 20% of the amount obtained by multiplying the revenue amount by the rates provided in the following table. Revenue Amount Rate

10,000,000,000 won or less 20/10,000

From 10,000,000,000 won

to 50,000,000,000 won

20,000,000 won + (10/10,000 of the amount in

excess of 10,000,000,000 won)

More than 50,000,000,000 won

60,000,000 won + (3/10,000 of the amount in

excess of 50,000,000,000 won)

(2) Of expenses for one entertainment paid by a domestic corporation, those expenses exceeding any such amount as prescribed by the Presidential Decree which do not fall under any of the following subparagraphs shall not be included in deductible expenses when calculating the amount of income for each fiscal year:

1. Entertainment expenses paid with credit cards under the Specialized Credit Financial Business Act (including other articles similar thereto as prescribed by the Presidential Decree; hereafter in this Article, "credit cards, etc."); and

2. Entertainment expenses paid by receiving an invoice under Article 121 of this Act and Article 163 of the Income Tax Act, or tax invoice under Article 16 of the Value-Added Tax Act.

(3) In applying the provisions of paragraph (2) 1, if sales slips, etc. which are prepared in the name of any member store other than that of a credit card company supplying goods or services are delivered, the payment amount of such sales slips, etc. shall not be included in entertainment expenses as prescribed in paragraph (2) 1.

(4) Deleted.

(5) The term "entertainment expenses" used in paragraphs (1) through (3) shall mean entertainment expenses, social expenses, honoraria and other similar expenses paid by a corporation in connection with its business, regardless of their names or pretexts.

■■■■ Article 26 (Exclusion of Excessive Expenses from Deductible Expenses)

In calculating the amount of income of a domestic corporation for each fiscal year, any amount recognized to be excessive or inappropriate as prescribed by the Presidential Decree among expenses falling under any of the following subparagraphs shall not be included in deductible expenses:

1. Personnel/labor expenses;

2. Welfare expenses;

3. Travel, education, and training expenses;

4. Business expenses of a corporation conducting an insurance business (including any mutual aid business under the Agricultural Cooperatives Act and the Fisheries Cooperatives Act; hereinafter, the same shall apply);

5. Expenses generated or paid by a corporation as a result of the joint operation or management of an identical organization or business with a person other than that corporation; and

6. Expenses other than those recognized under subparagraphs 1 through 5 as having little direct connection to the business of a corporation, as prescribed by the Presidential Decree.

■■■■ Article 27 (Exclusion of Non-Business Expenses from Deductible Expenses)

Among expenditures of a domestic corporation for each fiscal year, such expenses as prescribed in any of the following subparagraphs shall not be included in deductible expenses in calculating the amount of income for the relevant fiscal year:

1. Expenses which are incurred by acquiring and managing such assets deemed to have no direct connection to the business of the corporation concerned as prescribed by the Presidential Decree and which are prescribed by the Presidential Decree; and

2. Expenses which are deemed to have no direct connection to the business of the corporation concerned other than those as prescribed in subparagraph 1 and which are prescribed by the Presidential Decree.

■■■■ Article 28 (Exclusion of Interest Expenses from Deductible Expenses)

(1) In calculating the amount of income of a domestic corporation for each fiscal year, interest on loans falling under any of the following subparagraphs shall not be included in deductible expenses:

1. Interest on debentures for which the creditor is unknown;

2. With regards to the interest, discount amount, or profits on bonds and securities under Article 16 (1) 1, 2, 6, and 9 of the Income Tax Act, the interest, discount amount, or profits on bonds and securities as prescribed by the Presidential Decree for which the person who received payment is not known;

3. Interest on loans appropriated for construction capital as prescribed by the Presidential Decree; and

4. With regard to interest on loans paid during each fiscal year by a domestic corporation that acquires or possesses assets falling under one of the following

categories, the amount calculated as prescribed by the Presidential Decree (limited to interest on loans of an appropriate amount for the value of the concerned assets):

(a) Assets falling under subparagraph 1 of Article 27; and

(b) Provisional payments to a person with a special relationship under Article 52 (1) with no connection to the business of the concerned corporation, as prescribed by the Presidential Decree.

(2) In calculating the amount of income of a domestic corporation falling under any of the following subparagraphs which has loans (hereafter in this Article, "loans exceeding the standards") exceeding four times its equity capital as prescribed by the Presidential Decree (hereafter in this Article, "equity capital") for each fiscal year, any such amount as calculated under the Presidential Decree among the interest on loans paid by the said domestic corporation in the relevant fiscal year shall not be included in deductible expenses:

1. Stock-listed or association-registered corporation as of the last day of each fiscal year: Provided, That any such small and medium enterprise as prescribed by the Presidential Decree shall be excluded; and

2. Corporation as prescribed by the Presidential Decree in consideration of the size of its assets or capital, etc.

(3) In applying the provisions of paragraph (2), the multiple of the loan to equity capital for credit specialist financial companies under the Specialized Credit Financial Business Act and corporations, as prescribed by the Presidential Decree, may be determined in accordance with the Presidential Decree.

(4) The provisions of paragraph (2) shall not apply to cases listed in any one of the following subparagraphs:

1. Where the loan interest paid in the relevant fiscal year is 3/100 or less of the revenue amount, as prescribed relevant by the Presidential Decree;

2. Where the loan interest paid in the fiscal year is 40/100 or less of the income amount for that fiscal year (referring to the amount before the concerned loan interest is included in the calculation of deductible expenses); and

3. Where a loan in excess of the standard of the relevant fiscal year has been reduced by 20/100 or more compared to the loan in excess of the standard of the immediately prior fiscal year.

(5) Where the provisions of paragraphs (1) and (2) and the provisions of the Restriction of Special Taxation Act on the exclusion of interest on payment from deductible expenses apply simultaneously, they shall apply in the order prescribed by the Presidential Decree.

(6) Necessary matters concerning the scope and calculation of loans and interest on payment under paragraphs (1) and (2) shall be prescribed by the Presidential Decree.

Subsection 4 Inclusion of Reserve Funds and

Appropriation Funds in Deductible Expenses

■■■■ Article 29 (Inclusion of Reserve Funds for Proper Purpose Business in Deductible Expenses)

(1) Where a non-profit domestic corporation (limited to an organization as prescribed by the Presidential Decree in case of that which is deemed to be a corporation) appropriates reserve funds for proper purpose business for deductible expenses in order to pay for its proper purpose business or designated donations (hereafter in this Article, "proper purpose business") in each fiscal year, those reserve funds shall, to the extent of the sum of the amount falling under any of the following subparagraphs, be included in deductible expenses in calculating the amount of income for the relevant fiscal year:

1. Interest income amount under Article 16 (1) 1 through 11 of the Income Tax Act;

2. Distributed funds of securities investment trust proceeds under Article 17 (1) 5 of the Income Tax Act;

3. Interest amount generated by loans to members or associates of welfare projects of a non-profit domestic corporation established under special Acts; and

4. Amount obtained by multiplying the income from profit-making businesses other than that under subparagraphs 1 through 3 by the percentage as prescribed by the Presidential Decree.

(2) Where a non-profit domestic corporation spends reserve funds for proper purpose business which are appropriated for deductible expenses under paragraph (1) on proper purpose business, it shall set off the amount of those reserve funds according to the sequence of the fiscal years in which the reserve funds are appropriated. In this case, where there is a positive balance in the reserve funds for proper purpose business as of the last day of the immediately prior fiscal year and the amount spent for proper purpose business in the relevant fiscal year, the excess amount shall be deemed as having been spent from the reserve funds for proper purpose business to be set off for the relevant fiscal year, and the provisions of paragraph (1) shall apply accordingly.

(3) Where a non-profit domestic corporation with a positive balance in reserve funds for proper purpose business included in deductible expenses under paragraph (1) comes to fall under any of the following subparagraphs, the balance shall be included in gross income in calculating the amount of income for the fiscal year including the date on which the cause for that change occurs:

1. Where it is dissolved;

2. Where the proper purpose business of the corporation are all discontinued;

3. Where the approval for an organization to be treated as a corporation is revoked or is changed to a resident, under Article 13 (3) of the Framework Act on National Taxes; and

4. Where reserve funds for proper purpose business appropriated for deductible expenses are not used for proper purpose business within 5 years from the last day of the fiscal year in which they are appropriated (limited to the balance not used within 5 years).

(4) Where the balance of reserve funds for proper purpose business is included in gross income under paragraph (3) 4, an appropriate amount of interest calculated under the Presidential Decree shall be paid in addition to corporate tax for the relevant fiscal year.

(5) A non-profit domestic corporation which intends to be subject to the application of paragraph (1) shall submit a detailed statement on the concerned reserve fund, as prescribed by the Presidential Decree, to the chief of the regional tax office having jurisdiction over that corporation's place of tax payment.

(6) Necessary matters concerning the scope of proper purpose business and the calculation of income generated by profit-making businesses under paragraph (1) shall be prescribed by the Presidential Decree.

■■■■ Article 30 (Inclusion of Liability Reserve Fund in Deductible Expenses)

(1) Where a domestic corporation operating an insurance business under the Insurance Business Act, other Acts, and subordinate statutes has appropriated the liability reserve fund and contingency reserve fund as deductible expenses for each fiscal year, any amount within the scope prescribed by the Presidential Decree shall be included in deductible expenses in calculating the amount of income for the relevant fiscal year.

(2) Any liability reserve fund included in deductible expenses under paragraph (1) shall be included in gross income in calculating the amount of income for the following fiscal year.

(3) A domestic corporation which intends to be subject to the application of paragraph (1) shall submit a detailed statement on the relevant reserve fund, as prescribed by the Presidential Decree, to the chief of the regional tax office having jurisdiction over that corporation's place of tax payment.

(4) Necessary matters concerning the disposition of the contingency reserve fund included in deductible expenses under paragraph (1) shall be prescribed by the Presidential Decree.

■■■■ Article 31 (Inclusion of Policyholder Dividend Reserve Fund in Deductible Expenses)

(1) Where a domestic corporation operating an insurance business appropriates a policy holder dividends reserve fund in order to pay dividends to insurance policy

holders as deductible expenses for each fiscal year, an amount within the scope as prescribed by the Presidential Decree shall be included in deductible expenses when calculating the amount of income for the relevant fiscal year.

(2) Where a domestic corporation that has included the policy holder dividends reserve fund in deductible expenses under paragraph (1) pays dividends to an insurance policy holder, it shall set them off in order, beginning with the policyholder dividend reserve funds appropriated for that fiscal year.

(3) The policyholder dividend reserve funds included in deductible expenses under paragraph (1) shall be set off under paragraph (2) until the date on which three years have passed from the last day of the relevant fiscal year, and the balance remaining shall be included in gross income when calculating the amount of income for the original fiscal year.

(4) Where the balance of policyholder dividend reserve funds is included in gross income under paragraph (3), the amount equivalent to any such interest as calculated under the Presidential Decree shall be paid in addition to corporate tax for the relevant fiscal year.

(5) Where a domestic corporation with the balance of policy holder dividends reserve funds included in deductible expenses under paragraph (1) comes to fall under any of the following subparagraphs, that balance shall be included in gross income when calculating the amount of income for the fiscal year in which the cause for the corporation's change in position occurs:

1. Where it is dissolved, provided that where it is dissolved due to merger, and the merged corporation operating an insurance business succeeds to the balance, this shall not apply; and

2. Where permission for an insurance business is revoked.

(6) In applying the provisions of paragraphs (2) through (5), the amount succeeded to by a merged corporation under the proviso of paragraph (5) 1 shall be deemed to be included in deductible expenses by the merged corporation in the fiscal year when the extinguished corporation includes that amount in deductible expenses.

(7) A domestic corporation which intends to be subject to the application of paragraph (1), it shall submit a detailed statement on the relevant reserve fund, as prescribed by the Presidential Decree, to the chief of the regional tax office having jurisdiction over that corporation's place of tax payment.

■■■■ Article 32 Deleted.

■■■■ Article 33 (Inclusion of Retirement Benefits Payment Fund in Deductible Expenses)

(1) Where a domestic corporation appropriates a retirement benefits payment fund as deductible expenses for each fiscal year in order to pay retirement benefits to officers or employees, an amount within the scope calculated as prescribed by the Presidential

Decree shall be included in deductible expenses when calculating the amount of income for the relevant fiscal year.

(2) Where a domestic corporation that includes the retirement benefits payment fund in deductible expenses under paragraph (1) pays retirement benefits to an officer or employee, it shall pay those benefits first from the concerned retirement benefits payment fund.

(3) Where a domestic corporation that includes the retirement benefits payment fund in deductible expenses under paragraph (1) is merged or divided, the amount of the retirement benefits payment fund as of the date of the registration of such merger or division that is transferred to the merged corporation, the corporation established by division, or a counterpart corporation to the division and merger (hereinafter, a "merged corporation") shall be deemed to be the retirement benefits payment fund of the merged corporation on the date of the registration of the merger or division.

(4) Where a project manager comprehensively transfers the project to a domestic corporation, the provisions of paragraph (3) shall apply mutatis mutandis.

(5) A domestic corporation that wishes to be subject to the provisions of paragraph (1) must submit a detailed statement on the retirement benefits payment fund, as prescribed by the Presidential Decree, to the chief of the regional tax office having jurisdiction over that corporation's place of tax payment.

(6) Matters relevant to the disposition of the retirement benefits payment fund under paragraphs (1) through (4) shall be prescribed by the Presidential Decree.

■■■■ Article 34 (Inclusion of Bad Debts Fund in Deductible Expenses)

(1) Where a domestic corporation appropriates a bad debts fund in order to cover bad debts from credit accounts, loans, and other related debentures as deductible expenses for each fiscal year, an amount up to the amount prescribed by the Presidential Decree shall be included in deductible expenses when calculating in the amount of income for the relevant fiscal year.

(2) The value of bonds that a domestic corporation possesses for which the obligor is bankrupt or the debenture cannot be collected due to causes prescribed by the Presidential Decree (hereafter in this Article, "bad debts") shall be included in deductible expenses when calculating the amount of income for the relevant fiscal year.

(3) The provisions of paragraphs (1) and (2) shall not apply to debentures falling under any of the following subparagraphs:

1. Claims for compensation arising from guarantees of obligations (not including guarantees of obligations as prescribed by the Presidential Decree); and

2. Payments listed under Article 28 (1) 4 (b).

(4) Where any domestic corporation that appropriates a bad debts fund for deductible expenses under paragraph (1) has bad debts under paragraph (2), such bad debts shall be first offset by the bad debts fund and then the remaining amount of the bad debts fund after such offset shall be included in gross income in calculating the amount of income for the next fiscal year.

(5) Bad debts included in deductible expenses under paragraph (2) that are later collected shall be included in gross income in calculating the amount of income for the fiscal year including the date of the collection.

(6) Where a domestic corporation that includes a bad debts fund in deductible expenses under paragraph (1) is merged or divided, the value of the bad debts fund of said corporation as of the date of the registration of such merger or division that is transferred to the merged corporation, etc. shall be deemed to be the bad debts fund of the merged corporation, etc. on that date.

(7) A domestic corporation that wishes to subject itself to the provisions of paragraphs (1) and (2) shall submit a detailed statement regarding bad debts funds and bad debts as prescribed by the Presidential Decree to the chief of the regional tax office having jurisdiction over that corporation's place of tax payment.

(8) Necessary matters concerning credit accounts, loans, and other related debentures, the scope of bad debts, and the disposition of bad debts funds and bad debts under paragraphs (1) and (2) shall be prescribed by the Presidential Decree.

■■■■ Article 35 (Inclusion of Allocation for Payment of Claims for Compensation in Deductible Expenses)

(1) Where domestic corporations as prescribed by the Presidential Decree among those conducting a credit-guarantee business under Acts appropriate an allocation for payment of claims for compensation for deductible expenses in each fiscal year, the allocation for payment of claims for compensation shall, to the extent of any such amount as calculated under the Presidential Decree, be included in deductible expenses in calculating the amount of income for the relevant fiscal year.

(2) The allocation for payment of claims for compensation included in deductible expenses under paragraph (1) shall be included in gross income in calculating the amount of income for the following fiscal year.

(3) A domestic corporation that wishes to subject itself to the provisions of paragraph (1) shall submit a detailed statement on the allocation for, payment of claims for compensation, as prescribed by the Presidential Decree to the chief of the regional tax office having jurisdiction over that corporation's place of tax payment.

(4) Necessary matters concerning the disposition of the allocation for payment of claims for compensation under paragraph (1) shall be prescribed by the Presidential Decree.

■■■■ Article 36 (Inclusion of Value of Assets for Business Acquired through Treasury Subsidies in Deductible Expenses)

(1) Where a domestic corporation is paid assets, including subsidies, under the Act on the Budgeting and Management of Subsidies, the Local Finance Act, and other Acts as prescribed by the Presidential Decree (hereafter, in this Article, referred to as the "treasury subsidies, etc.") and uses them to acquire or improve assets used for business as prescribed by the Presidential Decree (hereafter, in this Article, referred to as the "assets used for business") by the last day of the fiscal year including the date of such payment, the amount equivalent to the value of the treasury subsidies, etc. used for the acquisition or improvement of the assets used for business may be included in deductible expenses in calculating the amount of income for the relevant fiscal year as prescribed by the Presidential Decree.

(2) Where a domestic corporation that does not use the treasury subsidies, etc. for the acquisition or improvement of assets used for business by the last day of the fiscal year including the date of payment intends to do so within one year of the first day of the following fiscal year, the provisions of paragraph (1) shall apply mutatis mutandis, and the subsidies may be included in deductible expenses. In this case, "uses" shall be deemed to mean "intends to use."

(3) Where a domestic corporation that includes the amount equivalent to the treasury subsidies, etc. in deductible expenses under paragraph (2) fails to use the amount included in deductible expenses for the acquisition or improvement of assets used for business within the time limit, or discontinues business or goes bankrupt before using that amount, the unused amount shall be included in gross income in calculating the amount of income for the fiscal year including the date of the occurrence of the cause for the corporation's failure to use the amount: Provided, That this shall not apply where the domestic corporation is merged or divided and the merged corporation succeeds to the amount. In this case, the amount shall be deemed to be included in deductible expenses of the said merged corporation under paragraph (2).

(4) In applying paragraph (1), where a domestic corporation is paid treasury subsidies, etc. in the form of assets other than money and uses them for its business operation, such treasury subsidies shall be deemed to be used for the acquisition or improvement of assets used for business.

(5) A domestic corporation that wishes to subject itself to the provisions of paragraphs (1) and (2) shall submit a detailed statement on the treasury subsidies, etc. the assets used for business acquired though the treasury subsidies, etc. (a plan for use of the treasury subsidies, etc. in any case stated in paragraph (2)), as prescribed by the Presidential Decree, to the chief of the regional tax office having jurisdiction over that corporation's place of tax payment.

(6) In applying paragraphs (1) through (3), necessary matters concerning the calculation of the amount included in deductible expenses and gross income and the method of such inclusion shall be prescribed by the Presidential Decree.

■■■■ Article 37 (Inclusion of Value of Fixed Assets Acquired through Construction Charges in Deductible Expenses)

(1) Where a domestic corporation conducting a business falling under any of the following subparagraphs is provided with fixed assets making up facilities necessary

for the business, such as land, by a person who uses electricity, gas and heating, etc. or who receives convenience and benefit from those facilities in order to establish them, or where it is provided with money (hereafter in this Article, "construction charges") and uses the money for the acquisition of fixed assets composing the facilities by the last day of the fiscal year including the date of such provision, the value of said fixed assets (the amount equivalent to construction charges used for the acquisition of the fixed assets, where acquired through the construction charges) may be included in deductible expenses in calculating the amount of income for the relevant fiscal year as prescribed by the Presidential Decree:

1. Electricity-service business under the Electricity Business Act;

2. Urban gas business under the Urban Gas Business Act;

3. Liquefied petroleum gas-replenishing business, collective liquefied petroleum gas providing business, and liquefied petroleum gas sales business, under the Safety Control and Business Regulation of Liquefied Petroleum Gas Act;

4. Collective energy-providing business under subparagraph 2 of Article 2 of the Integrated Energy Supply Act; and

5. Businesses similar to the businesses under subparagraphs 1 through 4 as prescribed by the Presidential Decree.

(2) The provisions of Article 36 (2) and (3) shall apply mutatis mutandis to the inclusion in deductible expenses where fixed assets are acquired through construction charges.

(3) A domestic corporation that wishes to subject itself to the provisions of paragraphs (1) and (2) shall submit a detailed statement on fixed assets and construction charges received and the fixed assets acquired through construction charges (in cases arising under paragraph (2), a plan for the use of construction charges), as prescribed by the Presidential Decree, to the chief of the regional tax office having jurisdiction over that corporation's place of tax payment.

(4) In applying paragraphs (1) and (2), necessary matters concerning the calculation of the amount included in deductible expenses and gross income and the method of such inclusion shall be prescribed by the Presidential Decree.

■■■■ Article 38 (Inclusion of Value of Fixed Assets Acquired through Insurance Profits in Deductible Expenses)

(1) Where a domestic corporation receives payment of insurance money due to the destruction or damage of fixed assets and uses the money for the acquisition of the fixed assets of the same type to replace the destroyed fixed assets or for the improvement of the damaged fixed assets (including the improvement of acquired fixed assets) by the last day of the fiscal year including the date of the payment, an appropriate amount for the insurance profits used for the acquisition or improvement of fixed assets may be included in deductible expenses in calculating the amount of income for the relevant fiscal year as prescribed by the Presidential Decree.

(2) The provisions of Article 36 (2) and (3) shall apply mutatis mutandis with regard to cases of acquisition or improvement of fixed assets through insurance profits in the calculation of deductible expenses. In this case, "one year" in Article 36 (2) shall be deemed "two years".

(3) A domestic corporation that wishes to subject itself to the provisions of paragraphs (1) and (2) shall submit a detailed statement on the insurance money received and fixed assets acquired or improved through insurance profits (in cases under paragraph (2), a plan for use of insurance profits), as prescribed by the Presidential Decree, to the chief of the regional tax office having jurisdiction over that corporation's place of tax payment.

(4) In applying paragraphs (1) and (2), necessary matters concerning the calculation of the amount included in deductible expenses and gross income and the method of such inclusion shall be prescribed by the Presidential Decree.

■■■■ Article 39 Deleted.

Subsection 5 Period of Accrual of Profits and Losses

■■■■ Article 40 (Fiscal Year for Accrual of Profits and Losses)

(1) The fiscal year for accrual of gross income and deductible expenses of a domestic corporation shall be the fiscal year including the date on which the relevant gross income and deductible expenses are settled.

(2) Matters relevant to the scope of the fiscal year of accrual of gross income and deductible expenses under paragraph (1) shall be prescribed by the Presidential Decree.

■■■■ Article 41 (Acquisition Value of Assets)

(1) The acquisition value of assets acquired by a domestic corporation through purchase, production, exchange, and donation shall be the amounts as calculated in any of the following subparagraphs:

1. For assets purchased from another person, the value of the total of the purchase price and any incidental costs;

2. For assets acquired through the corporation's own manufacture, production, construction, or other corresponding method, the value of the total of the cost of production and any incidental costs; and

3. For assets acquired other than under subparagraphs 1 and 2, the amount as prescribed by the Presidential Decree.

(2) Matters relevant to the calculation of the scope of purchase price and incidental costs and other acquisition values of assets under paragraph (1) shall be prescribed by the Presidential Decree.

■■■■ Article 42 (Evaluation of Assets and Liabilities)

(1) Where the book value of assets and liabilities possessed by a domestic corporation increases or decreases, (not including depreciation, hereinafter, in this Article, "evaluation"), the book value of those assets and liabilities in the calculation of the income amount for the fiscal year including the date of the evaluation and each subsequent fiscal year shall be the value before the evaluation, provided that this shall not apply to cases falling into any one of the following categories:

1. Deleted;

2. Evaluation of fixed assets under the Insurance Business Act and other Acts and subordinate statutes (limited to the amount of increase); and

3. Evaluation of stored assets and other assets and liabilities as prescribed by the Presidential Decree.

(2) Assets and liabilities under paragraph (1) 3 must be evaluated separately as assets or liabilities by the method prescribed by the Presidential Decree.

(3) For assets falling under any of the following categories, the book value may be reduced under paragraphs (1) and (2), notwithstanding methods prescribed by the Presidential Decree:

1. Stored assets that cannot be sold at the normal price due to damage, spoilage, or other causes;

2. Fixed assets that are damaged or broken due to natural disaster, fire, or other cause as prescribed by the Presidential Decree;

3. Stocks, as prescribed by the Presidential Decree, that the issuing corporation refuses to honor; and

4. Stocks, where a corporation that has issued them goes bankrupt.

(4) A domestic corporation that evaluates assets and liabilities under paragraphs (2) and (3) must submit a detailed statement on the evaluation of the concerned assets and liabilities, as prescribed by the Presidential Decree, to the chief of the regional tax office having jurisdiction over that corporation's place of tax payment.

(5) Matters relevant to the disposition of evaluation profits and evaluation losses arising from the evaluation of assets and liabilities under paragraphs (2) and (3) shall be prescribed by the Presidential Decree.

■■■■ Article 43 (Application of Corporate Accounting Standards and Practices)

In calculating the income amount for any domestic corporation's fiscal year, where the concerned corporation applies corporate accounting standards that are generally acknowledges as fair and proper in the acquisition and evaluation of gross income and deductible expenses accrued in a fiscal year and assets and liabilities, and

continuously applies such practices, those corporate accounting standards or practices shall be followed except as otherwise provided in this Act and in the Restriction of Special Taxation Act.

Subsection 6 Special Cases Concerning Mergers and Divisions

■■■■ Article 44 (Inclusion of Reasonable Amount of Merger Evaluation Profits in Deductible Expenses)

(1) For mergers that meet the conditions listed in any of the following subparagraphs, where a merged corporation evaluates and succeeds to the assets of the extinguished corporation, an appropriate value for merger evaluation profits for those assets from the value of the assets acquired by succession (limited to assets as prescribed by the Presidential Decree) may be included in deductible expenses in calculating the amount of income for the fiscal year including the date of the registration of the merger, as prescribed by the Presidential Decree:

1. Where a merger occurs between domestic corporations that have continued to operate for one year or more after the date of registration of the merger;

2. Where the total value of the cost of merger received by stockholders of an extinguished corporation from the merged corporation in return for such merger is 95/100 or more of the value of the stocks; and

3. Where the merged corporation continues to operate a business it received by succession from the extinguished corporation until the last day of the fiscal year including the date of the registration of the merger.

(2) Where a merged corporation that includes an appropriate value for merger evaluation profits in deductible expenses under paragraph (1) discontinues a business it acquired through succession from the extinguished corporation within three years from the first day of the fiscal year following the fiscal year including the date of the registration of the merger, the amount included in the calculation of deductible expenses shall be included as gross income in the calculation of income for the fiscal year including the date the business was discontinued.

(3) A merged corporation that wishes to subject itself to the application of the provisions of paragraph (1) must submit a detailed statement on merger evaluation profits as prescribed by the Presidential Decree, to the chief of the regional tax office having jurisdiction over that corporation's place of tax payment.

(4) In applying the provisions of paragraphs (1) and (2), matters relevant to criteria for judgements regarding the continuance or discontinuance of businesses acquired by succession, calculation of deductible expenses and gross income, and the method for inclusion of deductible expenses and gross income in the calculation of income shall be prescribed by the Presidential Decree.

■■■■ Article 45 (Succession to Net Operating Losses Carried Forward at Time of Merger)

(1) For mergers that meet the conditions listed under any of the following subparagraphs, where the merged corporation succeeds to the assets of the extinguished corporation at book value, as of the date of the registration of the merger net operating losses of the extinguished corporation under subparagraph 1 of Article 13 shall be deemed net operating losses of the merged corporation, and shall be deducted from the standard of tax assessment for each fiscal year of the merged corporation as prescribed by the Presidential Decree up to the amount of income generated by the business acquired by succession:

1. Where mergers fall under any subparagraph of Article 44 (1);

2. Where the stocks received from a merged corporation by stockholders of an extinguished corporation are 10/100 or more of the total stocks issued by the merged corporation or total investment as of the day of registration of the merger; and

3. Where a merged corporation maintains separate accounting under Article 113 (3).

(2) Where a merged corporation that deducted net operating losses of the extinguished corporation under paragraph (1) discontinues a business acquired by succession from the extinguished corporation within three years of the first day of the fiscal year following the fiscal year including the date of the registration of the merger, the total amount deducted as net operating losses shall be included as gross income in the calculation of earnings for the fiscal year containing the date on which the business was discontinued.

(3) Where a merger is deemed to be a merger undertaken for the purpose of unjustly reducing tax payments, as prescribed by the Presidential Decree, the merged corporation may not deduct net operating losses under subparagraph 1 of Article 13 in the calculation of the tax base for each fiscal year.

(4) In applying the provisions of paragraphs (1) through (3), matters relevant to criteria for judgements regarding the continuance or discontinuance of businesses acquired by succession, calculation of net operating losses to be deducted, and the inclusion of deducted net operating losses in gross income in the calculation of the tax base for each fiscal year shall be prescribed by the Presidential Decree.

■■■■ Article 46 (Inclusion of Reasonable Amount for Division Evaluation Profits in Deductible Expenses)

(1) For divisions that meet the conditions listed under any of the following subparagraphs (not including physical division), where the corporation established through division or the corporation that is the counterpart of the division and merger evaluates and succeeds to the assets of the divided corporation or the counterpart corporation to a corporation extinguished through division and merger, an appropriate amount for division evaluation profits for the concerned assets from the value of the assets acquired by succession (limited to assets prescribed by the Presidential Decree) may be included in deductible expenses in calculating the amount of income for the fiscal year including the date of registration of the division, as prescribed by the Presidential Decree:

1. Where a domestic corporation that has continuously operated a business for 5 years or more as of the date of the registration of the division divides, as prescribed by the Presidential Decree;

2. Where the full amount of the cost of division received from the corporation established through division or the corporation that is the counterpart of the division and merger by the stockholders of a divided corporation or counterpart corporation to a corporation extinguished through division and merger (in case of division and merger, the rate under Article 44 (1) 2 or above) is paid in stocks, and those stocks are allocated in proportion to the stocks in the divided corporation or counterpart corporation to a corporation extinguished through division and merger held by each stockholder; and

3. Where the corporation established through division or the counterpart corporation to a division and merger continues to operate the business acquired from the divided corporation or the counterpart corporation to a corporation extinguished through division and merger by succession until the last day of the fiscal year including the date on which the division was registered.

(2) Where the corporation established through division or the counterpart corporation to the division and merger (referring to the merged corporation, where a corporation established through division or any counterpart corporation to the division and merger is merged with any other corporation) that includes an appropriate amount for division evaluation profits in deductible expenses under paragraph (1) discontinues a business it acquired through succession from a divided corporation or the counterpart corporation to a corporation extinguished through division and merger within three years from the first day of the fiscal year following the fiscal year including the date of the registration of the division, the amount included in deductible expenses (referring to an amount equivalent to the amount of deductible expenses, where a corporation established through division or the counterpart corporation to the division and merger is merged with any other corporation and the merged corporation succeeds the amount included in deductible expenses under paragraph (1) from such corporation established through division or such counterpart corporation to the division and merger) shall be included in gross income in calculating the income for the fiscal year including the date the business was discontinued. In this case, where the merged corporation succeeds again the business that the corporation established through division or the counterpart corporation to the division and merger has succeeded from the divided corporation or the counterpart corporation to the extinguished corporation that is merged through division, such business shall not be deemed discontinued.

(3) A corporation established by division or a counterpart corporation to a division and merger that wishes to subject itself to the application of the provisions of paragraph (1) must submit a detailed statement on division evaluation profits, as prescribed by the Presidential Decree, to the chief of the regional tax office having jurisdiction over that corporation's place of tax payment.

(4) In applying paragraphs (1) and (2), matters relevant to criteria for judgments regarding the continuance or discontinuance of businesses acquired by succession, calculation of deductible expenses and gross income, and the method for inclusion of

deductible expenses and gross income in the calculation of income shall be prescribed by the Presidential Decree.

■■■■ Article 47 (Inclusion of Reasonable Amount for Asset Transfer Profits Due to Physical Division in Deductible Expenses)

(1) Where a divided corporation acquires the stocks of a corporation established through division or a counterpart corporation to the division and merger, through a physical division, and the conditions under any subparagraph of Article 46 (1) are met (in case of subparagraph 2 of the Article 46 (1), the full amount shall be in stocks), an appropriate amount for assets transfer profits generated by the physical division from the value of those stocks may be included in deductible expenses in calculating the income for the fiscal year containing the date of the registration of the physical division, as prescribed by the Presidential Decree.

(2) Where a corporation established through division or a counterpart corporation to the division and merger (referring to the merged corporation, where a corporation established through division or a counterpart corporation to the division and merger is merged with any other corporation) ceases to conduct the business it succeeds to from any divided corporation that includes the amount equivalent to transfer profits in deductible expenses under paragraph (1), within 3 years from the date of the commencement of the fiscal year following the fiscal year including the date on which such a division registration is made, the amount included in deductible expenses under paragraph (1) (referring to the amount included in deductible expenses under paragraph (3), in any case falling under the same paragraph) shall be included in gross income in calculating the amount of income for the taxable year including the date on which the business is discontinued. In this case, where the merged corporation succeeds again to the business that the corporation established through division or the counterpart corporation to the division and merger has succeeded to from any divided corporation, the said business shall not be deemed to be discontinued.

(3) Where the merged corporation succeeds again to the business that the corporation established through division or the counterpart corporation to the division and merger has succeeded to from any divided corporation, the divided corporation may continue to include any such amount as included in deductible expenses under paragraph (1) therein without including the amount in gross income as prescribed by the Presidential Decree.

(4) A divided corporation that wishes to subject itself to the provisions of paragraph (1) must submit a detailed statement on transfer profits for assets generated by the division to the chief of the regional tax office having jurisdiction over that corporation's place of tax payment as prescribed by the Presidential Decree.

(5) In applying paragraphs (1) through (3), necessary matters concerning the calculation of transfer profits, the criteria for judgement on the discontinuation of businesses acquired by succession, the calculation of deductible expenses and gross income, and the method of inclusion of deductible expenses and gross income in the calculation of income shall be prescribed by the Presidential Decree.

■■■■ Article 48 (Special Cases of Income Calculation for Corporations that Continue to Exist After Division)

(1) Where a domestic corporation continues to exist after a division (not including physical division), when calculating income for the fiscal year including the date of the registration of the division of the relevant divided corporation, the income generated by the division, notwithstanding the provisions of Article 14 (1), shall be that amount calculated by balancing the amount in subparagraph 1 with the amount in subparagraph 2, as prescribed by the Presidential Decree:

1. The total value of the cost of division that stockholders of a divided corporation receive due to the division from the corporation established by division or the counterpart corporation to a division and merger; and

2. The decrease in the divided corporation's equity capital due to division (limited to divided business category).

(2) When applying the provisions of paragraph (1), matters relevant to the calculation of income amounts generated by the division, such as the total cost of the division and the calculation of the reduction of equity capital, shall be prescribed by the Presidential Decree.

■■■■ Article 49 (Succession to Assets and Liabilities upon Merger and Division)

In the instance of the merger or division of domestic corporations, except where provided for in this Act or other laws, in the calculation of the income amount and the standard for assessment of taxation for each fiscal year of a corporation extinguished due to a merger, divided corporation, or counterpart corporation to a corporation extinguished through division and merger (hereinafter, "non-merged corporation"), matters relevant to dispositions such as the inclusion or non-inclusion of gross income or deductible expenses in the calculation of the amount and succession to that amount and other assets and liabilities by the merged corporation shall be prescribed by the Presidential Decree.

■■■■ Article 50 (Inclusion of Reasonable Amount for Asset Transfer Profits due to Exchange in Deductible Expenses)

(1) Where assets, as prescribed by the Presidential Decree, that are fixed assets used directly for a business, as prescribed by the Presidential Decree, by a domestic corporation that operates that business for two years or more (hereinafter, in this Article, "fixed assets for business use") are exchanged for the same type of fixed assets for business use directly used for the concerned business for two years or more by another domestic corporation (hereinafter, in this Article, "assets acquired by exchange") other than a person with a special relationship under Article 52 (1) (including an exchange between many corporations, as prescribed by the Presidential Decree), an appropriate value for the transfer profit of the fixed assets for business use generated by the exchange, as prescribed by the Presidential Decree, from the value of assets acquired by exchange may be included in deductible expenses in the calculation of the income amount for the relevant fiscal year.

(2) The provisions of paragraph (1) shall apply only where the domestic corporation uses assets acquired by exchange for expenditures immediately prior to the exchange and identical expenditures until the last day of the fiscal year including the date of the exchange.

(3) A domestic corporation that wishes to subject itself to the provisions of paragraph (1) must submit a detailed statement on the exchange of assets, as prescribed by the Presidential Decree, to the chief of the regional tax office having jurisdiction over that corporation's place of tax payment.

(4) In applying the provisions of paragraph (1), matters relevant of the calculation of deductible expenses and the method for inclusion of such amount in the calculation of gross income shall be prescribed by the Presidential Decree.

Subsection 7 Tax Exemption and Income Deduction

■■■■ Article 51 (Non-Taxable Income)

Of the income of a domestic corporation for each fiscal year, corporate tax shall not be levied on income from the trust estate of a charitable trust.

■■■■ Article 51-2 (Income Deduction for Company Specializing in Liquidization)

(1) Where any domestic corporation falling into any of the following categories divides not less than 90/100 of income available for dividends as prescribed by the Presidential Decree, the amount shall be deducted from the calculation of income amount of the relevant business year:

1. A company specializing in liquidization under the Act on Asset Securitization;

2. A securities investment company incorporated under the Securities Investment Company Act;

3. A corporate restructuring investment company under the Corporate Restructuring Investment Companies Act; or

4. A corporate restructuring real estate investment company under the Real Estate Investment Company Act.

(2) Any person who intends to be subject to the application of the provisions of paragraph (1) shall file an application for income deduction as prescribed by the Presidential Decree.

Subsection 8 Special Cases Concerning Calculation of Income Amount

■■■■ Article 52 (Repudiation of Wrongful Calculation)

(1) Where the chief of the regional tax office having jurisdiction over a corporation's place of tax payment or director of the regional tax office deems that the tax burden of

a domestic corporation has been unjustly reduced through the wrongful calculation of the income amount of the corporation in transactions with a person with a special relationship, as prescribed by the Presidential Decree (hereinafter, "person with a special relationship"), he may calculate the income amount for each of that corporation's fiscal years without regard to the wrongful calculation of the income amount of the corporation (hereinafter, "wrongful calculation").

(2) In applying the provisions of paragraph (1), the standard for judgment shall be the prices applied or that would be applied in sound, generally accepted practice, and related activities in normal transactions between persons without a special relationship (including premium rates, interest rates, rental rates, exchange rates, and other corresponding rates hereinafter, in this Article, "market price").

(3) A domestic corporation must submit a detailed statement reporting the particulars of transactions with a person with a special relationship for each fiscal year as prescribed by the Presidential Decree to the chief of the regional tax office having jurisdiction over that corporation's place of tax payment.

(4) In applying the provisions of paragraphs (1) through (3), matters relevant to the forms of wrongful calculation and assessment of market price shall be prescribed by the Presidential Decree.

■■■■ Article 53 (Special Cases concerning Calculation of Income Amount from Transactions with Foreign Corporations)

(1) Where treaties are concluded between Korea and other countries in order to prevent double taxation (hereinafter "tax treaties") on transactions with foreign branches of domestic corporations, or non-resident or foreign corporations, the chief of the regional tax office having jurisdiction over a corporation's place of tax payment or director of the regional tax office may adjust and calculate the income amount of the corporation for each fiscal year in accordance with the provisions of the mutually agreed-upon treaties.

(2) In applying the provisions of paragraph (1), policies relevant to the application for settlement of the income amount of a domestic corporation and the settlement procedures shall be prescribed by the Presidential Decree.

■■■■ Article 54 (Regulations for Calculation of Income Amount)

Matters relevant to the calculation of the income amount of a domestic corporation for each fiscal year that are not provided for in this Act shall be prescribed by the Presidential Decree.

SECTION 2 Calculation of Tax Amount

■■■■ Article 55 (Tax Rates)

(1) The corporate tax amount on income of a domestic corporation for each fiscal year shall be the amount calculated by applying the following tax rates to the tax base under Article 13 (hereinafter, a "calculated tax amount", and where there is the

corporate tax to be levied on the income accruing from the transfer of land under Article 55-2, it shall be the sum of the amounts) Tax Base Tax Rate

100,000,000 won or less 15/100 of tax base

More than 100,000,000 won

15,000,000 won + 27/100 of the amount in excess

of 100,000,000 won

(2) For corporate tax on the income of a corporation for each fiscal year less than one year old, the tax base for the fiscal year will be that obtained by dividing the amount calculated for the fiscal year applying the provisions of Article 13 by the number of months in the fiscal year and multiplying that number by 12, and the tax amount obtained by multiplying the tax amount calculated under paragraph (1) by the number of the number of months in the fiscal year divided by 12 shall be the tax amount. In this case, the method of calculating the number of months shall be prescribed by the Presidential Decree.

■■■■ Article 55-2 (Special Cases concerning Taxation on Income Accruing from Land Transfer)

(1) Where any land or building (including facilities and structures attached to the building; hereafter in this Article and Article 95-2, "land, etc."), which is located in an area prescribed by the Presidential Decree where the average price of land during the immediately preceding quarter surveyed by the Minister of Construction and Transportation under Article 28 of the Act on the Utilization and Management of the National Territory rises by not less than 3/100 compared with that during the quarter before the immediately preceding quarter or by not less than 10/100 compared with that during the same quarter of the preceding year, is transferred, any such tax amount as calculated by multiplying 10/100 (20/100 with respect to any income accruing from the transfer of unregistered land, etc.) by any income accruing from such transfer (hereinafter, the "income accruing from the transfer of land, etc.") shall be the corporate tax on that income, which shall be paid in addition to any such corporate tax amount as calculated by applying tax rates under Article 55 to the tax base under Article 13.

(2) The provisions of paragraph (1) shall not apply to the income accruing from the transfer of land, etc. falling under any of the following subparagraphs: Provided, That this shall not apply to that accruing from the transfer of unregistered land, etc.:

1. Income accruing from the disposal of land, etc. which is made by the adjudication of bankruptcy;

2. Income accruing from the exchange, division or integration of farmland which is directly cultivated by a corporation and which is prescribed by the Presidential Decree; and

3. Income accruing from grounds as prescribed by the Presidential Decree, including land substitution dispositions taken under the Urban Redevelopment Act or other relevant Acts.

(3) The term "unregistered land, etc." used in paragraphs (1) and (2) means the land, etc. which any corporation acquiring it transfers without registering such acquisition: Provided, That the land, etc. which is acquired on the condition of long-term installment and of which contract terms make it impossible to register its acquisition at the time when it is transferred, and any other land, etc. as prescribed by the Presidential Decree, shall be excluded.

(4) The income accruing from the transfer of land, etc. shall be any such amount as given by deducting the book value of land, etc. at the time of such transfer from the transfer amount thereof.

(5) In applying paragraphs (1) through (4), necessary matters concerning the methods of the calculation of the income accruing from the transfer of land, etc. and a fiscal year to which any profit or loss from such transfer is attributed, where there is the loss therefrom in the relevant fiscal year, shall be prescribed by the Presidential Decree.

■■■■ Article 56 Deleted.

■■■■ Article 57 (Deduction of Tax Amount Paid in Foreign Country)

(1) Where the tax base of a domestic corporation for each fiscal year includes income generated in a foreign country, and some foreign corporate tax on income generated in a foreign country, as prescribed by the Presidential Decree (hereafter in this Article, "foreign corporate tax amount"), has been paid or will be paid, the corporation may choose to subject itself to the application of one of the methods in the following subparagraphs, notwithstanding the provisions of subparagraph 1 of Article 21:

1. Methods of deduction of the foreign corporate tax amount from the corporate tax amount in the relevant fiscal year to the extent of any such amount (hereafter in this Article, "deduction extent") as calculated by multiplying the said corporate tax amount (excluding the corporate tax amount on the income accruing from the transfer of land, etc.) calculated under Article 55 of this Act by the percentage of the tax base in that fiscal year comprised of the income generated in a foreign country (the percentage as prescribed by the Presidential Decree, where the tax amount is reduced or exempted under the Restriction of Special Taxation Act or other relevant Acts); and

2. Methods of inclusion of the foreign corporate tax amount paid or to be paid on income generated in a foreign country in deductible expenses in calculating of the income amount for each fiscal year.

(2) Where a foreign corporate tax amount in excess of the deduction extent is paid or will be paid to a foreign government, the excess amount may be carried forward to each fiscal year within five years of the first day of the fiscal year following the original fiscal year, and may be deducted up to the deduction extent for each fiscal year in which it is carried forward.

(3) The appropriate value of the reduced or exempted amount of corporate tax on income a domestic corporation generates in a foreign country that is a party to a tax treaty shall be the foreign corporate tax amount of the tax deduction or the amount included in deductible expenses under paragraph (1), within the scope prescribed by the relevant tax treaty.

(4) Where the income amount of a domestic corporation for each fiscal year includes profits from dividends or distribution of surplus funds from a foreign company (hereafter in this Article, "revenue dividends amount"), of the foreign corporate tax amount levied on the income of the foreign company, the amount corresponding to the concerned revenue dividends calculated as prescribed by the Presidential Decree shall be deemed the foreign corporate tax amount deducted or included in deductible expenses under paragraph (1), within the scope prescribed by tax treaty.

(5) "Foreign company" in paragraph (4) shall mean a foreign corporation with 20/100 or more of the total number of stocks issued to or total amount of financing invested by a domestic corporation, and that meets the requirements as prescribed by the Presidential Decree.

(6) Necessary matters concerning the deduction of the tax amount or the inclusion thereof in deductible expenses under paragraphs (1) through (4) shall be prescribed by the Presidential Decree.

■■■■ Article 58 (Tax Deduction Amount for Losses in Disasters)

(1) Where a domestic corporation loses 30/100 or more of its total assets in each fiscal year, as prescribed by the Presidential Decree, (hereinafter, in this Article, " total amount of assets") due to natural disaster or other accident(hereinafter, "disasters"), and it is deemed difficult for that corporation's to pay taxes, the amount calculated by multiplying the corporate tax amount under any of the following subparagraphs by the percentage of total assets prior to the loss according to the value of the lost assets shall be deducted from the tax amount. In this case, the value of land shall not be included in the value of the assets:

1. Corporate tax not yet paid as of the day of the occurrence of the disaster, and corporate tax which must be paid (including additional charges); and

2. Corporate tax on income for the fiscal year including the date of the occurrence of the disaster.

(2) A domestic corporation that wishes to receive a tax amount deduction under paragraph (1) must apply to the chief of the regional tax office having jurisdiction over that corporation's place of tax payment as prescribed by the Presidential Decree.

(3) Where the chief of the regional tax office having jurisdiction over a corporation's place of tax payment receives an application for a corporate tax deduction as referred to in paragraph (1) 1 under paragraph (2) (not including when the time limit for reporting has passed), he shall determine the tax deduction tax amount and notify the relevant corporation.

(4) In applying the provisions of paragraphs (1) through (3), matters relevant to the tax deduction amount for disasters, such as the calculation of the percentage of assets lost, shall be prescribed by the Presidential Decree.

■■■■ Article 58-2 (Deduction of Agricultural Income Tax)

(1) The agricultural income tax amount paid by a domestic corporation in each fiscal year shall be deducted from the corporate tax amount in the relevant fiscal year: Provided, That where the agricultural income tax amount exceeds the corporate tax amount, such excesses shall not be refunded.

(2) A domestic corporation which is subject to the deduction of tax amount under paragraph (1) shall make an application therefor to the head of a regional tax office having jurisdiction over the place of tax payment as prescribed by President Decree.

■■■■ Article 59 (Calculation of Reduction and Exemption and Amount of Tax Deduction)

(1) In applying this Act and other relevant Acts, where provisions on the reduction and exemption of corporate tax and provisions on the tax deduction amount apply simultaneously, they shall apply in the order of the following subparagraphs, except where provided otherwise. In this case, where the corporate tax amount (excluding the corporate tax on the income accruing from the transfer of land, etc. and additional taxes) to be paid by a corporation is in excess of the sum of subparagraphs 1 and 2, the excess amount shall be deemed not to exist:

1. Reduction and exemption (including exemption) of the tax amount on income for each fiscal year;

2. Unconfirmed tax deduction amount of the deduction carried forward; and

3. Confirmed tax deduction amount of the deduction carried forward. In this case, where the tax deduction amount generated during the relevant fiscal year and the carried- forward amount not deducted are together, the carried-forward amount not deducted shall be deducted first.

(2) Where taxes are reduced or exempted under paragraph (1) 1, the amount of such reduction or exemption shall be any such amount (the amount calculated by multiplying the reduced or exempted amount by the percentage of such reduction or exemption, in case of the reduction or exemption) as calculated by multiplying the calculated tax amount (excluding the corporate tax on income accruing from the transfer of land, etc.) by the percentage (100/100, where it exceeds 100/100) of the tax base under Article 13 composed of the reduced or exempted income, except as provided otherwise.

(3) Policies relevant to the method for application to extinguished corporations that received reduction, waiver, and tax deductions under any subparagraph of paragraph (1) in cases of merger or division, and the calculation of reduction and exemption, and the amount of tax deduction under paragraphs (1) and (2) shall be prescribed by the Presidential Decree.

SECTION 3 Report and Payment

■■■■ Article 60 (Report on Tax Base)

(1) A domestic corporation with a duty to pay taxes shall report the corporate tax base and tax amount on income for the relevant fiscal year within three months of the last day of each fiscal year to the chief of the regional tax office having jurisdiction over that corporation's place of tax payment, as prescribed by the Presidential Decree.

(2) Documents listed in any of the following subparagraphs must be attached to the report under paragraph (1):

1. The balance sheet, profits-and-losses invoice, and profits surplus funds disposition invoice (or net operating losses-settlement invoice), prepared by the mutatis mutandis application of corporate accounting standards;

2. Tax reconciliation statements prepared as prescribed by the Presidential Decree (hereinafter, "tax reconciliation statements"); and

3. Other documents as prescribed by the Presidential Decree.

(3) The provisions of paragraph (1) shall also apply where a domestic corporation has no income or has net operating losses for a fiscal year.

(4) Where the documents under paragraph (2) 1 and 2 are not attached to a report filed under paragraph (1), it shall not be deemed a report under this Act, provided that this shall not apply to a non-profit domestic corporation that is not operating a profit-making business under Article 3 (2) 1 and 6.

(5) Where there are errors or omissions in the report or other documents submitted to the chief of the regional tax office having jurisdiction over a corporation's place of tax payment and the director of the regional tax office under paragraphs (1) and (2), he may request that they be corrected.

■■■■ Article 61 (Special Cases concerning Appropriation of Reserve Funds for Deductible Expenses)

(1) Where a domestic corporation appropriates reserve funds under the Restriction of Special Taxation Act in tax reconciliation statements, or where a non-profit domestic corporation subject to any audit as conducted by an auditor under Article 3 of the Act on External Audit of Stock Companies appropriates reserve funds for proper purpose business under Article 29 of this Act in said tax reconciliation statements, any amount equivalent to those reserve funds which is accumulated as reserves thereof in disposing of profits for the relevant fiscal year, shall be deemed to be appropriated for deductible expenses.

(2) Necessary matters concerning the appropriation of reserve funds for deductible expenses and the settlement of the amount thereof under paragraph (1) shall be prescribed by the Presidential Decree.

■■■■ Article 62 (Special Cases concerning Tax Base Report of Non-Profit Domestic Corporations)

(1) For interest, discount amounts, and profits (excluding profits from no-interest loans under Article 16 (1) 12 of the Income Tax Act, and including distributed funds from securities investment trust proceeds; hereafter in this Article, "interest income") under Article 3 (2) 2, a non-profit domestic corporation may choose not to submit a tax base report on withheld interest income under Article 73, notwithstanding the provisions of Article 60 (1). In this case, the interest income not reported as tax base shall not be included in the calculation of the income amount for a fiscal year, under Article 14.

(2) Necessary matters concerning the tax base report on corporate tax on the interest income of a non-profit domestic corporation and collection under paragraph (1) shall be prescribed by the Presidential Decree.

■■■■ Article 62-2 (Special Cases concerning Taxation on Income Accruing from Transfer of Assets of Non-profit Domestic Corporation)

(1) Where a non-profit domestic corporation (excluding a non-profit domestic corporation conducting any profit-making business as prescribed in Article 3 (2) 1; hereafter in this Article the same shall apply) has any income accruing from the transfer of assets (hereafter in this Article, "income accruing from the transfer of assets") falling under any of the following subparagraphs, which is any revenue as prescribed in Article 3 (2) 4 and 5, the tax base may not be required to be reported notwithstanding the provisions of Article 60 (1). In this case, any income with respect to which the tax base is not reported shall not be included in the calculation of the amount of income for each fiscal year under Article 14:

1. Stocks or investment equities falling under Article 94 (1) 3 of the Income Tax Act and those as prescribed by the Presidential Decree; and

2. Land or building (including facilities and structures attached to the building).

(2) In case of any income accruing from the transfer of assets with respect to which the tax base is not reported under paragraph (1) above, any such amount as calculated by applying the tax rate under any subparagraph of Article 104 (1) of the Income Tax Act to any other tax base as calculated by mutatis mutandis applying Article 92 of the said Act shall be paid as corporate tax. In this case, where any tax rate as increased under Article 104 (4) of the Income Tax Act is applied, the provisions of Article 55-2 of this Act shall not be applied.

(3) In applying paragraph (2) above, the tax base calculated by mutatis mutandis applying Article 92 of the Income Tax Act shall be calculated by deducting any such amount as prescribed in Articles 95 (2) and 103 of the Income Tax Act from any other amount (hereinafter, "transfer profits") as given by deducting necessary expenses from the total income accruing from the transfer of assets (hereafter in this Article, "transfer value").

(4) The provisions of Articles 96, 97, 98 and 100 of the Income Tax Act shall apply mutatis mutandis to the calculation of transfer value, necessary expenses and transfer profits under paragraph (3) of this Article: Provided, That where a non-profit domestic corporation, to which any property excluded from the taxable value of inheritance tax or gift tax under the Inheritance Tax and Gift Tax Act is contributed, transfers assets as prescribed by the Presidential Decree, the contributor's acquisition value of such property shall be that of the said corporation, and in case of an organization treated as a corporation under Article 13 (2) of the Framework Act on National Taxes, the initial acquisition value prior to obtaining approval thereunder shall be the acquisition value.

(5) The provisions of Articles 101 and 102 of the Income Tax Act shall apply mutatis mutandis to the calculation of the tax base on the income accruing from the transfer of assets, and the provisions of Article 93 of the said Act shall apply mutatis mutandis to the calculation of the tax amount of that income.

(6) The provisions concerning the tax base report, payment, decision, correction and collection of corporate tax on the income for each fiscal year including the date of transfer of assets shall apply mutatis mutandis to those of corporate tax under paragraph (2), and it shall be reported, paid, decided, corrected and collected, including other corporate tax amounts. In this case, the provisions of Article 76 (1) shall apply mutatis mutandis.

(7) In case of corporate tax calculated under paragraph (2) above, a preliminary report on the tax base of transfer income and the voluntary payment shall be made by mutatis mutandis applying the provisions of Articles 105 through 108 of the Income Tax Act. In this case, the provisions of Articles 112 and 112-2 of the said Act shall also apply mutatis mutandis.

(8) Where any non-profit domestic corporation makes a preliminary report on the tax base of transfer income under paragraph (7) above, it shall be deemed that the tax base is reported under paragraph (6) above: Provided, That in any case falling under the proviso of Article 110 (4) of the Income Tax Act, the tax base shall be reported under paragraph (6) of this Article.

(9) Necessary matters concerning the methods of application of special cases concerning the income accruing from the transfer of assets as prescribed in paragraphs (1) through (8) shall be prescribed by the Presidential Decree.

■■■■ Article 63 (Interim Prepayment)

(1) A domestic corporation with a fiscal year (excluding the first fiscal year after the establishment of a newly established corporation, where it is not due to a merger or division) in excess of six months shall use the period of six months from the first day of the relevant fiscal year as the interim prepayment period, and of the calculated tax amount (including additional taxes, but excluding the corporate tax on the income accruing from transfer of land, etc.) confirmed as the corporate tax for the fiscal year immediately preceding the relevant fiscal year, it shall pay the amount obtained by dividing the amounts deducted under any of the following subparagraphs by the number of months in the immediately preceding fiscal year and multiplying by six

(hereinafter, the "interim prepaid tax amount") within two months of the date of the expiration of the interim prepayment period as prescribed by the Presidential Decree at the regional tax office having jurisdiction over the corporation's place of tax payment, the Bank of Korea (including its agents), or government postal office (hereinafter, the "regional tax office having jurisdiction over the corporation's place of tax payment"): Provided, That where a domestic corporation with an obligation to pay an interim prepaid tax amount had no corporate tax due in the immediately preceding fiscal year (excluding corporations falling under any of subparagraphs of Article 51-2 (1)), where its corporate tax amount for the immediately preceding fiscal year was not settled by the last day of the concerned interim prepayment period, or where a corporation established through a division or the counterpart corporation to a division and merger enters the first fiscal year after such a division, it shall pay the interim prepaid tax amount under paragraph (4):

1. The corporate tax amount reduced and waived in the fiscal year immediately preceding the relevant fiscal year (not including the amount deducted from income);

2. The amount of withholding tax paid as corporate tax in the fiscal year immediately preceding the relevant fiscal year; and

3. The amount of occasionally levied tax paid as corporate tax in the fiscal year immediately preceding the relevant fiscal year.

(2) Where the interim prepaid tax amount under paragraph (1) for the first fiscal year after the establishment of a merged corporation established through merger is paid, the fiscal year immediately preceding the fiscal year including the date of the registration of the merger of the extinguished corporation shall be deemed to be the immediately preceding fiscal year under paragraph (1).

(3) Where a merged corporation that continues to exist after a merger pays the interim prepaid tax amount under paragraph (1) for the first fiscal year after the merger, the immediately preceding fiscal year of the merged corporation and the fiscal year immediately preceding the fiscal year including the date of the registration of the merger-extinguished corporation shall both be deemed to be the immediately preceding fiscal year under paragraph (1).

(4) A domestic corporation that must make interim prepayments under paragraph (1) may use the relevant interim prepayment period as one fiscal year, and use the amount obtained by deducting the amounts under any of the following subparagraphs from the corporate tax amount calculated by applying the tax rates under Article 55 to the tax base calculated under Articles 13 through 54 as the interim prepaid tax amount, and pay it at the regional tax office having jurisdiction over that corporation's place of tax payment, notwithstanding the provisions the same paragraph:

1. The reduction and waiver tax amount falling under the concerned interim prepayment period (not including the amount deducted from income);

2. The withholding tax amount paid as corporate tax during the relevant interim prepayment period; and

3. The occasionally levied tax amount levied as corporate tax during the relevant interim prepayment period.

(5) Deleted.

(6) Where the chief of the regional tax office having jurisdiction over the corporation's place of tax payment deems it necessary, he may determine the interim prepaid tax amount, not to exceed the corporate tax amount for the immediately preceding fiscal year of the relevant corporation (in cases falling under paragraph (4), the amount of the relevant interim prepaid tax amount divided by six and multiplied by the number of months in the relevant fiscal year), as prescribed by the Presidential Decree, notwithstanding the provisions of paragraphs (1) through (5).

(7) Where the tax amount to be paid by a domestic corporation under paragraphs (1) and (4) is exceeds 10,000,000 won, the provisions of Article 64 (2) shall apply mutatis mutandis, and such payment may be made in installments.

■■■■ Article 64 (Payment)

(1) A domestic corporation must pay the corporate tax amounts under any of the following subparagraphs (not including additional taxes) deducted from the calculated tax amount of corporate tax on income for each fiscal year within the time limit for reporting under Article 60 at the regional tax office having jurisdiction over that corporation's place of tax payment:

1. The reduction and exemption tax amount for the relevant fiscal year;

2. The interim prepaid tax amount for the relevant fiscal year under Article 63;

3. The occasionally levied tax amount for the relevant fiscal year under Article 69; and

4. The withheld tax amount for the relevant fiscal year under Article 73.

(2) Where the tax amount to be paid by a domestic corporation under paragraph (1) exceeds 10,000,000 won, part of the tax amount to be paid in installments within one month of the date of the expiration of the payment period (45 days for small-and medium-sized enterprises under Article 25 (1) 1), as prescribed by the Presidential Decree.

■■■■ Article 65 (Payment in Kind)

(1) Where it is deemed difficult for a domestic corporation to pay corporate taxes in cash on income from the transfer of land for a public business classified under the Act on Special Cases concerning the Acquisition of Lands for Public Use and the Compensation for Their Loss to the operator of the relevant public business or the expropriation of land under the Land Expropriation Act and other Acts and subordinate statutes, payment may be made in the bonds that were received as payment for the relevant land, provided that this shall not apply in cases as prescribed by the Presidential Decree.

(2) Matters relevant to compensation in payment by bonds, the evaluation of the bonds, and the procedures for payment under paragraph (1) shall be prescribed by the Presidential Decree.

SECTION 4 Settlement, Correction, and Collection

Subsection 1 Settlement and Correction of Tax Base

■■■■ Article 66 (Settlement and Correction)

(1) Where a domestic corporation does not make a report under Article 60, the chief of the regional tax office having jurisdiction over that corporation's place of tax payment or director of the regional tax office shall determine the tax base and tax amount of corporate tax on income of the concerned corporation for each fiscal year.

(2) Where a report by domestic corporation under Article 60 falls into any one of the following categories, the chief of the regional tax office having jurisdiction over that corporation's place of tax payment or director of the regional tax office shall determine the tax base and tax amount of corporate tax on income of the concerned corporation for each fiscal year:

1. Where there are errors or omissions in the contents of the report;

2. Where all or part of the payment records under Article 120 or 120-2, or sales and purchase invoice aggregate balance sheets or sales and purchase tax invoice balance sheets under Article 121 are not submitted; and

3. Where it is judged that the contents of the report are dishonest, taking into consideration the scope of facilities or the business environment, because a corporation designated as a credit card affiliate member under Article 117 and under Article 32-2 of the Value-Added Tax Act does not join the credit card affiliation without reasonable cause.

(3) Where the chief of the regional tax office having jurisdiction over a corporation's place of tax payment or director of the regional tax office determines or corrects the tax base and tax amount of corporate tax under paragraphs (1) and (2), that determination or correction must be based on account books or other documentary evidence, provided that where the income amount cannot be calculated in accordance with the account book or other documentary evidence due to causes as prescribed by the Presidential Decree, the tax base or tax amount may be estimated as prescribed by the Presidential Decree.

(4) Where errors or omissions are discovered after the chief of the regional tax office having jurisdiction over a corporation's place of tax payment or director of the regional tax office determines or corrects the tax base and tax amount of corporate tax, he shall rectify those mistakes them again without delay.

■■■■ Article 67 (Disposal of Income)

In making the report on the tax base for corporate tax on income for each fiscal year under Article 60, or determining or correcting the tax base of corporate tax under Article 66 or 69, the amount included in the calculation of gross income shall be disposed of as bonus, dividends, or other outflows from or reserves held by the company, depending upon to whom the income accrues, as prescribed by the Presidential Decree.

■■■■ Article 68 (Special Cases concerning Estimation of Tax Base and Calculation of Tax Amount)

Where the tax base and tax amount of corporate tax is estimated under the proviso of Article 66 (3), the provisions of subparagraph 1 of Article 13 and Article 57 shall not apply, provided that where the account book or other documentary evidence is destroyed by natural disaster, and the amounts are estimated as prescribed by the Presidential Decree, this shall not apply.

■■■■ Article 69 (Determination of Occasional Imposts)

(1) Where the chief of the regional tax office having jurisdiction over a corporation's place of tax payment or director of the regional tax office deems that it is likely that a domestic corporation will evade payment of corporate taxes in the fiscal year due to causes as prescribed by the Presidential Decree, he may levy occasional corporate tax on that corporation (hereinafter, "occasional imposts"). In this case, also, the corporation must report on its income for each fiscal year under Article 60.

(2) The occasional impost period shall be from the first day of the fiscal year until the date on which the cause as prescribed by the Presidential Decree arises, and the provisions of paragraph (1) shall apply accordingly.

(3) Matters relevant to occasional imposts under paragraph (1) shall be prescribed by the Presidential Decree.

■■■■ Article 70 (Notification of Tax Base and Tax Amount)

Where the chief of the regional tax office having jurisdiction over a corporation's place of tax payment or director of the regional tax office determines or corrects the tax base and tax amount of corporate tax on income for each fiscal year of domestic corporation under Article 53 or 66, he shall notify that domestic corporation as prescribed by the Presidential Decree.

Subsection 2 Collection and Return of Tax Amount

■■■■ Article 71 (Collection and Return)

(1) Where a domestic corporation fails to pay all or part of the tax amount that must be paid as corporate tax on income for each fiscal year under Article 64, the chief of the regional tax office having jurisdiction over that corporation's place of tax payment shall collect the unpaid corporate tax amount within two months of the date of the expiration of the payment period.

(2) Where a domestic corporation fails to pay all or part of the interim prepaid tax amount that must be paid under Article 63, the chief of the regional tax office having jurisdiction over that corporation's place of tax payment shall collect the unpaid interim prepaid tax amount within two months of the date of the expiration of the payment period, provided that where the corporation that has not paid the interim prepaid tax amount falls under the proviso of Article 63 (1), the interim prepaid tax amount may be determined under paragraph (4) of the same Article and paid within three months of the date of the expiration of the payment period.

(3) Where the person responsible for collecting withholding taxes under Article 73 does not collect the tax amount that must be collected or does not pay the collected tax amount within the time limit, the chief of the regional tax office having jurisdiction over a corporation's place of tax payment shall without delay collect from the person responsible for collecting withholding taxes the amount of the sum of the appropriate amount for the tax amount to be withheld and paid by person responsible for collecting withholding taxes and the additional tax amount under Article 76 (2), provided that where the person responsible for collecting withholding taxes has not withheld the taxes and where the person liable to pay taxes has already included the withholding tax amount in the calculation of the tax base in the payment by self-assessment, only the additional tax under Article 76 (2) shall be collected.

(4) Where the interim prepaid, occasional levied or withheld corporate tax amount under Article 63, 69 or 73 exceeds the corporate tax amount on income for each fiscal year (including additional taxes), the head of the regional tax office having jurisdiction over the place of tax payment shall return the amount of such excess or appropriate it for other national taxes, additional charges or disposition costs for the collection of taxes in arrears under Article 51 of the Framework Act on National Taxes.

■■■■ Article 72 (Return by Retroactive Deduction of Net Operating Losses)

(1) Where a small or medium enterprise under Article 25 (1) 1 generates net operating losses for each fiscal year under Article 14 (2), it may apply for the return of the amount calculated as prescribed by the Presidential Decree up to the corporate tax amount (referring to the corporate tax amount as prescribed by the Presidential Decree) levied on income during the fiscal year immediately preceding the fiscal year in which the net operating losses occurred. In this case, in the application of the provisions of subparagraph 1 of Article 13 to the relevant net operating losses, it shall be deemed to be the amount deducted.

(2) A domestic corporation that wishes to receive a corporate tax return under paragraph (1) must apply to the chief of the regional tax office having jurisdiction over that corporation's place of tax payment as prescribed by the Presidential Decree within the time limit for reporting under Article 60.

(3) Where the chief of the regional tax office having jurisdiction over a corporation's place of tax payment receives an application under paragraph (2), he shall without delay determine the tax return amount and return it under Articles 51 and 52 of the Framework Act on National Taxes.

(4) Application of the provisions of paragraphs (1) through (3) shall be limited to where the relevant domestic corporation makes a report on the fiscal year in which the net operating losses occur, and the tax base and tax amount of the corporate tax on income for the immediately preceding fiscal year within the time limit for reporting under Article 60.

(5) Where net operating losses are reduced after the chief of the regional tax office having jurisdiction over the place of tax payment grants a return under paragraph (3) due to a correction in the tax base and tax amount of corporate tax for the fiscal year in which the net operating losses occurred, the appropriate tax amount for the reduced net operating losses and an appropriate amount for interest shall be collected as corporate tax for the fiscal year in which the relevant net operating losses occurred.

(6) The method of the tax amount to returned by retroactive deduction of net operating losses and other relevant policies shall be prescribed by the Presidential Decree.

■■■■ Article 73 (Withholding)

(1) Any person who pays the interest income amount under Article 127 (1) 1 of the Income Tax Act (including the revenue amount of financial insurance businesses as prescribed by the Presidential Decree) and the distributed funds from securities investment trust proceeds under Article 17 (1) 5 of the same Act to a domestic corporation (hereinafter "person responsible for collecting withholding taxes") shall collect the appropriate corporate tax amount calculated by applying the tax rate falling under any of the following subparagraphs to the amount paid (hereinafter "withholding") and pay it at the regional tax office having jurisdiction over the place of tax payment by the 10th day of the month following the month including the date of tax collection:

1. 15/100, in case of the interest income amount (25/100, in case of profits from non-profit loans under Article 16 (1) 12 of the Income Tax Act); and

2. 15/100, in case of distributed funds from securities investment trust proceeds.

(2) For the interest income amount accruing to the trust estate of a corporation that governed by the Trust Business Act and Securities Investment Trust Business Act and as prescribed by the Presidential Decree, the concerned trust estate shall be deemed a domestic corporation and the provisions of paragraph (1) shall apply, notwithstanding the provisions of Article 5.

(3) In applying the provisions of paragraph (2), where financial institutions prescribed by the Presidential Decree (hereinafter, in this paragraph, "financial institutions, etc.") directly utilize or keep and manage a trust estate under the Trust Business Act and Securities Investment Trust Business Act, it shall be deemed that there is a relationship of representation or commission between that financial institution, etc. and the party paying the interest income amount accruing to the financial institution, etc. and the concerned trust estate.

(4) The actions of the person representing or commissioned by the person responsible for collecting withholding taxes under paragraph (1) shall be deemed to be the actions of the latter or his delegate within the scope of the delegation or commission, and the provisions of paragraphs (1) through (3) shall apply.

(5) Where a financial institution falling under any item of subparagraph 1 of Article 2 of the Act on Real Name Financial Transactions and Guarantee of Secrecy (hereafter in this paragraph referred to as the "financial institution") takes over, trades or brokers bills or obligation certificates or acts for such transactions, that are issued by a domestic corporation (including a domestic resident: the same in this paragraph shall apply), the provisions of paragraph (1) shall apply to the case in the light of the existence of the representation or commission relationship between the financial institution and that domestic corporation.

(6) Deleted.

(7) The person responsible for collecting withholding taxes, as prescribed by the Presidential Decree, may consider the number of regular employees and categories of business, and pay the withheld corporate tax by the 10th day of the month following the last month of the semiannual period including the date of the collection as prescribed by the Presidential Decree, notwithstanding the provisions of paragraph (1).

(8) Where a domestic corporation sells (including intermediating, recommending, or other cases as prescribed by the Presidential Decree; hereafter the same shall apply in this Article) or acquires bonds (excluding those bonds which are free of or exempted from the corporate tax and other bonds as prescribed by the Presidential Decree; hereafter in this Article, "bonds") during the calculation period of the interest and discounts (hereafter in this Article, "interest") on said bonds under Article 46 (1) of the Income Tax Act, the amount which is equivalent to the withholding tax amount corresponding to the interest on the bonds for the period for which they are held and which is calculated under the Presidential Decree, shall be deemed to be the withholding tax amount to be deductible from the calculated tax amount or the tax amount withheld at source, in applying Articles 63 and 64 of this Act.

(9) In applying paragraphs (1) through (5), (7) and (8), necessary matters concerning the time of payment of interest income, the scope and amount calculation of income subject to corporate withholding tax, the calculation and payment of withholding tax amount, the scope of persons responsible for collection of withholding tax, and the calculation of the period for which the bonds are held, shall be prescribed by the Presidential Decree.

■■■■ Article 74 (Issue of Withholding Receipt)

(1) Where the person responsible for collecting withholding taxes under Article 73 withholds corporate tax from the person liable to pay taxes, he must issue a withholding receipt to the person liable to pay taxes as prescribed by the Presidential Decree.

(2) Deleted.

(3) Matters relevant to the issue of the withholding receipt under paragraph (1) shall be prescribed by the Presidential Decree.

■■■■ Article 75 (Non-Collection of Small Amounts)

Where the withholding tax amount under Article 73 (1) is less than 1,000 won, the relevant corporate tax shall not be collected.

■■■■ Article 76 (Additional Taxes)

(1) In collecting corporate tax on income for each fiscal year under Article 71, where a domestic corporation falls into any one of the following categories, the chief of the regional tax office having jurisdiction over that corporation's place of tax payment must collect the sum of the amounts under the relevant subparagraphs as corporate tax, provided that the provisions of subparagraph 2 shall not apply where the provisions of subparagraph 1 apply, and the provisions of subparagraph 1 on additional taxes on the account book shall not apply to non-profit domestic corporations:

1. Where there is no report under Article 60, or the duty to keep the accounting records on file under Article 112 is not performed, 20/100 of the calculated tax amount (excluding the amount of the corporate tax on the income accruing from the transfer of land; hereafter, in this paragraph, the same shall apply) determined by the chief of the regional tax office having jurisdiction over a corporation's place of tax payment (where such amount is less than 7/10,000 of the revenue amount of that corporation or there is no calculated tax amount, the amount corresponding to 7/10,000 of the revenue amount), provided that where the unreported income amount is in excess of 5,000,000,000 won, it shall be 30/100 of the calculated tax amount (where such amount is less than 10/10,000 of the revenue amount of the concerned corporation or there is no calculated tax amount, the amount corresponding to 10/10,000 of the revenue amount);

2. Where the report on the tax base that must be made under Article 60 is reported below the tax base, the amounts under any of the following items:

(a) Where the reported amount is one-third or more of the tax base that must be reported, and the wrongfully under-reported amount as prescribed by the Presidential Decree, (hereinafter, in this subparagraph, "wrongfully under-reported amount") is in excess of 5,000,000,000 won, an amount corresponding to 30/100 of the calculated tax amount on the amount reported, provided that where the amount is less than 10/10,000 of the reported amount or there is no calculated tax amount, it shall be 10/10,000 of the reported amount; and

(b) In cases other than those covered by item (a), an amount corresponding to 10/100 of the calculated tax amount on the amount reported (20/100 of the wrongfully under-reported amount), provided that this shall not apply where there is no calculated tax amount;

3. Where the corporate tax under Article 63 or 64 (including the amount equivalent to the interest to be paid in addition to the corporate tax under Articles 29 (4) and 31 (4)

of this Act and under the Restriction of Special Taxation Act) is not paid or is underpaid, the amount calculated according to the following formula:

unpaid tax amount (underpaid tax amount, in case of underpayment) × period from the date following the date of a time-limit of payment to the date of voluntary payment or notice × interest rate as prescribed by the Presidential Decree, taking into account the interest rate applying to loans in arrears of financial institutions.

(2) Where the person liable for withholding taxes under Article 73 pays the tax amount withheld or which must be withheld after the time limit for payment, he must pay an additional amount corresponding to 10/100 of the original amount as additional taxes, provided that where the person responsible for collecting withholding taxes is the national government or a local government municipality, this shall not apply.

(3) Deleted.

(4) Where a domestic corporation that must submit a group enterprise combined balance sheet under Article 115 fails to submit it within the time limit, excluding those cases prescribed by the Presidential Decree, the chief of the regional tax office having jurisdiction over that corporation's place of tax payment shall collect the sum of an amount corresponding to 2/100 of the calculated tax amount reported under Article 60 or the settled or corrected tax amount calculated under Article 66 and the amount corresponding to 8/100,000 of the revenue amount of the relevant corporation as corporate tax.

(5) Where a corporation (excluding that as prescribed by the Presidential Decree) is provided with goods or services in connection with business by a businessman as prescribed by the Presidential Decree, and does not receive documentary evidence as prescribed in any subparagraph of Article 116 (2), the chief of the regional tax office having jurisdiction over that corporation's place of tax payment shall, except as governed by the proviso of the same paragraph, collect the amount equivalent to 2/100 of any other amount for which the documentary evidence is not received, in addition to the corporate tax. In this case, the additional taxes shall be collected even where there is no calculated tax amount.

(6) Where a domestic corporation that shall submit a detailed statement on the fluctuation of stocks under Article 119 (hereafter, in this Article, "detailed statement on the state of fluctuation") fails to do so or submits a statement which omits the state of fluctuation, and where the detailed statement on the state of fluctuation submitted is unclear, as prescribed by the Presidential Decree, the chief of the regional tax office having jurisdiction over the corporation's place of tax payment shall collect an amount corresponding to 2/100 of the face value or finance value of the non-submitted, submitted with omission, and unclearly submitted stocks, in addition to the corporate tax. In this case, the additional tax shall be collected even where there is no calculated tax amount.

(7) Where a domestic corporation that shall submit written evidence of payment under Articles 120 and 120-2 or under Articles 164 and 164-2 of the Income Tax Act fails to do so within the time limit under paragraphs (1) and (3) of the said Articles of the said

Act, or the written evidence of payment submitted under the said Articles are unclear, as prescribed by the Presidential Decree, the chief of the regional tax office having jurisdiction over the corporation's place of tax payment shall collect an amount corresponding to 2/100 of the non-submitted amount of payment or the unclearly submitted amount of payment, in addition to the corporate tax. In this case, the additional taxes shall be collected even where there is no calculated tax amount.

(8) Where the contents and the person receiving payment are unclear in the written evidence of payment submitted under Article 120 or 120-2, the application of additional taxes under paragraph (7) shall be limited to one year from the day on which the time limit for report under Article 60 for the fiscal year including the date of payment on the written evidence of payment under Article 120 or 120-2 expires.

(9) Where a corporation (not including corporations as prescribed by the Presidential Decree) falls into any one of the following categories, the chief of the regional tax office having jurisdiction over the corporation's place of tax payment shall collect an amount corresponding to 1/100 of the value provided as corporate tax. In this case, additional taxes shall be collected even where there is no calculated tax amount, and the provisions of subparagraph 1 shall not apply where the provisions of subparagraph 2 apply, and this shall not apply to the portions on which additional taxes are levied under Article 22 (2) through (4) of the Value-Added Tax Act:

1. Where an invoice under Article 121 (1) or (2) is not delivered, or all or part of the matters that must be recorded on the invoice, as prescribed by the Presidential Decree, are not recorded on the delivered invoice, or they differ from actual facts; and

2. Where the sales and purchase invoice aggregate balance sheet under Article 121 (5) is not submitted within the time period under the same Article, or all or part of the matters that must be recorded on the aggregate balance sheet as prescribed by the Presidential Decree are not recorded on the delivered invoice, or they differ substantially from the actual facts.

CHAPTER III CORPORATE TAX ON LIQUIDATION INCOME OF DOMESTIC CORPORATION

SECTION 1 Tax Base and its Calculation

■■■■ Article 77 (Tax Base)

The tax base for corporate taxes shall be the amount of liquidation income of a domestic corporation under Articles 79 through 81.

■■■■ Article 78 (Special Cases for Taxation of Liquidation Income due to Restructuring of Corporation)

Where a domestic corporation restructures under Commercial Act and where a corporation established under special acts restructures to become a company under the Commercial Act due to the reform or repeal of the relevant special acts, corporate tax shall not be levied on the liquidation income.

■■■■ Article 79 (Calculation of Liquidation Income Amount due to Dissolution)

(1) Where a domestic corporation is dissolved (not including dissolution due to including merger or division), the liquidation income (hereinafter "liquidation income from dissolution") amount shall be the sum of the paid-in capital or investment funds and the surplus funds (hereinafter "total amount of equity capital")as of the date of registration of the dissolution corporation deducted from the value of the residual assets from dissolution of the corporation.

(2) Where a domestic corporation in the process of liquidation due to dissolution continues to conduct business under Article 229, 285, 519, or 610 of the Commercial Act after part of the residual assets from dissolution are distributed to the stockholders, the liquidation income amount from dissolution of the corporation shall be the total amount of equity capital as of the date of registration of the dissolution deducted from the total amount of the residual assets distributed from the date of registration of the dissolution to the date of registration of the continuation.

(3) In calculating the liquidation income amount due to dissolution of a domestic corporation, where there is a corporate tax amount to be refunded under the Framework Act on National Taxes during the period of liquidation, an appropriate amount shall be added to the total amount of equity capital of the corporation as of the date of the registration of the dissolution.

(4) In calculating the liquidation income amount due to dissolution of a domestic corporation, where the domestic corporation has such net operating losses carried forward as prescribed by the Presidential Decree as of the date of the registration of the dissolution, an amount reflecting the net operating losses carried forward must be set off from the total amount of the corporation's equity capital from that date, provided that the amount to be set off for net operating losses carried forward may not exceed the surplus funds from the total amount of equity capital, and where the amount of net operating losses carried forward does exceed the surplus funds, it shall be deemed not to exist.

(5) In calculating the value of liquidation income due to dissolution of a domestic corporation, where there is income for each fiscal year generated during the period of liquidation, it shall be included when calculating the income amount for the relevant fiscal year of the corporation.

(6) In calculating the liquidation income amount under paragraph (1) and the income amount for each fiscal year during the period of liquidation under paragraph (5), the provisions of Articles 14 through 54 shall apply mutatis mutandis except where provided for in paragraphs (1) through (5).

(7) In applying the provisions of paragraphs (1) through (6), matters relevant to the calculation of the value of residual assets shall be prescribed by the Presidential Decree.

■■■■ Article 80 (Calculation of Liquidation Income Amount due to Merger)

(1) Where a domestic corporation is dissolved due to a merger, the value of the liquidation income (hereinafter, "liquidation income due to merger") shall be the total merger cost that the stockholders of the extinguished corporation receive from the merged corporation minus the total equity capital of the extinguished corporation as of the day of the registration of the merger.

(2) In calculating the total cost of merger under paragraph (1), where the merged corporation acquires the stocks of the extinguished corporation (in case of an establishment by merger or the merger of three or more corporations, this includes the acquisition of an extinguished corporation's stocks by another extinguished corporation, hereinafter, in this Article, "combined stocks") within 2 years prior to the date of the registration of the merger, and such combined stocks are not exchanged for stocks of the merged corporation, the total cost of the merger shall be the sum of the acquisition value of the relevant stocks. In this case, where stocks are exchanged, the value of the transferred stocks shall be deducted from the acquisition value of the stocks concerned.

(3) In calculating the income amount due to merger, the provisions of Article 79 (3), (4), and (6) shall apply mutatis mutandis.

(4) In applying the provisions of paragraphs (1) through (3), matters relevant to the calculation of the total cost of merger and other calculations for the liquidation income amount due to merger shall be prescribed by the Presidential Decree.

■■■■ Article 81 (Calculation of Liquidation Income Amount due to Division)

(1) Where a domestic corporation is dissolved through a division, the value of the liquidation income (hereinafter, "liquidation income due to division") shall be the total amount of the cost of the division that the stockholders of the divided corporation receive from the corporation established by division or the counterpart corporation to the division and merger minus the total amount of equity capital of the divided corporation as of the date of the registration of the division.

(2) In calculating the total cost of division under paragraph (1) in the case of division and merger, where the counterpart corporation to a division and merger or counterpart corporation to a corporation extinguished through division and merger acquires stocks of divided corporation within two years prior to the date of registration of the division (hereinafter, in this Article, "combined stocks") and those combined stocks are not exchanged for stocks of the corporation established by division or counterpart corporation to a division and merger, the total cost of the division shall be the acquisition value of the combined stocks. In this case, where stocks are exchanged, the value of the transferred stocks shall be deducted from the acquisition value of the combined stocks.

(3) The provisions of paragraphs (1) and (2) shall apply mutatis mutandis to the calculation of liquidation income amount due to division for a counterpart corporation to a corporation extinguished through division and merger.

(4) The provisions of Article 79 (3), (4), and (6) shall apply mutatis mutandis to the calculation of liquidation income amount due to division.

(5) In applying the provisions of paragraphs (1) through (4), policies relevant to the calculation of the total cost of division and other calculations for the liquidation income amount due to division shall be prescribed by the Presidential Decree.

■■■■ Article 82 (Detailed Rules for Calculation of Liquidation Income Amount)

Policies relevant to the calculation of the liquidation income amount of a domestic corporation not provided for in this Act shall be prescribed by the Presidential Decree.

SECTION 2 Calculation of Tax Amount

■■■■ Article 83 (Tax Rate)

The corporate tax on liquidation income of a domestic corporation shall be the tax amount calculated by application of the tax rate under Article 55 (1) to the tax base under Article 77.

SECTION 3 Report and Payment

■■■■ Article 84 (Settlement Report)

(1) A domestic corporation required to pay corporate tax on liquidation income shall report the tax base and tax amount of the corporate tax on liquidation income within the period set forth in any of the following subparagraphs to the chief of the regional tax office having jurisdiction over that corporation's place of tax payment, as prescribed by the Presidential Decree:

1. For cases governed by the provisions of Article 79 (1), within three months of the date the value of the residual assets is settled, as prescribed by the Presidential Decree;

2. For cases governed by the provisions of Article 79 (2), within three months of the date of the registration of continuation;

3. For cases governed by the provisions of Article 80, within three months from the date of the registration of the merger; and

4. For cases governed by the provisions of Article 81, within three months from the date of the registration of the division.

(2) The documents listed in any of the following subparagraphs must accompany the report under paragraph (1):

1. For cases arising under paragraph (1) 1 and 2, the balance sheet of the dissolved corporation as of date of the settlement of the value of the residual assets or the date of the registration of continuation;

2. For cases arising under paragraph (1) 3 and 4, the balance sheet of the extinguished corporation as of the date of registration of the merger or the date of the registration of the merger and a detailed statement on the assets and liabilities succeeded to by the merged corporation due to the merger or division; and

3. Other documents prescribed by the Presidential Decree.

(3) The provisions of paragraphs (1) and (2) shall apply even where there is no liquidation income amount.

■■■■ Article 85 (Interim Report)

(1) Where a domestic corporation falls into any one of the following categories, it shall report to the chief of the regional tax office having jurisdiction over the corporation's place of tax payment, as prescribed by the Presidential Decree, within one month of the date as prescribed in the relevant subparagraph, provided that for a corporation liquidating in accordance with the liquidation process under Article 55 of the State Properties Act, the provisions of subparagraph 2 shall not apply:

1. Where a part of the residual assets from dissolution are distributed to the stockholders prior to the settlement of the value of the residual assets from dissolution, the date of the distribution; and

2. Where the value of the residual assets has not been settled within one year from the date of registration of the dissolution, the date on which one year has passed.

(2) The balance sheet as of the date of the registration of the dissolution and the date of distribution or the date on which one year has passed from the date of the registration of dissolution and other documents as prescribed by the Presidential Decree must each accompany the report, under paragraph (1).

■■■■ Article 86 (Payment)

(1) Domestic corporations governed by the provisions of Article 79 (1) or (2) that have made the settlement report under Article 84 must pay the tax amount calculated by applying the provisions of Article 83 to the amount of liquidation income from dissolution, minus the total tax amount paid under paragraph (3) or (4), as corporate tax at the regional tax office having jurisdiction over the corporation's place of tax payment within the time limit for the report.

(2) Domestic corporations governed by the provisions of Article 80 or 81 that have made the settlement report under Article 84 must pay the tax amount calculated by applying the provisions of Article 83 to the amount of liquidation income from merger or division as corporate tax at the regional tax office having jurisdiction over the place of tax payment within the time limit for reporting.

(3) For domestic corporations that must report under Article 85 (1) 1, where the value of distributed residual assets (where there are residual assets previously distributed, the total value amount) is in excess of the total amount of equity capital as of the date of registration of the dissolution, the corporation must pay the tax amount calculated by applying the provisions of Article 83 to the amount in excess (where corporate tax has previously been paid on distributed portions of residual assets, the tax amount after deducting the previously paid amount from the total tax amount) at the regional tax office having jurisdiction over the corporation's place of tax payment within the time limit for reporting.

(4) For domestic corporations that must report under Article 85 (1) 2, where the predicted value of the residual assets as prescribed by the Presidential Decree as of the date on which one year passes from the registration date of dissolution is in excess of the total amount of equity capital as of the date of registration of the dissolution, the corporation must pay the tax amount calculated by applying the provisions of Article 83 to the amount in excess at the regional tax office having jurisdiction over that corporation's place of tax payment within the time limit for reporting.

SECTION 4 Settlement, Correction, and Collection

■■■■ Article 87 (Settlement and Correction)

(1) Where a domestic corporation does not report under Articles 84 and 85, the chief of the regional tax office having jurisdiction over that corporation's place of tax payment or director of the regional tax office shall determine the tax base and tax amount of corporate tax on liquidation income for that corporation.

(2) Where there are errors or omissions in a report by a domestic corporation under Articles 84 and 85, the chief of the regional tax office having jurisdiction over that corporation's place of tax payment or director of the regional tax office shall determine the tax base and tax amount of corporate tax on liquidation income for that corporation.

(3) Where errors or omissions are discovered after the chief of the regional tax office having jurisdiction over a corporation's place of tax payment or director of the regional tax office determines or corrects the tax base and tax amount of corporate tax on liquidation income, he shall rectify that mistake them again without delay.

(4) The provisions of Article 66 (3) shall apply mutatis mutandis to settlements and corrections under paragraphs (1) and (2).

■■■■ Article 88 (Notification of Tax Base and Tax Amount)

Where the chief of the regional tax office having jurisdiction over a corporation's place of tax payment or director of the regional tax office determines or corrects the tax base and tax amount of corporate tax on liquidation income of domestic corporation under Article 87, he shall notify that corporation or liquidator as prescribed by the Presidential Decree, provided that where it is not possible to notify the corporation or liquidator, he may give public notification instead.

■■■■ Article 89 (Collection)

(1) Where a domestic corporation fails to pay all or part of the tax amount that must be paid as corporate tax on liquidation income under Article 86, the chief of the regional tax office having jurisdiction over the corporation's place of tax payment shall collect the unpaid corporate tax amount within two months of the date of expiration of the payment period.

(2) Where the corporate tax amount paid under Article 86 or collected under paragraph (1) does not satisfy the corporate tax amount as determined or corrected by the chief of the regional tax office having jurisdiction over that corporation's place of tax payment or director of the regional tax office under Article 87, the chief of the regional tax office having jurisdiction over the place of tax payment shall collect the appropriate corporate tax amount to make up for the deficiency.

■■■■ Article 90 (Additional Taxes)

(1) In collecting corporate tax on liquidation income, the provisions of Article 76 (1) shall apply mutatis mutandis, provided that where there is no corporate tax amount on liquidation income, this shall not apply.

(2) In collecting corporate tax on liquidation income, the provisions of Articles 21 and 22 of the National Tax Collection Act shall not apply.

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CHAPTER IV CORPORATE TAX ON INCOME FOR EACH FISCAL YEAR OF FOREIGN CORPORATION

SECTION 1 Tax Base and its Calculation

■■■■ Article 91 (Tax Base)

(1) The tax base for corporate tax on the income for each fiscal year of foreign corporations with a domestic place of business and foreign corporations with real estate income under subparagraph 3 of Article 93 or foreign corporations with woodlands income under subparagraph 8 of the same Article shall be the total amount of income generated in Korea (not including income generated in Korea withheld under Article 98 (1) )minus the amount or income listed in any of the following items, deducted in sequential order:

1. Net operating losses generated during each fiscal year that began within 5 years of the first day of the current fiscal year (limited to net operating losses generated in Korea) that were not deducted in the calculation of the tax base for each fiscal year;

2. Non-taxable income under this Act and other Acts and subordinate statutes; and

3. Income generated by the navigation of a ship or aircraft to a foreign country, provided that this shall be limited to where the country in which the foreign corporation has its headquarters or main office affords the same exemption to ships and aircraft utilized by Korean corporations.

(2) For foreign corporations that do not fall under paragraph (1), income generated in Korea under any subparagraph of Article 93 shall be the tax base for corporate tax on income for each fiscal year of the relevant corporation.

(3) The tax base for corporate tax on income generated in Korea by a foreign corporation falling under provisions of paragraph (1) that was withheld under Article 98 (1) shall be the amount of income generated in Korea under any subparagraph of Article 93.

(4) The provisions of paragraph (1) 3 shall also apply to foreign corporations that have no domestic place of business.

■■■■ Article 92 (Calculation of Amount of Income Generated in Korea)

(1) The total income generated in Korea by a foreign corporation for each fiscal year governed by the provisions of Article 91 (1) shall be an amount calculated by the mutatis mutandis application of the provisions of Articles 14 through 54 of this Act and Articles 104 and 135 through 138 of the Restriction of Special Taxation Act, as prescribed by the Presidential Decree.

(2) Income generated in Korea, other than the income provided for in subparagraph 7 of Article 93, each fiscal year by a foreign corporation under Article 91 (2) and (3) shall be measured by adding the amounts listed in any of the following subparagraphs:

1. Deleted;

2. For the income generated in Korea under subparagraphs 1 through 6 and 8 through 11 of Article 93, the amount of such income shall be the revenue amount by income under any subparagraph (excluding subparagraph 7) of the same Article, provided that for the income generated in Korea under subparagraph 10 of Article 93, it may be an amount calculated by deducting the acquisition value of the securities and the expenses incurred for transfer of the securities as confirmed pursuant to the Presidential Decree, from the revenue amount; and

3. Where the income generated in Korea under subparagraph 10 of Article 93 by a foreign corporation with no domestic place of business meets the conditions listed in any of the following subparagraphs, the normal price as prescribed by the Presidential Decree (hereinafter, in this subparagraph "normal price") shall be the relevant revenue amount, notwithstanding the provisions of subparagraph 2:

(a) Transactions between a foreign corporation with no domestic place of business and a foreign corporation with a special relationship, as prescribed by the Presidential Decree, (including non-residents); and

(b) Where transaction prices in transactions under item (a) fall short of normal prices.

(3) The amount of transfer income under subparagraph 7 of Article 93, among the amount of income of any foreign corporation generated in Korea for each fiscal year under Article 91 (2), shall be any such amount as calculated by deducting the amount falling under any of the following subparagraphs from the transfer value of assets (hereafter in this Article, "land, etc.") from which the income falling under subparagraph 7 of Article 93 is accrued:

1. Acquisition value: Provided, That where any foreign corporation, to which any property excluded from the taxable value of inheritance tax or gift tax under the Inheritance Tax and Gift Tax Act is contributed, transfers the land as prescribed by the Presidential Decree, the contributor's acquisition value of such land shall be deemed to be that of the said corporation; and

2. Expenses directly paid in order to transfer the land.

(4) In applying paragraph (3), the acquisition value and the transfer value shall be the value of actual transaction, but shall be any such value as calculated by mutatis mutandis applying Articles 99, 100 and 114 (5) of the Income Tax Act, where the value of actual transaction is unclear.

(5) In applying paragraph (3), the provisions of Article 98 of the Income Tax Act shall apply mutatis mutandis to the transfer and acquisition time of relevant assets.

(6) The provisions of Article 101 of the Income Tax Act shall apply mutatis mutandis to any act of unfairly calculating the transfer income under paragraph (3) of this Article. In this case, the "person with a special relationship" in Article 101 of the Income Tax Act shall be deemed to be the "person with a special relationship under Article 52 (1) of this Act."

■■■■ Article 93 (Income Generated in Korea)

The income generated in Korea by a foreign corporation shall be classified as follows:

1. Income mentioned in the provisions of any of the following items that is interest income under Article 16 (1) of the Income Tax Act (not including income under subparagraph 8 of the same paragraph) and other interest on loans and profits from trusts, provided that this shall not apply to interest on loans for a foreign place of business of a resident or domestic corporation that are directly borrowed by the foreign place of business:

(a) Income received as payment from a national or local government municipality, the domestic place of business of a resident, domestic corporation or foreign corporation, or the domestic place of business of a non-resident under Article 120 of the Income Tax Act; and

(b) Income received as payment from a foreign corporation or non-resident that is substantially related to the domestic place of business of the foreign corporation or

non-resident and included in the calculation of necessary expenses or deductible expenses in the calculation of the income amount for the domestic place of business;

2. Other dividends income arising under Article 17 (1) of the Income Tax Act (excluding any income under subparagraph 6 of the same paragraph) and the amount disposed as a dividend under Article 9 of the Adjustment of International Taxes Act, which are received as payment in Korea by domestic corporations or organizations to be treated as corporations;

3. Income generated from domestic real estate or real estate rights and domestically acquired mining claims, mining concessions, rights concerning gathering earth, sand, and rock, or the development, transfer or lease of usage rights or other management of underground water, provided that this shall not apply to transfer income arising under subparagraph 7;

4. Income generated by the rental of ship, aircraft, registered automobiles, or construction machinery to a resident, domestic corporation, the domestic place of business of a foreign corporation, or the domestic place of business of a non-resident under Article 120 of the Income Tax Act;

5. Income generated by a business operated by a foreign corporation (including income that can be taxed as domestically generated business income under tax treaties) as prescribed by the Presidential Decree, provided that this shall not apply to income arising under subparagraph 6;

6. Income generated domestically from the provision or use of human services as prescribed by the Presidential Decree;

7. Transfer income generated under Article 94 of the Income Tax Act (not including income generated under paragraphs (1) 3 of the same Article), provided that this shall be limited to where the assets that generate the income are in Korea;

8. Forestry income under Article 23 of the Income Tax Act, provided that this shall be limited to instances where the assets that generate the income are in Korea;

9. Where assets, information, or rights related to any one of the following items are used domestically or the price is paid domestically, that price and the income generated by the transfer of the assets, information, or rights, provided that where the standards for use are determined in treaties for the prevention of double taxation on income and there are provisions therein to determine whether the concerned income can be classified as income generated in Korea, the price of assets, information, or rights used abroad shall not be deemed to be income generated in Korea, regardless of whether it was paid in Korea:

(a) Production rights, copyrights, patent rights, trademark rights, designs, forms, and sketches of works of learning or fine art (including movie films), or secret formulae or processes, film or tape for radio and television broadcasts, and other similar assets or rights;

(b) Information or know-how related to industrial, commercial, or scientific knowledge and experience; and

(c) Industrial, commercial, or scientific machines, facilities, equipment, and other tools, as prescribed by the Presidential Decree;

10. Such income as prescribed by the Presidential Decree among income generated by transfer of stocks, subscription certificates, or other financial instruments falling under any of the following items (excluding the other assets under Article 94 (1) 4 of the Income Tax Act: hereafter the same shall apply in this subparagraph):

(a) Stocks, subscription certificates, or other financial instruments issued by a domestic corporation; and

(b) Stocks or subscription certificates issued by a foreign corporation (limited to those listed on the securities market or registered with the association brokerage market under the Securities and Exchange Act), or other financial instruments issued by a foreign corporation's domestic place of business; and

11. Income falling under any of the following items, other than those under subparagraphs 1 through 10:

(a) Insurance money, compensatory payment, or punitive damages received on real property or other assets situated in Korea, or received in connection with businesses carried on in Korea;

(b) Penalties or compensation for damages paid in Korea as prescribed by the Presidential Decree;

(c) Income generated by inheritance of assets in Korea;

(d) Prize, reward, compensation, other similar income paid in Korea;

(e) Income generated from underground deposits discovered in Korea;

(f) Income generated from licenses, permission, or rights established by other similar administrative disposition under Korean Acts and subordinate statutes, and from transfer of domestic assets other than real property;

(g) Prize received based on lottery, gift tickets, or other drawing tickets, or refunds or premiums paid on or to the purchasers of horse-race tickets, all issued in Korea;

(h) Amount disposed of as other income in disposal of income referred to in Article 67 of this Act and the amount adjusted under Article 9 of the Adjustment of International Taxes Act, which is disposed of as other income;

(i) Income from businesses operated in Korea, from personal services rendered in Korea, or from economic benefits received in relation to assets located in Korea (excluding the difference, if any, between the amount received for redemption of and the issue prices of foreign currency-denominated bonds issued by the State or

financial institutions established under special Acts), or other similar income as prescribed by the Presidential Decree, except those falling under any of items (a) through (h).

■■■■ Article 94 (Domestic Place of Business of Foreign Corporation)

(1) Where a foreign corporation has a fixed place where it conducts all or part of its domestic business, it shall be deemed to have a domestic place of business.

(2) The domestic place of business under paragraph (1) shall include places falling into any one of the following categories:

1. Branches, offices, or business offices;

2. Shops and other fixed places for selling;

3. Workshops, factories, or storage areas;

4. Places used for building, construction and assembly sites, foundation construction sites, or places used for the management and direction of such sites continuously for more than 6 months;

5. Places falling under any of the following items where services are provided by employees:

(a) Place where services are provided for a period of more than 6 months in total during a period of 12 months in which such services continue to be provided; and

(b) Place where similar services are continually and repeatedly provided for not less than 2 years in case that services are provided for a period of not more than 6 months in total during a period of 12 months in which such services continue to be provided; and

6. Places for exploration and gathering of mine, quarry, or marine natural resources and other natural resources (including places where there are seas and low-lying lands of marine areas adjacent to the coast of Korea outside its territorial waters where Korea exercises sovereignty under international law).

(3) Even where a foreign corporation does not have a fixed place of business as defined the provisions of paragraph (1), where it employs a person in Korea with the authority to conclude contracts on its behalf who repeatedly exercises such authority or a similar person as prescribed by the Presidential Decree operating its business, the location of that person's place of business (where there is no place of business, location of his address, and where there is no address, the location of his residence) shall be deemed to be the domestic place of business.

(4) The domestic place of business as defined under paragraph (1) shall not include the places listed in any of the following subparagraphs:

1. Fixed locations used by a foreign corporation only for the simple procurement of assets;

2. Fixed locations used by a foreign corporation only for storage and holding of assets not for the purpose of selling;

3. Fixed locations used by a foreign corporation for advertisement, publicity, gathering and providing information, market research, and other places used in order to conduct such preparatory and supporting business activities; and

4. Fixed locations used by a foreign corporation only in order to have its own assets processed by another person.

SECTION 2 Calculation of Tax Amount

■■■■ Article 95 (Tax Rate)

The corporate tax on income for each fiscal year of foreign corporations under Article 91 (1) and foreign corporations under paragraphs (2) and (3) of the same Article that have income generated in Korea according to the provisions of subparagraph 7 of Article 93 shall be an amount calculated by applying the provisions of Article 55 to the tax base under Article 91 (where the amount of the corporate tax on the income accruing from the transfer of land, etc. under Article 95-2 exists, such amount of the corporate tax shall be added up in the above-referenced corporate tax).

■■■■ Article 95-2 (Special Case of Taxation on Income Accruing from Transfer of Land, etc. by Foreign Corporation)

The provisions of Article 55-2 shall apply mutatis mutandis to the payment of the corporate tax on the income accruing from the transfer of land, etc. earned by any foreign corporation provided for in Article 91 (1) and any foreign corporation provided for in paragraph (2) of the same Article. In this case, the amount of the corporate tax on the income accruing from the transfer of land, etc. earned by any foreign corporation provided for in Article 91 (2) shall be an amount calculated by applying mutatis mutandis the provisions of Article 92 (3).

■■■■ Article 96 (Special Cases of Taxation on Domestic Place of Business of Foreign Corporation)

(1) The domestic place of business of a foreign corporation (not including non-profit foreign corporations) shall add the amount calculated by application of the tax rate under paragraph (3) to the income amount subject to taxation (in the event that any tax treaty concluded between Korea and any foreign country where the relevant foreign corporation is based makes taxable the amount of profit remittance, the income amount subject to taxation shall be the amount of remittance prescribed by the Presidential Decree) under paragraph (2) to the corporate tax under Article 95 and pay it under tax treaties concluded between Korea and the country of residence of the concerned foreign corporation.

(2) The income amount subject to taxation under paragraph (1) shall be the sum or difference between the income amount of the relevant domestic place of business for each fiscal year and the amount under any of the following subparagraphs:

1. The amount of corporate tax under Article 95 less the amount under item (a) but with the amount under item (b) added:

(a) Tax amount deducted under Article 57 (1) 1, and Articles 58 and 58-2 that are applied mutatis mutandis by virtue of the provisions of Article 97 (1), and tax amount deducted or exempted under other Acts; and

(b) Additional tax under Article 76 or tax paid additionally under this Act or the Restriction of Special Taxation Act;

1-2. Resident tax imposed in proportion to income;

2. The amount deemed to be reinvested for the business by the relevant domestic place of business, as prescribed by the Presidential Decree; and

3. The amount not included in deductible expenses under Article 14 of the Adjustment of International Taxes Act.

(3) The tax rate to be applied under paragraph (1) shall be the tax rate under Article 98 (1) 3, and where there are different provisions in the tax treaties concluded between Korea and the country of residence of the relevant foreign corporation, the provisions of the treaty shall be observed.

SECTION 3 Report, Payment, Settlement,

Correction, and Collection

■■■■ Article 97 (Report, Payment, Settlement, Correction, and Collection)

(1) Except as otherwise provided in this Section, the provisions of Articles 57 (1), 58, 58-2, 59 through 62, and 63 through 76 shall apply mutatis mutandis to the report, payment, settlement, correction, and collection of corporate tax on income for each fiscal year of foreign corporations falling under Article 91 (1) and foreign corporations under paragraphs (2) and (3) of the same Article that have generated income in Korea under subparagraph 7 of Article 93. In this case, in the mutatis mutandis application of the provisions of Article 64, where the tax base for corporate tax on the income of a foreign corporation for each fiscal year under Article 91 (1) includes the income withheld under Articles 98 and 98-3, the relevant withholding tax amount shall be deemed to be the deducted tax amount under Article 64 (1) 4.

(2) Where a foreign corporation that must report on the tax base for corporate tax on income for each fiscal year under paragraph (1) cannot submit the report within the time limit due to causes as prescribed by the Presidential Decree, it may obtain the consent of the chief of the regional tax office having jurisdiction over that corporation's place of tax payment or director of the regional tax office and extend the

time limit for making the report as prescribed by the Presidential Decree, notwithstanding the provisions of paragraph (1).

(3) Where a foreign corporation that has received consent to extend the time limit for report under paragraph (2) pays the tax amount, it shall add the amount calculated by applying the rate as prescribed by the Presidential Decree with reference to the interest rates charged by financial institutions to the number of days of the extension.

(4) The number of days of the extension in the calculation of the amount to be added under paragraph (3) shall be the number of days from the day following the time limit for report under Article 60 until the day for which consent for the extension was obtained, provided that where the report and payment is made within the extended time limit, it shall be the number of days until the day of such report and payment.

■■■■ Article 98 (Special Cases of Withholding or Collection for Foreign Corporations)

(1) With regard to a foreign corporation, where the person who pays the amount of income generated in Korea under subparagraphs 1, 2, 4 through 6, and 9 through 11 of Article 93 that has no substantial connection with the domestic place of business or does not accrue to the domestic place of business (including the amount paid to foreign corporations with no domestic place of business) makes such payment, amounts under any of the following subparagraphs shall be withheld as corporate tax on the income for the fiscal year of the relevant corporation and paid at the regional tax office having jurisdiction over that corporation's place of tax payment as prescribed by the Presidential Decree by the 10th day of the month following the month including the date of the withholding, notwithstanding the provisions of Article 97, provided that this shall not apply to income under subparagraph 5 of Article 93 that may be taxed as business income generated in Korea under tax treaties:

1. For income generated under subparagraphs 4 and 5 of Article 93, 2/100 of the amount paid;

2. For income generated under subparagraph 6 of Article 93, 20/100 of the amount paid;

3. For income generated under subparagraphs 1, 2, 9, and 11 of Article 93, 25/100 of the amount paid; and

4. For income generated under subparagraph 10 of Article 93, 10/100 of the amount paid (for cases arising under Article 92 (2) 3, this refers to the "normal price" under the same Article; hereinafter, in this subparagraph, "amount paid"), provided that where the acquisition value and transfer expenses incurred for transfer of the concerned securities are determined under the proviso of Article 92 (2) 2, it shall be the smaller of the amount corresponding to 10/100 of the amount paid or the amount corresponding to 25/100 of the amount calculated under the same paragraph and subparagraph.

(2) Where a person who withholds corporate tax under paragraphs (1) and (4) through (7) pays the withheld corporate tax after the time limit for payment has passed, he

shall add the amount of additional taxes under Article 76 (2) to the corporate tax amount.

(3) Where the amount that must be withheld as corporate tax on the income of a foreign corporation for each fiscal year under paragraphs (1) and (4) through (7) is not withheld or is not paid within the time limit for payment under paragraph (1), the amount under Article 76 (2) shall be added to the collected amount, and collected as corporate tax from the person responsible for collecting withholding taxes without delay according to the method of collection of national taxes, provided that where it is the national government or a local government municipality, this shall not apply.

(4) The person who pays the foreign corporation with no domestic place of business the income amount generated in Korea under subparagraphs 1, 5, 6, and 9 of Article 93 as foreign loan funds shall withhold under paragraph (1) each time the income amount is to be paid in accordance with the terms of payment in the contract, even where he does not directly pay the income amount under the terms of the concerned contract.

(5) The domestic representative of a foreign corporation operating a ship or aircraft going to a foreign country who does not fall under Article 94 (3) shall withhold taxes on the amount of income generated in Korea by the foreign corporation under paragraph (1) when he pays the income from the voyage of the ship or aircraft to a foreign country to the foreign corporation.

(6) Where securities under subparagraph 10 of Article 93 are transferred through a securities company under the Securities and Exchange Act, the relevant securities company shall withhold taxes under paragraph (1), provided that where previously issued stocks are transferred to be listed stocks under the Securities and Exchange Act, the corporation that issued the concerned stocks shall withhold taxes.

(7) The person paying the income amount generated in Korea through providing services related to the establishment, foundation, and conducting or leading or guiding of other operations for building, construction machinery, equipment, or income generated in Korea under subparagraph 6 of Article 93 to a foreign corporation shall withhold taxes under paragraph (1), even where that income accrues to the domestic place of business, provided that this shall not apply where the relevant domestic place of business has registered its business under Article 111.

(8) Where income generated in Korea under paragraph (1) is paid in a foreign country and the person making payment has a domestic address, residence, headquarters, main office, or domestic place of business (including domestic place of business under Article 120 of the Income Tax Act), the person making payment shall be deemed to have paid that income amount generated in Korea and the provisions of paragraph (1) shall apply.

(9) Where the person responsible for collecting withholding taxes withholds corporate taxes under paragraphs (1) and (4) through (7), he shall issue a withholding receipt to the person receiving payment with the amount of payment and other necessary matters noted as prescribed by the Presidential Decree.

■■■■ Article 98-2 (Special Cases of Report and Payment, etc. of Transfer Income of Securities of Foreign Corporation)

(1) Where a foreign corporation with no domestic place of business comes to satisfy the taxation criteria under the corresponding tax treaty by transferring stocks or subscription certificates of one identical domestic corporation twice or more times within one identical fiscal year (referring to the fiscal year of the corresponding domestic corporation; hereafter the same shall apply in this Article), such a foreign corporation shall, within three months from the closing day of the fiscal year to which the date of transfer belongs, report and pay to the head of the regional tax office having jurisdiction over the place of tax payment an amount equivalent to the withholding tax on the income of transfer margin (hereafter in this Article, "income") that was not paid at the time of such transfer, as prescribed by the Presidential Decree.

(2) The provisions of paragraph (1) shall apply mutatis mutandis to such income of a foreign corporation with a domestic place of business that is not substantially related to or does not belong to the domestic place of business.

(3) Where a foreign corporation fails to report a tax base or pay the payable tax, or reports an incorrect tax base or pays a tax amount less than the correct payable amount under paragraphs (1) and (2), the head of the regional tax office having jurisdiction over the place of tax payment shall, by applying mutatis mutandis the provisions of Article 66, collect the correct payable amount together with the amount that is computed by applying mutatis mutandis the provisions of Article 76 (1).

■■■■ Article 98-3 (Special Cases of Withholding Tax on Bonds, etc. of Foreign Corporation)

(1) Any person who pays interest or discounts (hereafter in this Article, "interest, etc.") on bonds, etc. under Article 46 (1) of the Income Tax Act (hereafter in this Article, "bonds, etc.") to a foreign corporation (referring to a foreign corporation subject to the application of Article 98 (1); hereafter the same shall apply in this Article) shall withhold income tax considering the period of such bonds, etc. held by such a foreign corporation as prescribed by the Presidential Decree.

(2) Where any foreign corporation sells bonds, etc. before being paid interest, etc. thereof and such sales are subject to the application of tax rates higher than those as prescribed in Article 73 (1) 1, any person liable to withhold taxes at source shall withhold the amount of tax calculated under the Presidential Decree from any person who purchases such bonds, etc.(in the event that the relevant bonds, etc. are sold to any resident or any nonresident under the Income Tax Act, a foreign corporation that sells such bonds, etc.). Where the foreign corporation that sells the relevant bonds, etc. is subject to tax rates lower than those as prescribed in Article 73 (1) 1 (including a case where interest, etc. accruing from the bonds, etc. is not taxed or exempted from taxation; hereafter the same in this Article shall apply), such foreign corporation may file an application for the refund of tax amount calculated under the Presidential Decree.

(3) Any act performed by any person who acts in the capacity of a person who is liable to withhold taxes at source under paragraphs (1) and (2) or is commissioned to

act in the capacity of the latter shall be deemed an act peformed by the latter or the mandator within the scope of the delegation of power and commissioning, and is subject to the application of the provisions of paragraphs (1) and (2).

(4) Where any financial institution falling under any item of subparagraph 1 of Article 2 of the Act on Real Name Financial Transactions and Guarantee of Secrecy takes over, trades, brokers or acts by proxy on bonds, etc. issued by any domestic person or any foreign corporation, the relationship of agency or delegation shall be deemed to exist among such financial institution, a person liable to withhold taxes at source under paragraph (1) and a foreign corporation that sells bonds, etc. and is subject to the application of paragraph (3).

(5) In applying paragraphs (1) through (4), the provisions of Article 98 (1) through (3) shall apply mutatis mutandis to the time limit for the payment of taxes withheld at source and the payment and collection of the additional tax.

(6) In applying paragraphs (1) and (2), the time of interest income payment, computation of the holding period of such bonds, etc. computation and payment of withholding tax amount, scope of persons liable for withholding tax, issuance of withholding tax receipts, methods of request for refund, etc. that are required shall be prescribed by the Presidential Decree.

■■■■ Article 98-4 (Application for Non-Taxation on Income Generated in Korea by Foreign Corporation)

Any foreign corporation that intends to get its income generated in Korea under Article 93 (excluding the income under subparagraphs 5 and 6 of the same Article) untaxed or exempted from taxation under any tax treaty shall file an application therefor with the head of the regional tax office having jurisdiction over the place of tax payment as prescribed by the Presidential Decree.

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CHAPTER V Deleted.

■■■■ Articles 99 through 108 Deleted.

CHAPTER VI SUPPLEMENTARY PROVISIONS

■■■■ Article 109 (Report on Establishment or Foundation of Corporation)

(1) A domestic corporation shall submit a report on incorporation supplying the information listed below, with such documents as prescribed by the Presidential Decree, within two months of the date of the registration of the establishment to the chief of the regional tax office having jurisdiction over the place of tax payment. Where the business is registered under Article 111, it shall be deemed that the report on incorporation has been submitted:

1. Name of the corporation and its representative;

2. Location of its headquarters or main office;

3. Purpose of business; and

4. Date of establishment.

(2) Where a foreign corporation comes to have a domestic place of business, it shall submit a report on the establishment of a domestic place of business supplying the information listed below within two months of the date on which the domestic place of business was established, with the balance sheet as of the day the domestic place of business was established and other documents, as prescribed by the Presidential Decree, attached, to the chief of the regional tax office having jurisdiction over the place of tax payment. If a foreign corporation which comes to have a place of business under Article 94 (3), it may only submit a report on establishment of a domestic place of business:

1. Name of the corporation and its representative;

2. Location of its headquarters or main office;

3. Name of the person responsible for management or administration of the business conducted in Korea or the assets located in Korea;

4. Purpose and type of domestic business, and type and location of assets in Korea; and

5. Date of initiation of domestic business or date on which assets came to be held in Korea.

(3) Where there are changes in the contents of the report and other documents submitted by domestic corporations and foreign corporations under paragraphs (1) and (2), the altered information shall be reported to the chief of the regional tax office having jurisdiction over the place of tax payment within 14 days.

(4) The provisions of paragraph (2) shall apply mutatis mutandis to a report by a foreign corporation with real estate income under subparagraph 3 of Article 93 or forestry income under subparagraph 8 of the same Article.

■■■■ Article 110 (Report on Start of Profit-Making Business by Non-Profit Corporation)

Where a non-profit domestic corporation or non-profit foreign corporation (limited to foreign corporations with a domestic place of business) begins a profit-making business (limited to profit-making businesses as defined under Article 3 (2) 1 and 6), it must submit a report detailing matters under any of the following subparagraphs, with the balance sheet of the profit-making business and other documents as prescribed by the Presidential Decree, attached, to the chief of the regional tax office

having jurisdiction over the place of tax payment within two months of the date of the start of the business:

1. Name of corporation;

2. Location of its headquarters or main office;

3. Name of the representative and the person responsible for management or administration;

4. Proper business purposes;

5. Type of profit-making business;

6. Date of start of profit-making business; and

7. Place of business of profit-making business.

■■■■ Article 111 (Registration of Business)

(1) A corporation starting a new business shall register with the chief of the regional tax office having jurisdiction over the place of tax payment as prescribed by the Presidential Decree.

(2) A businessman who has registered his business under the Value-Added Tax Act shall be deemed to have registered that business under paragraph (1).

(3) The provisions of Article 5 of the Value-Added Tax Act shall apply mutatis mutandis to a corporation registering its business under this Act.

(4) Where the report on incorporation under Article 109 has been made, it shall be deemed that application for registration of business has been made.

■■■■ Article 112 (Keeping of Account Books)

A Corporation with tax liability shall keep its account books according to the double entry system, and keep and preserve important documentary evidence relating to the account books, provided that for non-profit domestic corporations, this shall be limited to those operating a profit-making business under Article 3 (2) 1 and 6.

■■■■ Article 113 (Separate Accounting)

(1) Where a non-profit corporation operates a profit-making business, the assets, liabilities, and profits and losses of the concerned profit-making business and the other business that is not a profit-making business must be separately accounted for and separate accounts must be maintained.

(2) A corporation, under the application of the Trust Business Act and the Securities Investment Trust Business Act, must keep separate accounts for income accruing to

the trust estate and other income in the calculation of the income amount for each fiscal year.

(3) A merged corporation that wishes to deduct net operating losses carried forward of an extinguished corporation under Article 45 (1) must maintain separate accounts of assets, liabilities, and profits, and losses included in the business succeeded from the extinguished corporation and those included in other business.

(4) Matters relevant to the separate accounting method under paragraphs (1) through (3) and other necessary matters shall be prescribed by the Presidential Decree.

■■■■ Article 114 Deleted.

■■■■ Article 115 (Duty to Submit Combined Financial Statements)

A company writing a combined financial statement under the Act on External Audit of Stock Companies shall submit the group enterprise combined balance sheet and group enterprise combined losses and profits invoice under the same Act and other documents as prescribed by the Presidential Decree within sixth months of the last day of the fiscal year of the relevant corporation, as prescribed by the Presidential Decree, to the chief of the regional tax office having jurisdiction over the place of tax payment.

■■■■ Article 116 (Receipt and Safekeeping of Documentary Evidence of Expenditures)

(1) A corporation must make or receive documentary evidence for all business-related transactions for each fiscal year and keep them for five years from the date of expiration of the time limit for making a report under Article 60.

(2) In case of paragraph (1), where a corporation receives goods or services from a businessman, as prescribed by the Presidential Decree, and pays for them, it shall receive and keep documentary evidence as listed in any of the following subparagraphs, provided that in cases as prescribed by the Presidential Decree, this shall not apply:

1. Credit card sales slip under the Specialized Credit Financial Business Act (in case of transactions using payment methods similar to credit cards as prescribed by the Presidential Decree, it shall include the relevant documentary evidence);

2. The tax invoices under Article 16 of the Value-Added Tax Act; and

3. The invoices under Article 121 of this Act and Article 163 of the Income Tax Act.

(3) In applying the provisions of paragraphs (1) and (2), matters relevant to the receipt and safe-keeping of documentary evidence shall be prescribed by the Presidential Decree.

■■■■ Article 117 (Administrative Guidance on Joining Credit Card Affiliation)

(1) Where the Commissioner of the National Tax Administration deems that a corporation, as prescribed by the Presidential Decree, that provides goods or services to consumers who are not mainly businessmen, is in need of tax management, he may designate it as a person subject to joining a credit card affiliation under the Specialized Credit Financial Business Act, and have it join the credit card affiliation.

(2) Matters relevant to designation of a corporation as a person subject to joining a credit card affiliation under paragraph (1) shall be prescribed by the Presidential Decree.

■■■■ Article 118 (Making and Keeping Registry of Names of Stockholders)

A domestic corporation (not including non-profit domestic corporations) shall make and keep a stockholder registry or employee registry with the names, addresses, and resident registration numbers (for stockholders or employees which are corporations, the name of the corporations, the location of the headquarters of the corporations, and the business registration numbers) of the stockholders or employees (referring to limited partnership employees; hereinafter, in this Article, the same shall apply) and other matters as prescribed by the Presidential Decree.

■■■■ Article 119 (Submission of Detailed Statement on State of Fluctuation of Stocks)

(1) A corporation with changes in the state of stocks during the fiscal year (not including partnership corporations as prescribed by the Presidential Decree) shall submit a detailed statement on the fluctuation of stocks as prescribed by the Presidential Decree within the time limit for making a report under Article 60 to the chief of the regional tax office having jurisdiction over the place of tax payment.

(2) The provisions of paragraph (1) shall not apply to stocks held by minority stockholders of stock-listed corporations, and association-registered corporations and the investment equities of corporations that are not stock corporations as prescribed by the Presidential Decree.

■■■■ Article 120 (Duty to Submit Written Evidence of Payment)

(1) The person responsible for collecting withholding taxes under Article 73 (1) shall submit written evidence of payment to the chief of the regional tax office having jurisdiction over the place of tax payment as prescribed by the Presidential Decree.

(2) The provisions of Article 164 of the Income Tax Act shall apply mutatis mutandis to the submission of written evidence of payment under paragraph (1).

■■■■ Article 120-2 (Special Cases of Submission of Written Payment Statements on Income, etc. Generated in Korea by Foreign Corporation)

(1) Any person who pays the income generated in Korea to any foreign corporation under Article 93 shall file a written payment statement with the head of the regional tax office having jurisdiction over the place of tax payment by the end of the month

following the last month of a half year to which the payment day belongs, provided that the same shall not apply to a case where the income prescribed by the Presidential Decree is paid, including the income, etc. that are confirmed non-taxation or tax exemption under Article 98-4.

(2) The provisions of Article 164 of the Income Tax Act shall apply mutatis mutandis to submission of written payment statements under paragraph (1).

■■■■ Article 121 (Making and Issuing of Invoice)

(1) When a corporation provides goods or services, it must make an invoice or receipt (hereinafter, "invoice"), as prescribed by the Presidential Decree, and deliver it to the person receiving the goods or services.

(2) Where agricultural products, livestock products, marine products, and ginseng products exempted from the value-added tax under Article 12 (1) 1 of the Value-Added Tax Act sold on consignment or through a representative, the consignee or representative shall be deemed as providing the goods and must make an invoice and deliver it to the person receiving the goods, provided that where the invoice is delivered under paragraph (1) prescribed by the Presidential Decree, this shall not apply.

(3) With respect to imported goods, the head of a customs house shall deliver an invoice to any corporation that imports such goods under the conditions as prescribed by the Presidential Decree.

(4) Where the delivery of any invoice is deemed inappropriate, including the case of sale of real estate, etc. as prescribed by the Presidential Decree, the provisions of paragraphs (1) through (3) shall not be applied.

(5) A corporation shall submit a sales and purchase invoice aggregate balance sheet for invoices issued or received under paragraphs (1) through (3) (hereinafter, a "sales and purchase invoice aggregate balance sheet") within the time limit prescribed by the Presidential Decree to the chief of the regional tax office having jurisdiction over the place of tax payment.

(6) Those who have made or issued tax invoices or receipts or submitted sales and purchase tax invoice aggregate balance sheets under the Value-Added Tax Act shall be deemed to have made or issued invoices or submitted the sales and purchase invoice aggregate balance sheet under paragraphs (1) through (3) and (5).

(7) Matters relevant to making and issuing the invoice and submitting the sales and purchase invoice aggregate balance sheet shall be prescribed by the Presidential Decree.

■■■■ Article 122 (Inquiry and Investigation)

Where necessary for a public servant investigating business affairs related to corporate tax to perform his duties, he may question persons falling into any of the

following categories, or examine the relevant account books, documents and other items or order them to be submitted:

1. Persons liable to pay taxes or person deemed to have tax liability;

2. Persons responsible for collecting withholding taxes;

3. Persons liable to submit written evidence of payment and persons liable to submit the sales and purchase invoice aggregate balance sheet;

4. Persons responsible for management or administration under Article 109 (2) 3;

5. Persons deemed to have engaged in a transaction with persons under subparagraph 1; and

6. Trade associations organized by persons liable to pay taxes and corresponding organizations.

TOP↑

ADDENDA

■■■■ Article 1 (Enforcement Date)

This Act shall enter into force on January 1, 1999: Provided, That the amended provisions of Articles 8, 16, 17, 33, 34, 36, 46 through 49, 59, 63, 79, 81, 84, 86 and 99 (11) (limited to the sections on divisions) and the amended provisions of Article 29 (1) shall enter into force on the date of promulgation, the amended provisions of Articles 28 (2) through (4) and 76 (5) shall enter into force on January 1, 2000, and the amended provisions of Articles 76 (9) 1 and 121 (2) shall enter into force on July 1, 1999.

■■■■ Article 2 (Examples of General Application)

This Act shall apply from the fiscal year which starts first after the entry into force of this Act: Provided, That the amended provisions on the corporate tax on liquidation income shall apply from the dissolution or merger which occurs first after the entry into force of this Act or from the division of the fiscal year which includes the date of the entry into force of this Act, and the amended provisions on the special transfer income tax shall apply from the transfer which first occurs after the entry into force of this Act.

■■■■ Article 3 (Examples of Application for Special Cases of Merger and Division)

The amended provisions of Article 8, subparagraphs 3 and 4 of Article 17, and Articles 44 through 49, 59 (3), 99 (11) (limited to the section on divisions) and 113 (3) shall apply from the first merger after the entry into force of this Act or from the division of the fiscal year which includes the date of the entry into force of this Act.

■■■■ Article 4 (Examples of Application of Report and Payment)

(1) The amended provisions of Articles 6, 7, 62, and 109 through 111 shall apply from the arrival of the first time limit for report or registration after the entry into force of this Act.

(2) The amended provisions of Articles 60 and 63 through 65 shall apply from the first report or payment of corporate tax after the entry into force of this Act: Provided, That the amended provisions of Article 63 (1) shall apply to the first interim prepaid portion after the entry into force of this Act.

(3) The amended provisions of Articles 66 through 70 shall apply from the first report, settlement, or correction after the entry into force of this Act.

(4) The amended provisions of Articles 71 and 89 shall apply from the arrival of the first time limit for the payment of corporate tax after the entry into force of this Act.

(5) The amended provisions of Articles 73 through 75 shall apply from the first payment after the entry into force of this Act.

■■■■ Article 5 (Examples of Application for Fictitious Dividends or Distributed Funds)

The amended provisions of Article 16 shall apply from the first retirement of stocks, entry into capital or dissolution after the entry into force of this Act: Provided, That the amended provisions of Article 16 (1) 2 (a) (limited to merger evaluation marginal profits and division evaluation marginal profits) shall apply from the first merger after the entry into force of this Act or the entry into capital of funds generated by a division during the fiscal year which includes the date of the entry into force of this Act, and the amended provisions of subparagraph 6 of the same paragraph shall apply from the division of the fiscal year which includes the date of the entry into force of this Act.

■■■■ Article 6 (Special Application for Calculation of Losses)

(1) The amended provisions of Article 28 (2) through (4) shall apply from the first fiscal year starting on or after January 1, 2000.

(2) The amended provisions of Articles 29 (not including paragraph (1)) through 34 (not including paragraph (3)), 36 through 38, and 61 shall apply from the entry into the calculation of losses in the fiscal year beginning first after the entry into force of this Act: Provided, That the amended provisions of Article 29 (1) shall apply from the entry into the calculation of losses in the fiscal year which includes the date of the entry into force of this Act, the amended provisions of Articles 31 (4), 32 (4), 33 (3), 34 (6), and 36 (3) (including where the amended provisions of Articles 37 (2) and 38 (2) shall apply mutatis mutandis) shall apply from the first dissolution after the entry into force of this Act or from the division of the fiscal year which includes the date of the entry into force of this Act.

(3) The amended provisions of Article 34 (3) shall apply from the first guarantee of obligation (including guarantee of obligation made prior to the entry into force of this Act for which the time limit has been extended) or payment after the entry into force of this Act: Provided, That for corporation which had been under the application of the previous provisions of Article 14 (1), the amended provisions of Article 34 (3) 1 shall apply from the first guarantee of obligation after January 1, 1998 (including guarantee of obligation made prior to December 31, 1997 for which the time limit has been extended).

(4) The amended provisions of Article 52 shall apply to the first transaction after the entry into force of this Act.

(5) The amended provisions of Articles 92 (2) 3 and 98 (1) 4 shall apply to the first transfer after the entry into force of this Act.

■■■■ Article 7 (Special Application for Additional Taxes)

(1) The amended provisions of Article 76 (1) shall apply from the collection of corporate tax in the first fiscal year starting after the entry into force of this Act.

(2) The amended provisions of Articles 76 (4) and 115 shall apply from the combined financial statements submitted in the first fiscal year starting after the entry into force of this Act. In this case, the time limit for submission for the fiscal year which starts between the date of the entry into force of this Act and December 31, 1999 shall be 7 months from the end of the concerned fiscal year, notwithstanding the amended provisions of Article 115.

(3) The amended provisions of Article 76 (5) shall apply from the first goods or services provided after January 1, 2000, and the amended provisions of Article 116 shall apply from the first goods or services received after the entry into force of this Act.

(4) The amended provisions of Article 76 (6) shall apply from the detailed statement submitted in the first fiscal year starting after the entry into force of this Act, and the amended provisions of Article 119 (1) (not including the section on the time limit for report) shall apply from the statement first submitted after the entry into force of this Act.

(5) The amended provisions of Article 76 (8) shall apply from the arrival of the first time limit for submission after the entry into force of this Act.

(6) The amended provisions of Articles 76 (9) 1 and 121 (2) shall apply from the first provision after July 1, 1999.

(7) The amended provisions of Article 114 shall apply from the arrival of the first time limit for public notification after the entry into force of this Act.

■■■■ Article 8 (Special Cases concerning Calculation of Income of Profit-taking Business)

(1) In the application of the amended provisions of Article 3 (2) 4, the acquisition value of stocks or contribution quotas acquired before December 31, 1988 may be the higher of the book value or the amounts under each of the following subparagraphs:

1. For stocks or contribution quotas listed on a stock exchange, the higher amount of the stock exchange final market value on December 31, 1988 (regardless of the existence of any real transaction) or the average of the officially announced stock exchange final market value for each day of December 1988; and

2. For stocks or contribution quotas not listed on a stock exchange, the value as of January 1, 1989 as evaluated under the provisions of Article 60 of the Inheritance Tax and Gift Tax Act and Article 63 (1) 1 (b) and (c) of the same Act.

(2) In the application of the amended provisions of Article 3 (2) 5, the acquisition value of land and buildings acquired before December 31, 1988 (including attached facilities and constructions) may be the larger amount of the book value or the value as of January 1, 1989 as evaluated under the provisions of Article 60 of the Inheritance Tax and Gift Tax Act and Article 61 (1) through (3) of the same Act: Provided, That the acquisition value of land and buildings acquired before December 31, 1990 not used for profit-making business may be the larger amount of the book value or the value as of January 1, 1991 as evaluated under the provisions of Article 60 of the Inheritance Tax and Gift Tax Act and Article 61 (1) through (3) of the same Act.

■■■■ Article 9 (Special Cases in Application of Non-Inclusion of Enter- tainment Expenses in Calculation of Losses)

(1) In the application of the amended provisions of Article 25 (1) 2, for the fiscal year starting between the date of the entry into force of this Act and December 31, 1999, the rates applied shall be as in the following table, notwithstanding the table under the amended provisions of the same Article. Revenue Amount Rate

10,000,000,000 won or less 30/10,000

More than 10,000,000,000 won

and up to 50,000,000,000 won

30,000,000 won + 15/10,000 of the amount

in excess of 10,000,000,000 won

More than 50,000,000,000 won

90,000,000 won + 4/10,000 of the amount

in excess of 50,000,000,000 won

(2) In the application of the amended provisions of Article 25 (2) and (4), for the fiscal year starting between the date of the entry into force of this Act and December 31, 1999, the amount of secret service funds under the previous provisions of the proviso of Article 18-2 (3) within the scope of 10% of the sum of the amounts under each subparagraph of Article 25 (1) appropriate amount shall be deemed the business

related entertainment expenses paid, and the amended provisions of Article 25 (2) shall not apply.

■■■■ Article 10 (Special Cases on Time of Acquisition of Land)

In the application of the amended provisions of Article 99, land acquired prior to December 31, 1984 shall be deemed as land acquired on January 1, 1985.

■■■■ Article 11 (General Interim Measures)

Corporate tax paid or to be paid under the previous provisions prior to the entry into force of this Act shall be governed by the previous provisions.

■■■■ Article 12 (Interim Measures on Non-Taxation of Interest Income)

Corporate Tax shall not be levied on income generated by bonds or savings under any one of the following subparagraphs:

1. Citizen housing bonds issued under the Housing Construction Promotion Act by the Korea Housing and Commercial Bank under the previous Korea Housing and Commercial Bank Act before January 1, 1982;

2. Bonds issued before January 1, 1983 which fall under any one of the following items:

(a) Industrial reconstruction bonds issued by the government under the previous Industrial Reconstruction Bonds Act;

(b) Bonds issued by the government as compensation for requisition under the Act on Special Measures for Readjustment of Requisitioned Properties;

(c) Bonds issued by the government under the previous Act on Temporary Measures on the Settlement of Communication Facilities;

(d) Citizen housing bonds issued by the government under the Housing Construction Promotion Act;

(e) Subway public bonds, roads public bonds, and waterworks public bonds issued by local government municipalities under the Local Finance Act; and

(f) Land development bonds issued by the Korea land corporation under the Korea Land Corporation Act; and

3. Interest on savings in the National Savings Association generated before December 31, 1990.

■■■■ Article 13 (Interim Measures for Inclusion of Reserve Fund in Calculation of Earnings)

(1) Reserve funds included in the calculation of losses in the calculation of earnings under the provisions of the previous Article 12 (3) before the entry into force of this Act shall be governed by the previous provisions.

(2) The time of accrual of profits and losses for transactions under the application of the provisions of the previous Article 17 at the time of the entry into force of this Act shall be governed by the previous provisions.

(3) The withholding tax rate on interest income from bonds issued under the provisions of the previous Article 39 (6) before September 30, 1998 shall be 20%, notwithstanding the amended provisions of Article 73 (1) 1.

■■■■ Article 14 Omitted.

■■■■ Article 15 (Relation with Other Acts and Subordinate Statutes)

Where other Acts and subordinate statutes cite the provisions of the previous Corporate Tax Act at the time of the entry into force of this Act, and there are corresponding provisions in this Act, they shall be deemed to have cited the concerned provisions of this Act in lieu of the previous provisions.

ADDENDA

■■■■ Article 1 (Enforcement Date)

This Act shall enter into force on January 1, 2000.

■■■■ Article 2 (Application Example)

(1) The amended provisions of Article 18-2 shall apply starting with the portion of a dividend received first from a subsidiary after the enforcement of this Act.

(2) The amended provisions of Article 36 shall apply starting with the portion of assets acquired and renovated for business using subsidies provided first after the enforcement of this Act.

(3) The amended provisions of Article 73 (1) and (5) shall apply starting with the portion of the payment of interest income accruing first after the enforcement of this Act.

ADDENDA

(1) (Enforcement Date) This Act shall enter into force on the date of its promulgation.

(2) (General Application Examples) This Act shall apply starting with the portion of a declaration of tax base filed for the special transfer income tax and a determination or an alteration made with respect to the special transfer income tax for the first time after the enforcement of this Act.

(3) (Application Example to Litigation Cases on Special Transfer Income Tax) This Act shall apply to disposition pursuant to the provisions of Article 59-2 (1) (limited to appeals, requests for review, requests for adjudgment or administrative lawsuits that have already been filed) under the Corporate Tax Act (referring to the Act before amendment by Act No. 5581).

ADDENDA

■■■■ Article 1 (Enforcement Date)

This Act shall enter into force on January 1, 2001: Provided, That the amended provisions of Articles 25 (2) and 98-2 shall enter into force on the date of its promulgation, the amended provisions of Articles 73 (1), (6), (8) and (9), 74 (2) and 98-3 shall enter into force on July 1, 2001, the amended provisions of the main sentence of Articles 28 (2) shall enter into force on January 1, 2002, and the amended provisions of Articles 66 (2), 76 (7) and (8) and 120-2 shall enter into force on July 1 2002.

■■■■ Article 2 (General Application Examples)

This Act shall apply starting with the portion for the business year that starts first after the enforcement of this Act.

■■■■ Article 3 (Example of Application to Exclusion of Received Dividend Amount from Taxable Income)

The amended provisions of Articles 18-2 (1) and (3) and 18-3 shall apply starting with the portion of received dividend amount first received after the enforcement of this Act.

■■■■ Article 4 (Example of Application to Exclusion of Entertainment Expenses from Deductible Expenses)

The amended provisions of Article 25 (2) shall apply starting with the portion of entertainment expenses included in calculation of deductible expenses for the business year to which the promulgation date of this Act belongs.

■■■■ Article 5 (Example of Application to Exclusion of Paid Interest from Deductible Expenses)

The amended provisions of the main sentence of Article 28 (2) shall apply starting with the portion of paid interest for the business year that first starts on or after January 1, 2002.

■■■■ Article 6 (Example of Application to Inclusion of Policyholder Dividend Reserve Fund in Deductible Expenses)

The amended provisions of Article 31 (4) shall apply starting with the portion that is included in deductible expenses for the business year to which the enforcement date of this Act belongs.

■■■■ Article 7 (Example of Application to Securities Trading Reserve)

The amended provisions of Article 32 shall apply starting with the portion of the business year to which the enforcement date of this Act belongs.

■■■■ Article 8 (Example of Application to Deduction of Taxable Income for Mutual Funds, etc.)

The amended provisions of Article 51-2 (1) 2 and 3 shall apply starting with the portion first distributed after the enforcement of this Act.

■■■■ Article 9 (Example of Application to Estimate Interim Payments)

The amended provisions of the proviso of Article 63 (1) shall apply starting with the portion of the first estimate interim payment after the enforcement of this Act.

■■■■ Article 10 (Example of Application to Withholding at Source)

(1) The amended provisions of Article 73 (1) shall apply starting with the portion of interest income first accrued or earnings distributed from securities investment trust fund first paid on or after July 1, 2001.

(2) The amended provisions of Articles 73 (6) and (8), 74 (2), and 98-3 shall apply starting with the portion of bonds, etc. first sold or interest, etc. first paid on or after July 1, 2001.

(3) The previous provisions of Articles 73 (6) and 74 (2) shall apply to bonds, etc. issued before July 1, 2001 until the first payment date of interest, etc. on bonds, etc. on or after July 1, 2001 wherethe interest computing period spans over the periods before or on or after July 1, 2001.

■■■■ Article 11 (Example of Application to Domestic Source Income of Foreign Corporations)

(1) The amended provisions of Article 92 (2) 2 (proviso), subparagraphs 7 and 10 of Article 93, and Article 98 (1) 4 (proviso) shall apply starting with the portion first transferred after the enforcement of this Act.

(2) The amended provisions of subparagraph 11 of Article 93 shall apply starting with the portion first accrued after the enforcement of this Act.

■■■■ Article 12 (Example of Application of Exception to Reports, etc. on Securities Transfer Margin by Foreign Corporations)

The amended provisions of Article 98-2 shall apply starting with the portion that first meets the taxable criteria under the corresponding taxation treaty after the promulgation of this Act.

■■■■ Article 13 (Example of Application to Submission of Written Payment Statements by Foreign Corporations)

The amended provisions of Articles 66 (2) 2, 76 (7) and (8), and 120-2 shall apply starting with the portion first paid on or after July 1, 2002.

■■■■ Article 14 (Example of Application to Special Transfer Income Tax)

The amended provisions of Articles 99, 102, and 104 shall apply starting with the portion first transferred after the enforcement of this Act.

■■■■ Article 15 (Transitional Measures for Inclusion of Securities Trading Reserve in Taxable Income)

The previous provisions shall apply to inclusion, etc. of securities trading reserve in taxable income in calculation of deductible expenses pursuant to the previous provisions of Article 32 before the enforcement of this Act.

ADDENDA

■■■■ Article 1 (Enforcement Date)

This Act shall enter into force on January 1, 2002: Provided, That the amended provisions of Articles 45 (1), 61 (1), 76 (3) and (5), and 114 shall enter into force on the date of its promulgation, and the amended provisions of Articles 98-4 and 120-2 (1) shall enter into force on July 1, 2002.

■■■■ Article 2 (General Applicable Cases)

This Act shall apply to each fiscal year commencing on or after the enforcement of this Act.

■■■■ Article 3 (Applicable Cases concerning Legal Fiction as Dividends or Distributions)

The amended provisions of Article 16 (1) 2 shall apply to any corporation's own stocks or investment equities retired on or after the enforcement of this Act.

■■■■ Article 4 (Applicable Cases concerning Exclusion of Received Dividend Amount from Gross Income)

The amended provisions of Articles 18-2 (1) 4 and 18-3 (2) shall apply to a dividend paid on or after the enforcement of this Act.

■■■■ Article 5 (Applicable Cases concerning Inclusion of Value of Assets for Business Acquired through Treasury Subsidies in Deductible Expenses)

The amended provisions of Articles 36 (1) and (4) shall apply to treasury subsidies paid on or after the enforcement of this Act.

■■■■ Article 6 (Applicable Cases concerning Succession to Net Operating Losses Carried Forward at Time of Merger)

The amended provisions of Article 45 (1) 1 shall apply to a merger in or after the fiscal year to which the promulgation date of this Act belongs.

■■■■ Article 7 (Applicable Cases concerning Inclusion of Amount Equivalent to Asset Transfer Profits Accruing from Physical Division in Deductible Expenses)

The amended provisions of Article 47 shall apply to any division or merger on or after the enforcement of this Act.

■■■■ Article 8 (Applicable Cases concerning Income Deduction for Corporate Restructuring Real Estate Investment Company)

The amended provisions of Article 51-2 (1) 4 shall apply to a dividend paid on or after the enforcement of this Act.

■■■■ Article 9 (Applicable Cases concerning Special Cases for Taxation on Income Accruing from Transfer of Land, etc.)

The amended provisions of Articles 2 (2), 55, 55-2, 57, 59, 63 (1), 76 (1) 1, 92 (2) through (6), 95 and 95-2 shall apply to any transfer on or after the enforcement of this Act.

■■■■ Article 10 (Applicable Cases concerning Special Cases for Appropriating Reserve Fund for Deductible Expenses)

The amended provisions of Article 61 (1) shall apply to the portion appropriated in tax reconciliation statements in or after the fiscal year to which the promulgation date of this Act belongs.

■■■■ Article 11 (Applicable Cases concerning Special Cases for Taxation on Income Accruing from Transfer of Assets of Non-Profit Domestic Corporation)

The amended provisions of Article 62-2 shall apply to any transfer on or after the enforcement of this Act.

■■■■ Article 12 (Applicable Cases concerning Additional Tax)

(1) The amended provisions of Article 76 (1) 3 shall apply to a time-limit of payment coming on or after the enforcement of this Act.

(2) The amended provisions of Article 76 (5) shall apply to goods and services supplied in or after the fiscal year to which the promulgation date of this Act belongs.

■■■■ Article 13 (Applicable Cases concerning Income Generated in Korea by Foreign Corporation)

The amended provisions of subparagraphs 2 and 11 of Article 93 shall apply to dispositions as dividends or any other income taken on or after the enforcement of this Act.

■■■■ Article 14 (Applicable Cases concerning Tax Withholding of Bonds, etc. of Foreign Corporation)

The amended provisions of Article 98-3 shall apply to any interest paid or the bonds sold on or after the enforcement of this Act.

■■■■ Article 15 (Applicable Cases concerning Application for Non-Taxation on Income Generated in Korea by Foreign Corporation)

The amended provisions of Article 98-4 shall apply to any income free of or exempt from the corporate tax on or after July 1, 2002.

■■■■ Article 16 (Applicable Cases concerning Obligation to Publish Balance Sheet)

The amended provisions of Articles 76 (3) and 114 shall apply to any fiscal year to which the promulgation date of this Act belongs.

■■■■ Article 17 (Applicable Cases concerning Submission of Written Payment Statement of Income Generated in Korea by Foreign Corporation)

The amended provisions of Article 120-2 (1) shall apply to any payment made on or after July 1, 2002.

■■■■ Article 18 (Applicable Cases concerning Preparation and Delivery, etc. of Statements)

The amended provisions of Article 121 shall apply to goods or services supplied or imported on or after the enforcement of this Act.

■■■■ Article 19 (Transitional Measure concerning Exclusion of Received Dividend Amount of Corporation Belonging to Large Enterprise Group from Gross Income)

At the time when this Act enters into force, the exclusion of the dividend amount which any domestic corporation belonging to a large enterprise group receives from its affiliate from gross income shall be governed by the previous provisions, notwithstanding the amended provisions of Article 18-3 (2).

■■■■ Article 20 (Transitional Measure concerning Acquisition Tax on Non-Business Land)

The acquisition tax (limited to the amount exceeding the tax amount under Article 112 (1) of the previous Local Tax Act) on the non-business land of any corporation under Article 112 (2) of the said Act (referring to the Local Tax Act before the amendment by Act No. 6312) and the exclusion of the refund amount thereof from deductible expenses and gross income shall be governed by the previous provisions of subparagraph 7 of Article 18 and subparagraph 3 of Article 21 of this Act.

■■■■ Article 21 (Transitional Measure concerning Inclusion of Amount Equivalent to Revaluation Balance of Land in Deductible Expenses)

At the time when this Act enters into force, the inclusion of any such amount as included in deductible expenses under the previous provisions of Article 39 in gross income shall be governed by the previous provisions.

■■■■ Article 22 (Transitional Measure concerning Corporate Tax on Proper Excess Reserve Income)

At the time when this Act enters into force, the disposal of a corporate development reserve fund accumulated under the previous provisions of Article 56 and the payment of the corporate tax caused by the disposal of said fund for any other purpose shall be governed by the previous provisons.

■■■■ Article 23 (Transitional Measure according to Abolishment of Special Surtax)

At the time when this Act enters into force, any special surtax which was levied or is to be levied under the previous provisions shall be governed by the previous provisions.

■■■■ Article 24 Omitted.

■■■■ Article 25 (Transitional Measures according to Amendment to Any Other Act)

Where the special surtax is levied on the income accruing from the transfer of any land or business before this Act enters into force, the recognition of the amount of that special surtax as the development cost shall be governed by the previous provisions, notwithstanding the amended provisions of Article 24 of this Addenda.

Source: http://www.nta.go.kr/ National Tax Service 2001